There’s no magic formula to short sale success, in fact, they’re pretty straight forward these days with mostly predictable guidelines and timelines. Yet we’re constantly finding people with the “solution” to all your problems. Here is a recent short sale alert from our California Association of Realtors. Be very careful when someone comes to you with a “new” idea. Or an idea so innovative you wonder why everyone isn’t doing it. There may be a reason.
Tip of the Week: Straw buyers for short sales
Recently, a business model surfaced that purported to help homeowners stay in their homes by allowing straw buyers to purchase the homes via short sale, with the understanding that the buyers would allow the former owners to live in the property as renters after the sale closed. Some even included a promise to sell or deed the property back to the former owner. After investigating these transactions, DRE found that the lenders would never have agreed to the short sales had they known the former owners were going to be living in the home and paying rent to the new buyers. This led to disciplinary action against the agents involved for misrepresentation to a lender and/or fraud.
Source: California Association of Realtors
Many lenders will have you sign their own short sale addendum stating the terms of their approval. Read any short sale approval and addendum from your bank, CAREFULLY. Many have very strict rules on whether or not an owner can stay to occupy the home following closing. But even more, are you SURE that all facts are being disclosed to your lender? Would your lender have agreed to the short sale if they knew all the facts? If not, this is a HUGE red flag and can have you , and your agent, on the hook for mortgage fraud. Tread lightly and really it’s not worth trying to “game” the system or deceive your lender.
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