![]() ![]() Both the homeowner and the lender lose in this scenario. ![]() The buyer then turns around and immediately sells the property in the open market and makes a quick (and usually substantial) profit. The homeowner then does a short sale, allowing the buyer to get the house at a steep discount. This form of mortgage fraud occurs when an outside third party (usually a potential buyer) convinces both the homeowner and the lender that the property’s market value is considerably lower than what it appraised for. This is why undisclosed payments are considered fraudulent and why the primary lender can’t make secret payments to junior lenders under any circumstances. Without this rule, there would be nothing to stop the primary lender from using extra compensation to convince other lenders to go along with a short sale they otherwise wouldn’t agree to. Failure to disclose such an arrangement is a form of criminal fraud. While it’s not fraudulent to make such an offer, it must be disclosed in the loan settlement statement at the time of the sale. To address this, the primary lender may offer extra compensation to the junior lender to get them to agree to the sale. They may get little or nothing from the short sale, which means they may be hesitant to agree to it. Secondary lenders are called junior mortgage holders. For example, your primary mortgage lender will get its money first, then the secondary lender, and so on. In a short sale with multiple creditors, the lenders are repaid according to a hierarchy. So if you have more than one loan on your home, then you must get permission from each of your lenders before you can begin the short sale process. All short sale real estate transactions happen at the discretion of the lender. If you want to try to sell your house for less than what you owe on it, the lender or lenders will have to agree to it beforehand. There are four main types of short sale fraud schemes that dishonest parties use to make a quick profit at either the seller or the lender’s expense. Get Started with Upsolve Watch Out for These Common Short Sale Scams Buyers and sellers should be cautious to guard against being cheated in these sales. Homeowners and lenders are the most frequent victims of this type of fraud. Short sale fraud can come from homeowners, lenders, real estate agents and brokers, or other third parties involved in the sale. Short sale fraud is a type of mortgage fraud where either false information is used or valid information is withheld to convince a homeowner to do a short sale. Here we’ll cover four common types of short sale fraud, what to look out for, and how to avoid fraudsters. Unfortunately, there are several types of fraud that can happen in short sales that you should be aware of. If they do, the lender usually forgives the remaining balance owed and releases the mortgage lien on your property. Your lender has to approve the short sale before it happens. One way to avoid foreclosure is with a loss mitigation option called a short sale, where you sell your home for less than what you owe on it. If you are behind on your mortgage payments and it doesn’t look like you’ll be able to catch up quickly, then you may be facing foreclosure and eviction from your home. ![]()
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