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Short Sale Fraud

I. GENERAL OVERVIEW Just as REALTORS® struggled with loan fraud during the subprime heyday, they now face the rampant growth of short sale fraud in the subprime aftermath.  Short sale fraud comes in many shapes and sizes to wreak havoc on the unsuspecting sellers, buyers, and agents, often at the most inopportune time. This legal article provides legal and practical guidelines for REALTORS® and their clients for dealing with short sale fraud.  This legal article also describes certain types of short sale scams, and explains how REALTORS® and their clients can distinguish between legitimate and illegal short sale activities. Q1.  What is short sale fraud? A   Short sale fraud is a loose term for describing fraud, deceit, or trickery in connection with a short sale transaction.  As background, a short sale is a sales transaction where: (1) the sales price is less than the seller’s existing mortgage loan balance, other liens, and costs; and (2)  the existing creditors agree to a payoff of less than what’s owed.  Short sales help homeowners to avoid the stress and stigma of foreclosure.  Short sales also help mortgage lenders by avoiding the costs of foreclosure, including the burden of maintaining and reselling properties acquired through the…Read More

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