Short Sale Fraud Schemes

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What is “Short Sale Fraud”?

A short sale occurs where the profit from a property sale is less than the debt owed on the property mortgage.  Short sale fraud occurs when a person intentionally misrepresents facts in order to induce a property owner to participate in a short sale.  Usually it’s necessary to prove that the homeowner wouldn’t have engaged in the short sale if the misrepresentation did not occur.

Short sale fraud schemes can be aimed at any of the different steps involved in the short sale process, including:

As the number of short sales increases due to economic pressures, the risk of short sale fraud also increases.  Thus, it’s helpful for homeowners and prospective buyers to be aware of how short sale fraud schemes work.

What are Some Examples of Short Sale Fraud Schemes?

Short sale fraud can come in many different forms. Also, there may be several parties involved in a short sale such as the property owner and various lenders, and fraud schemes can involve more than one party.  Some examples of short sale fraud schemes include:

Part of the difficulty with many short sale fraud schemes is that the fraudster will usually try to disappear after the fraud is accomplished.  Thus, be sure that you check for credentials, licenses, and that you verify the person’s contact information.  Be wary of any persons who are from out of state or who don’t have any working contact information. 

What are the Legal Consequences of Short Sale Fraud?

Short sale fraud is a crime and can be punished by penalties such as fines, suspension of professional licenses, and possibly even jail time.  Also, one thing about short sale fraud schemes is that the victim will have to prove that they weren’t a party to the fraud. 

That is, a person who is the target of a short sale fraud scheme may also be guilty if they cooperated with the fraudster.  This often happens where the home owner is desperate to avoid foreclosure, and is more willing to bend the rules just to complete a sale.  As the saying goes, if an arrangement seems too good to be true, it probably is- and it may be illegal as well. 

Finally, short sale fraud can result in a lawsuit against the fraudster, who may then have to pay the victim civil damages for any losses caused by their fraud.

Do I Need a Lawyer if I Have Issues With Short Sale Fraud?

If you have any questions or concerns regarding short sale fraud schemes, you may wish to speak with a lawyer immediately.  Your attorney can help you recover any losses you may have experienced due to short sale fraud schemes.  It’s also worth your while to hire a lawyer well before a sale occurs, so they can help you to recognize and avoid fraudulent arrangements.

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Last Modified: 07-19-2013 12:41 PM PDT

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