Distressed home-buyers are easy prey to perpetrators of short-sale fraud. In this fraud, the perpetrator presents the homeowner with a bogus purchase contract that they will purportedly present to and negotiate with the mortgage lender on behalf of the homeowner. The perpetrator will secure possession of the property, supposedly to do some alterations necessary to secure a new loan on the property. While “negotiating” the short sale with the mortgage lender, the perpetrator rents the home to independent third parties and pockets the money, all without the knowledge of the homeowner.
Other Forms of Short-Sale Fraud
Another form of short-sale fraud involves perpetrators colluding with real estate agents, appraisers, or others, to give faulty appraisals to potential sellers and/or banks in order to purchase properties at less than the fair market value. Once in control of the home, the fraudster may resell or finance the home at its real market value.