Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

26.2runner: (April 06, 2010 5:51am)

If the stupid banks would tell realtors what price they would take and not take 9 months to approve offers (bank of america), then realtors would not resort to this type of fraud.

catlady: (March 30, 2010 5:22pm)

Short Sales bring out the vultures, they bring out all the unethical agents in the business, that's why we realtors have such a bad reputation. But, since this is America, the land of the free and the crooked, it makes sense. Maybe some day this country will self distruct and be reincarnated into a just society.

obxrealtorgirl: (March 30, 2010 4:44pm)

I thought you did a great job with the Salvation Army story. The truth is the truth. Thanks for bringing it out.

ThePhoenix: (March 28, 2010 8:00pm)

Shortsold1234 said: "Where did you fools learn contract law." Law school, what about you?

Leslie in Denver: (March 28, 2010 2:56pm)

To ssfranny - email me at [email protected]. I have just the ticket - only 48 states, but hey!

ssfranny: (March 27, 2010 3:25pm)

I'm looking for a good federally chartered Savings bank who can do loans in 50 states to be a loan officer for. I've been in the mortgage business for 15 years and had a shop with my dad but hes retiring and doesn;t have FHA. If you know of any good ones to contact, email me at [email protected]

itcouldhappentoyou: (March 27, 2010 7:04am)

So there are lots of people living in million dollar mansions in Southern California. Is this a sign of things to come for million dollar mansion owners (including celebs) in California? Could this happen in a workers of the world unite, USSA uptopia? (See: Dr. Zhivago) ;-)

joecolorado: (March 26, 2010 6:27pm)

valuequestor-I will be blogging for a while yet, but need to get gainful employment.will be visiting this site even though I may not be an appraiser,I will have my license active until 12/31/2012 as I have already paid for it until then,but the mandatory education costs will be the first to go.

5pence: (March 26, 2010 6:00pm)

hey valuequestor : Still here. I've been looking into personal property appraising, boats, etc. I actually got a job yesterday and 1 on hold, so things might be picking up for springtime and summers approaching - so my fingers are crossed. I would like to hear if things are picking up or getting worse so I can make more concrete plans than playing it by ear like I'm doing now. If anybody would like to keep in touch by e-mail, mine is [email protected]. Sidenote: It was good to see a multitude of brokers posting today. I'm here to learn as much as anybody else and todays posts added to my knowledge. Have a great weekend all!

loaner55: (March 26, 2010 5:54pm)

Frank or Brian, For some unknown reason the system is not letting me forward this to a friend. Help ?

valuequestor: (March 26, 2010 3:22pm)

Joecolorado and 5pence if you guys are leaving the Biz, I would like to stay in touch. I hope both of you will keep posting. I would love to do something els at this point. My other love is sailing and stinkpots. Boat brokerage not exactly a hot spot in the economy right now.

valuequestor: (March 26, 2010 3:19pm)

If the contract states "or assignee" and you as the seller don't challenge or question it, tough luck. How stupid are the banks?....ahh....never mind. All "fees" must be reported.

Your barber: (March 26, 2010 2:00pm)

There is another way to look at the "and/or assignee" issue: The buyer on the contract is a guarantor. He has the cash to close as per the contract. That certainty unto itself has valid economic value to the seller. If he chooses to assign his position as buyer, at no cost or loss of time to the seller, there is absolutely no harm done to the seller. Remember, the parties are the buyer and the seller, not the "other guy" who was squeezed out of the deal.

pdxBroker: (March 26, 2010 1:55pm)

@ SherwoodOne. That is a great point. AND What incentive do Realtors have to even write on short sales? Having the bank respond to an offer like that does address the time issue and does serve in the interest of helping the homeowner because they get an answer. Maybe then it wouldn't go to foreclosure when the banks REALLY make bank.

Anonymous: (March 26, 2010 1:49pm)

I have the letter from Rodney L Hansen, Housing Program Director for the USDA Rural Development program which states and I quote "... Loan Program will likely be exhausted by the end of April 2010." If you have any questions please call the them at: 202-720-1452

SherwoodOne: (March 26, 2010 1:39pm)

With regards to the “or assignee” on the contract, I have never attempted it but I’m sure the reason some agents are doing it is because the lenders are taking 6 to 9 months and longer to approve a short sale. I personally think if the banks brought that ridiculous time frame into line, this work around wouldn’t even be happening. Furthermore, the bank is actually the winner with “or assignee” as a pre-approved short sale is similar to an REO with a normal 30 to 45 day close which means the lender gets their proceeds quicker, and the statistics I have read state that the bank nearly always obtains higher offers when the property is in a short sale than once it’s an REO. There is no way a lender needs more than 60 days to review and approve/disapprove a short sale and then another 30 to 45 days to close it. It may also bring back buyers who had been steering clear of these properties because of the timelines involved with no assurance of ever owning the home.

Catlady: (March 26, 2010 1:08pm)

The whole problem is the short sale., who ever approved such a thing? There is too much fraud involved: the seller hides his assetts and the bank doesn't give a hoot. Let the banks go to foreclosure, maybe some sellers will find money to make their mortgage payments.

CornerstoneKathy: (March 26, 2010 12:48pm)

Lovin having you guys in The Niche Report!! Great article!!

joecolorado: (March 26, 2010 12:37pm)

madashell: The date and estimate of value is stated in the report for a reason!THAT is the date the property is valued and the second date states the date of inspection.If an appraiser updates the report with a new value or ratifies the initial value,without complying with USPAP then they are liable.What happens if a report is completed on 3/1/2010 and updates are required on 4/1/201 and in between those dates the house is damaged or is razed or destroyed in a fire or the value is seriously affected in some way? If the appraiser has not complied with USPAP then S/he is liable.

Anonymous: (March 26, 2010 12:30pm)

actually Grant they said as of a certain date(within the next 60 days or so) they are due to run out of funds. they never said that you can no longer get USDA funding. Pay attention to detail before you criticize

grant: (March 26, 2010 12:21pm)

appreciate the videos, however they are not always 100% accurate. recently a statement was made that "non approved FHA brokers will be able to orignate FHA loans by March 1st". as a non approved FHA broker i know for a fact that is false. additionally, a statement was recently made that "USDA has run out of funds". that is also false. i obtained an approval from USDA on a file yesterday. again, i appreciate the videos, but i take the matter of fact statements with a grain of salt....

CaliREAgent: (March 26, 2010 12:10pm)

My experience with short sales as a Real Estate agent for 19 years has been as follows: As the listing agent I have never done a BPO on my listing,or when I represent the buyer. The bank contacts another agent,not involved in the transaction,to do the BPO.All of the short sale approval letters that I have seen name the buyer,and say that the approval may not be assigned.It has also been my experience taht when buyer #1 walks,and buyer #2s offer is sent to the bank,the entire process starts all over again from square one..I have many times submitted offers on "approved short sales" with exception to Wachovia,they still took 3 to 6 monthe..It depends on who the lender is.

Shortsold1234: (March 26, 2010 11:45am)

If and/or assignee(s) is put into the contract it is completely legal and ethical. Where did you fools learn contract law. The problem is if the "straw buyer" actually has no intent to perform. If the buyer would perform if his deal got accepted out right and no condition were changed (this is extremely rare) then there is absolutely no fraud. The key is making all the correct disclosures to all parties throughout the process.

IrishBull77: (March 26, 2010 11:15am)

Go GAELS! hey dad394, i am a SCU Bronco class of 83. St. Mary's is on a lock to be a BBALL Stronghold for years to come as Bennett is one of the best coaches in NCAA. SCU needs to recruit better and the only way they can is if they bring in new staff.

IrishBull77: (March 26, 2010 11:12am)

Sorry LarryWow, guess we are here to amuse you eh?My doctor requires that i stay within 30 miles of the ocean. Pueblo too land-locked but i wouldn't mind visiting and a round or two of golf...you gotta package deal for 90 minute seminar?

madashell: (March 26, 2010 11:09am)

Apparently there is a new appraisal requirement. I mistakenly thought a appraisaers opinion of value was based on the date they viewed the property, or a date they assigned to the appraisal,and value. Apparently the lenders have deceided we provide perpetual values value at no additional cost. Should a appraiser be responsible for the value 3,4,and 6 months later due to the lenders inability a fund the loan in a reasonable time. These constant request for free value updates, cover up review conditions to get free updates must stop. Happy to help, but we cant work for free

madashell: (March 26, 2010 11:09am)

Apparently there is a new appraisal requirement. I mistakenly thought a appraisaers opinion of value was based on the date they viewed the property, or a date they assigned to the appraisal,and value. Apparently the lenders have deceided we provide perpetual values value at no additional cost. Should a appraiser be responsible for the value 3,4,and 6 months later due to the lenders inability a fund the loan in a reasonable time. These constant request for free value updates, cover up review conditions to get free updates must stop. Happy to help, but we cant work for free

byoung: (March 26, 2010 11:08am)

What is thei TBWS contest all about ?

Larrywow: (March 26, 2010 10:57am)

Wow.. you guys are very funny... see my site at www.HomesPueblo.com to see homes in Pueblo Colorado.

Cali Appraiser: (March 26, 2010 10:42am)

There is definitely room for fraud. However, I can see this being used to get a higher offer that might otherwise be realized. In my market no one wants to deal with an unapproved short sale unless they are getting a screaming deal. By getting the short sale pre-approved, you might actually be able to sell it for more. One house I know of had offers of $1.3m which actually made it a bit short. Once advertised as a short sale, the offers were $150-250K less. Same house, same market but the difference was an unapproved short sale. Agent tried to get a pre-approval but the bank wouldn't do it. So you say, fine, the bank will get a larger loss and that is their own fault. Problem is, the bank wanted the homeowner to be on the hook for the full loss even though at least part of it was caused by the onerous short sale process that no "conventional" buyer wants to touch.

IrishBull77: (March 26, 2010 10:41am)

Dodd, Frank and especially Obama and Geitner, and for that matter Bank o' America are all a day late and a dollar short. We should've let BoA fail. Their offer to help 45,000 troubled homeowners is a joke. How many hoops do the borrowers need to jump through this time? This is merely a PR job to offset all the public criticism, just like the radio ads on NPR stating that they are allocating billions of dollars to low to moderate families over the next ten years...more rhetoric and hyperbole, great job bofa spokesperson! Also, guess who is paying for all those ads? Why bail-out money of course! Brilliant! The worst of the no doc sinners from WAMU and Countrywide continue to perpetuate the ills that caused this mess in the first place...and don't forget their realtor partners in crime. And so they continue their crimes..short sales to relatives of the owner, YES, I know, it's illegal to do a less-than-armslength transaction in a short-sale. Does anyone take legal affidavits seriously?

joecolorado: (March 26, 2010 10:39am)

Thouht I would share an incredible laugh I was given by adn AMC.Thye wanted a full 1004 appraisal report on a $4,000,000 property which unfortunately is located about 1/4 mile East of a hazardous waste site and were willing to pay all of $225.I broke a rib I laughed so hard.

Red Burke: (March 26, 2010 10:29am)

There is no Lender in tyhe universe that accepts an "Assignee Clause". This has been a scam by companies "training" wanta-be investors for MONEY.

joecolorado: (March 26, 2010 10:29am)

I find it absolutely amazing that none of us can work out whether this is a fraud or not!I assume that ALL of the commentators have taken madatory ethics classes which goes to show they are pretty much a waste of money and time,as something definately smells fishy in Denmark.Interestingly enough from the appraisal aspect,the "additional" fees($2,500) which are above and beyond the "typical" Realtor fees have to be accounted AND adjusted in the appraisal report as they are"other than typical/normal" for the market.Just thought I would add fuel to the fire.

gsuarez: (March 26, 2010 10:19am)

Guys, I agree that no lender I'm aware of allows assigned contracts but back to the fraud issue. @9erFAN- when the contract is assigned the terms don't change. That new buyer now owns a cash contract with no financing contingencies and if he can't close he loses his deposit. Where is the fraud here guys? As long as the "straw" buyer intends to buy if they can't sell the contract, what indeed is the harm as long as everything is disclosed?

Utah Mortgage & Real Estate Guy: (March 26, 2010 10:13am)

Ok, I understand the way the agents are getting Short-Sale Approved with Cash Buyer Sales Contract. I just did some quick research: of the 14 companies I contacted this morning: 11 of them DO NOT ALLOW ASSIGNEE PURCHASE CONTRACTS, PERIOD. I am unsure if these are just in the State of Utah, or if the lenders have this rule nationally. If the potential buyer (the assignee) want to purchase the property, they have to submit a REPC without the previous buyer on the REPC. Granted, not all lenders have this guideline, so it is possible that the fraud can continue or grow. But it appears to me that the lenders are catching on quickly. Most of the Fraudulent schemes are curtailed quickly. The Fraud scheme's that are kept quiet (IE: no website's explaining how to do it) that have the potential to be disasterous.

9erFAN: (March 26, 2010 10:03am)

Look at it from another way...the CASH BUYER with proof of funds for the bank NEVER INTENDS to buy. They are the straw buyer and once the PRICE is negotiated (Based on CASH) the Realtor substitutes in the new Buyer (Who by the way needs to get a loan and thus extends the escrow and now the Bank needs to do repairs in order for the Buyer to get the loan). This is FRAUD - Realtor KNEW this would not be a CASH deal-just a way to get the banks to accept a lower price THINKING it would be CASH and CLOSE QUICKLY.

Ancient Appraiser (retired): (March 26, 2010 10:03am)

Just curious - maybe somebody knows something I don't (not a big leap). Is there an un-written rule through AMC's that the appraised value has to be 5% less than the market? Seems like if the home is worth $400,000 and EVERYBODY knows it's worth $400,000 including buyer, seller, agent, independent appraiser etc. - it will come in at $380,000 every time!! How does this help the market? Am I the only one ?

frankgaray: (March 26, 2010 10:02am)

Utah Mortgage - What these companies do is provide not only a buyer to sign the contract, but also bank statements to prove the cash to close is available. The fake buyers actually do have enough assets to buy the home cash.. that's how they get the contract approved.

pdxbroker: (March 26, 2010 9:56am)

Why on earth would a Realtor waste their time with this sceme? You have already pointed out that banks make more money on foreclosures.

Ancient Appraiser (forced retirement): (March 26, 2010 9:52am)

Trying to close a B of A short sale now. After pulling teeth and getting everything done in four months, the buyers have signed off and closed and we are still waiting for someone at the Bank to sign the HUD ! Every phone call leads to multiple people who "Don't know nuttin" !

Utah Mortgage & Real Estate Guy: (March 26, 2010 9:46am)

Continued From Previous Short Sale Fraud Post. The "assignee" terminology is not a new thing in the sales contract. This type of Contract was being used a ton during the housing boom of the last couple of years in the very hot markets of Western United States (SLC-UT, Las Vegas-NV, Phoenix-AZ, just to name a few). And the Buyer's lender's caught on quickly. Investors were getting Homes Under Contract as Fast as possible and then taking these Contract to Agent's Buyers and offering the the assigned contract for a fee. I am a Mortgage Broker and Real Estate Agent in the State of Utah. I have 30+ wholesale lenders to send loans to. To my knowledge, there is NOT ONE LENDER that WILL ALLOW an "ASSIGNEE" purchase contract. When my lenders see this terminology, they request a REPC Addendum notifying ALL parties who the Designated Assignee is. If all parites don't agree to this, the REPC is not VALID. From my understanding, there are many lenders that just OUTLAWED ASSIGNEE CONRTRACTS.

pdxbroker: (March 26, 2010 9:36am)

Short sales with or without assignees WASTE OF TIME

BoKnows: (March 26, 2010 9:32am)

This entire short-sale process as well as the foreclosure process is a mess. The houses are not up to FHA standards in many cases so buyers without deep pockets are out of the running. The answer is investors who buy cheap, put in the required work and sell the homes (yes, a nice, clean, legal "flip"). Unfortunately, there are not enough lenders willing to lend to investors so the houses sit and sit and turn into eyesores or worse. On a related note, yes, time for a haircut. NO, don't remove the skydiving ninja! The humor ADDS to the site; the people who can't take a joke need to check themselves. In THIS economy, the more laughs the better!

Utah Mortgage and Real Estate Guy: (March 26, 2010 9:32am)

There are a couple of problems with your assumptions in the Short-Sale Assignee Fraud situation. I have originated 15 short-sale purchase loans in the last two months. EVERY, and I stress EVERY, seller's lender trying to approve the short-sale, requested this documentation from the Buyer (and buyer's loan officer): Copy of AUS (DU, DO, LP, etc.) approval, Copy of Buyer's Bank Statements showing buyer has Funds (assets) available for Down Payment as shown in the AUS approval, and a Copy of the Borrower's Credit Report. All 15 of these (banks/lenders) required this information before they would approve the contracted sales price. If All Banks (nationwide) would follow this process, the Short-Sale Fraud you have eluded to would never happen. All of these transctions were closed in the Sale Lake City, UT area and there were 9 different banks involved in the 15 transactions. See Next Post for more info:

Dweebster: (March 26, 2010 9:25am)

Brian - your hair is starting to remind me of Foghorn Leghorn . . . give us annother challenge to shave it

PDxbroker: (March 26, 2010 9:23am)

As a Realtor, I educate my buyers about short sales... They most often choose not to. Why would they want to write on those? They take months, they may require cash at close, the banks take multiple offers... As a buyer broker I would much rather sell a home that is not in the process of foreclosure. Any other house is a better bet. I think banks need to wake up to the fact that they are loosing business by how they treat offers in this process. Too long to respond. They shop our offers. They don't do repairs. They tend to need more money. Why do that when there are foreclosed properties? They repair and respond and don't shop your offer. AND there are plenty of houses on the market that aren't impacted by all of this. It is a choice. Choose to do short sales - close one out of 10 offers made. Choose not to close 9 out of 10 offers made. Easy choice.

Barber: (March 26, 2010 9:15am)

Brian, time for a haircut.

MetMan: (March 26, 2010 9:01am)

I work for a large national lender and we REQUIRE that the borrowers be named on the shortsale agreement. If the actual borrower is not named on the shortsale agreement, we will not clear the loan to close.

Fishkill: (March 26, 2010 8:53am)

If the contract is enforced by the seller if a new buyer is not found, then what harm could they be. The seller still sold the property to a cash buyer for the price the bank was willing to settle for. If the seller knowingly executes a fake contract then it is fraud.

FortWorthBroker: (March 26, 2010 8:52am)

Intend not to buy is not an issue on the flips I know of. The investor buyer does purchase on an A to B transaction, then sells on a completed different and totally new funded B t C transaction. Total disclosure of investor to buy and sell for a profit all the way

gsuarez: (March 26, 2010 8:51am)

So Frank- r u saying that if the Realtor perpetuating this "fraud" doesn't get another offer and the short sale is approved at that great price, the original "straw buyer" will NOT close on it? If that's the case I completely agree that this is fraud, but I bet that's not the case. As many have mentioned, it takes so long to negotiate short sales that most Realtors proficient in doing them have cash investors in the wings ready to make offers. These investors are more than happy to close on a great deal but are just as willing to sell an assignable contract and have no risk on their part. Why is there a problem with that? I remember back in the heat of the market when people were trying to sell new construction contracts to capitalize on "appreciation" achieved during construction. Was that fraud too? As long as it's all disclosed I think it's good business sense.

dad394: (March 26, 2010 8:47am)

Go Gaels? I'm holding my nose rooting for them tonight - Santa Clara Bronco class of 85

wholesaleAE: (March 26, 2010 8:44am)

I just came across this scenario this week. Mom & Dad let their home go to foreclose because they are upside down. Son and wife purchase "mom & dad's" home from the lender at a greatly reduced price as an o/o loan. Hum, smells a little fishy.

frankgaray: (March 26, 2010 8:43am)

DLONG - I agree.. we need something new there.. I'll work on that. Thanks!

WannaSmokeSomething..SmokeThis!: (March 26, 2010 8:39am)

This is simple, It's all about disclosure.When there is no disclosure, it's fraud, be it $25, $2500 or $25,000. Disclose, Disclose, Disclose!

HAPPY DAYS: (March 26, 2010 8:39am)

PIMP and HOES: DO NOT WORRY You do know that all accorn is doing is closing the accorn name and will reopen under a different name.

QBofRE: (March 26, 2010 8:39am)

On any RE contract, disclose, disclose, disclose. If everyone agrees, where's the fraud? Reality is, on short sale contracts, banks won't accept an assignable contract anyway. In Colorado, there is a check box in the contract for assignable, not assignable. Secondly, if the price is low and only attracts investors, I can only guess the condition of the property.

IllinoisBroker: (March 26, 2010 8:36am)

Next team effort: push a rule that requires short sale application reply in less time; say 7 days versus the current 5 months! This would ignite the housing market at NO COST. Banks & Servicers would have to actually SPEND some of the free bailout funds we gave them to hire CAPABLE PROFESSIONALS to move these through. Oh, and maybe a uniform short sale app & doc list would help!!

Turk: (March 26, 2010 8:33am)

Great outro, guys. What is the connection to St. Mary's?

Anonymous: (March 26, 2010 8:31am)

Would like to forward the Daily to policy makers, but too much comedy & "sexy-fest" stuff to be taken seriously. How about a more formal Daily for sharing, and another for "industry players"?

CLARK KENT: (March 26, 2010 8:26am)

FRANK AND GARY, GOOD WEBCAST AND POLL TODAY. THANKS.

DLONG: (March 26, 2010 8:25am)

Ok you guys want some criticism… well I watch you show religiously to start every day and I love it … you guys are total goof balls, however deliver very good information and have created a place for an intellectual (mostly) meeting of the minds. Furthermore the links and promotion of inner industry sites and individuals is also a great thing. Love everything about the show. Now for the kick in the “junk” please, please, oh for the love of god please remove the part with frank falling from a plane with knives. That just really needs to go :) ( no joke) that’s all the criticism I have for you guys. Other than that GREAT JOB !!!

WorkHard: (March 26, 2010 8:25am)

ThePhoenix - Under the scenario discussed in the video - the BUYER is real, and has the cash to close, they just have the ability and the intent to assign as per the accepted contract. If the bank approved the contract within the allowed time, and the buyer decided not to close because they could not assign it, then they would be subject to liquidated damages, etc. Again, we are assuming that this "Straw Buyer" is showing actual proof of funds, etc. to the bank, and therefor can close if the bank approves the contract in time.

CLARK KENT: (March 26, 2010 8:19am)

WHEN SOMEONE WAS NAMED AS A BUYER IN A CONTRACT AND WAS NEVER INTENDING TO BE A BUYER, THAT IS FRAUD PLAIN AND SIMPLE. ===BEWARE AGENTS, YOUR E AND O WON'T COVER THIS IF YOU KNEW ABOUT IT.

WorkHard: (March 26, 2010 8:18am)

Anonymous - depends on location, if dual agency is allowed or not.

So Cal Agent: (March 26, 2010 8:18am)

Way too many double deals in LA and Orange County. Thinking the next wave of problems will be IRS problems for the sellers may owe more taxes (because of a refi way below market sales)and attorneys will called -someone with deep pockets to blame and or sellers will be forced to file BK anyway.

ThePhoenix: (March 26, 2010 8:15am)

The problem with the purchase contracts on those sales is they are not purchase contracts but option contracts. The essential element of a valid contract is consideration. Consideration must include sufficient legal detriment. The straw buyer does not have the ability to close the transaction but can only do so by an "illusory promise" to secure a "real" buyer who is unknown. Any agent presenting an option contract to a seller and the lender as a purchase contract is most likely committing fraud. Further, in California, the cases hold the transaction involves a secret profit (the holding company) that legally must be disclosed. This stuff has been around for years. For grins, read the case of Ward v. Taggart, 336 P. 2d 534 - Cal: Supreme Court 1959, which talks about secret profits and real estate agents. Yeah, that is a 1959 California Supreme Court case.

Anonymous: (March 26, 2010 8:14am)

With regard to the "assignee contract", there is absolutely nothing illegal, immoral, or unethical about assignable contracts. The *only* unethical behavior would be the listing broker, who owes fiduciary duty to the seller, assisting the buyer (assignor) to find a new buyer (assignee) without disclosing and obtaining written permission from the seller. In the example, the "cash buyer" (assignor) must retain a different broker to find a new buyer (assignee). The listing broker cannot assist the assignor to find an assignee without prior written permission from the seller. Assignable contracts happen all the time. There is nothing inherently wrong with assignable contracts. The real issue is the ethical behavior of the listing broker, who must represent the interests of ONE PARTY AT A TIME for a particular property.

WorkHard: (March 26, 2010 8:12am)

Fraud or not, depends on the facts. Under the described transaction, a cash buyer makes an offer, and adds "or assignee" clause to the contract. The seller accepts it, and then asks the bank to approve it. First of all, I suspect that the bank does not approve it within the allowed time for the contract - therefore the offering buyer has the ability to walk away without losing their earnest money. Second of all, if the bank does approve the contract, it now has a cash buyer - if the assignee buyer cannot perform with cash and has to get a loan, then the bank is under no obligation to allow the sale to go through. Also, it is important to remember that the agent works for the seller, not the bank. To call this fraud, when there is clear assignee language is a stretch. Fraud from other "short sale" agents, is that they submit a completely fictitious buyer to the bank to get the short sale approved, then once they have the approved price, they cancel and put it BOM.

Esq.: (March 26, 2010 8:10am)

Frank: I would be glad to elaborate. Realtor starts negotiating in the name of Joe & Suzie. Month #5 Joe & Suzie walk away. Month #6 Realtor re-markets the property. Month #7 Realtor gets a new buyer (John & Mary) and resubmits the short sale package. Month #12 or 13 (5 or 6 months after contract) hopefully the short sale is approved and hopefully John & Mary are still around. If they are: Great If not: OUT OF TIME - Sheriff's Sale. Option 2: Realtor negotiates in the name of Joe & Suzie or Cash Investor LLC and/or assigns. Month #5 Joe & Suzie bail because they found a new house that just came on the market but the Realtor keeps negotiating and gets the payoff. Now John & Mary fall in love with the house and John & Mary take an assignment form Joe & Suzie and close within 45 days!!! Happy Buyer. Happy Realtor. Happy Seller. 1 less Sheriff Sale so Happy Bank!!! Who cares who makes a $2,500 assignment fee?

Anonymous: (March 26, 2010 8:09am)

First Americ – I mean Philippines – Corenot too logical. This is a recap of an issue experienced recently. It is suggested whatever business you do with them be it Realquest or Realist Data Service you get the agreement in writing and specific terms of use. I was sold a Month-to-Month service but when I tried to cancel, I was told I had a Year Contract. The only person that really benefited from this second hand data collective was the Sales person that lied to me. It took 17 phone calls, 5 Philippines representatives of First Who-ever and two-thirds the Accounting Staff to provide me with a receipt of payment and confirm MY CANCELLATION OF SERVICE. I never thought it was possible to HATE a service provider but it is. I located one other data provider though limited to 19 States – I have had wonderful success with the company National Data Collective actually established for Appraisers. https://www.ndcdata.com/Default.aspx

GODLIKE: (March 26, 2010 7:53am)

FRANK AND GARAY FortWorthBroker and I are in the same time zone and his 8:52 post was on the blog when I began posting and yet every post I've done today has been posted BEFORE his. It's almost 10:00 here and yet my posts are showing up as 7:xx. This makes it very hard to follow the blog as you can't just look at the top to see what you've missed, you have to reread the whole thing. That might be one reason posts are down.

GODLIKE: (March 26, 2010 7:51am)

ANONYMOUS so the Realtor has 30-45 days to find another buyer AND get their loan approved so that they can close on time? GOOD LUCK! Since it's taking pretty dang close to 30 days to get a loan approved. What used to take me 10 days now takes very close to 30 days. Now that's progress!

GODLIKE: (March 26, 2010 7:48am)

We see Jesse James as a bandit, but back in the day he was considered a folk hero because he was sticking it to the banks who were foreclosing on everyone's properties. Are the Realtors today's version of Jesse James?

Anonymous: (March 26, 2010 7:46am)

Godlike, from the short sale approvals I have seen the original contract is the standard 30-45 days to close we normally always have to do an extension, on the straight forward short sales.

GODLIKE: (March 26, 2010 7:42am)

For those asserting the straw buyer isn't fraud what happens if the Realtor doesn't find a new buyer before the designated closing time? Will the first buyer close? If not it's also fraud. There are several levels of fraud in here. Interesting question how long do these "contracts" give for closing on the part of the first buyer? How much time does the Realtor have to find a real buyer?

GODLIKE: (March 26, 2010 7:31am)

The problem with the short sale fraud (and it is fraud) is that the Realtor is involved. The Realtor is charged to work FOR the Seller (their client) and to get them the highest price they are capable of. If they knowingly defraud the seller then that has always been cause for license revocation in years past. If the agent is an unknowing dupe then that's another story altogether. The way you presented the story the agent is a dope, not a dupe.

GODLIKE: (March 26, 2010 7:28am)

ONCE AGAIN THE BLOG IS POSTING OUT OF ORDER. MY POSTS ARE BEING POSTED BEFORE I WAS EVEN OUT OF BED.

PJ: (March 26, 2010 7:27am)

Frank, Esq, Here in some of the areas of Chicago & burbs the banks may have foreclosed on the property but have not paid to have the sheriff remove the occupants. Our guess is an unoccupied home is subject to vandals and the hope may be that the previous owner realizes they are being given a gift of free occupancy and will not sell off the insides or trash the property when finally asked to leave.

gfamilyrealestate: (March 26, 2010 7:26am)

This is no different then what I've been doing for quit some time, buying in an ABC LLC (my company) and/or Assignee - then creating a single purpose LLC for the project that will in the end hold ownership/title - technically a different buyer/entity - I don't see how its fraud,.

GODLIKE: (March 26, 2010 7:25am)

In the past NAR has said transactions like this were cause for an agent to lose their license. Who knows what anyone says nowadays

BoKnows: (March 26, 2010 7:15am)

Yeah, but in most cases the bank is never disclosed about the B to C transaction. If you are buying from bank and have a buyer at a price higher than the bank received, in many cases the title company will not insure. Of course in most cases they are using the sale to C to fund the purchase from A and that's a big NO.

anne: (March 26, 2010 7:11am)

I agree with Esq. The realtor gets a buyer, they send an offer to the bank who continues to foreclose the owner. Bank finally after receiving their SFJ in the foreclosure and receive a sale date, accept the offer to close within 30 days, buyer either walks (because the contract has not been approved) or can not obtain financing that fast, and owner loses the property at the foreclosure sale. I thought I heard where the banks have to accept or deny an offer in less time?

frankgaray: (March 26, 2010 7:04am)

Esq... elaborate a little more on this. My question is if it takes 9 months to get an answer and by then the sheriff comes in, how would that change in this situation, it will still take 9 months with the fake cash buyer. right?

Investigator: (March 26, 2010 7:02am)

I hope the new program addresses the ridiculous fees the Real Estate agents are paid, 5 to 7%, really. If the crime didn’t pay the fraud would not be so rampant. Crime pays here.

Esq.: (March 26, 2010 7:02am)

Realtors are constantly getting under contract with a "Joe & Suzie" home buyer; starting to negotiate a short sale (which takes 6+ months); just to have their buyer walk way after waiting 5 months of waiting. Then they need to start from scratch. If this happens a 2nd time then the homeowner looses the home to sheriff's sale because the bank dragged their feet. I think the Realtors are submitting these "and or assigns" contracts so they can save people from sheriff's sale and not to make the $2,500. How many times do you need to work a sale for 9 months for nothing before you try to figure out a way to get your deals closed. Anyone pointer a finger needs to look at the reality of the situation out there.

frankgaray: (March 26, 2010 7:01am)

Tahoe.. good points. Thanks.

brian tbws: (March 26, 2010 7:00am)

one of the problems that came to our attention is agents taking cash on the side to accept offers. we live in a market where properties are moving so the potential to try and run a scam exists. I dont think its a big problem but its happening. Also I get it on the length of these deal and the fact that many banks wont consider a short sale until an offer is in hand. Really industry conditions have created this mess. Agree with Frank as well. One of the best forums we've had.

anne: (March 26, 2010 6:58am)

Just FYI alot of the bank short sale approvals that the banks send state there can not be any changes to the contract or their approval. So the assignee will not go through considering the bank needs a copy of the HUD-1 from the closing.

BoKnowsClosings: (March 26, 2010 6:57am)

Any time someone gets a fee off the HUD is a bit 'gray' don't you think? Everyone keeps saying intent--fact pattern is 'cash buyer' is never planning to buy. Disclosure is another facet of this scenario. But I totally agree that these banks can't deal properly. Lose a portion of the property value on a short sale or lose almost all of it through foreclosure--seems like a simple business decision but they don't have the staff to keep up, no one knows what the other departments are doing and finally no one has the authority to actually approve. But why am I spelling this out--y'all know the deal already. Just venting! As for a new government program for short sales (or anything, choose an acronym or buzzword)--All I can say is, "Gee the old ones have worked so well, how can a new one fail?" HA

Tahoe Loan Guy: (March 26, 2010 6:56am)

Frank..Remember, HAFA is voluntary and for non GSE loans, I think it changes little

Tahoe Loan Guy: (March 26, 2010 6:52am)

Frank, They never buy? I doubt that and if true they are fools for posting it!

Ric: (March 26, 2010 6:50am)

Also, guys. As real estate brokers, we have to suggest that if a client has questions about the contract that they consult their attorney. Wouldn't it be fun to hear what the judge would say about the lenders saying the $ 15/hr lying, cheating, arm-twisting former collection agents they use as "negotiators" were duped and that their cost cutting measures caused their claimed loss. I think the judge would not be impressed by the argument that Bank's can't afford an attorney. Your know the rest of the cost cutting measures - paying $40 to a real estate agent instead of $ 350 to a real appraiser. Lenders caused the housing bubble and strategic foreclosures are the only way to get them to pay for it - as the govt is putting impediments in the way of solving the crisis any other way.

frankgaray: (March 26, 2010 6:48am)

Tampa Bay... the problem is that the "intent to NOT buy" is not disclosed... again, question is.. is it ethical? Does that non-disclosure equal fraud? This is a very controversial method of establishing a short sale price for sure.

tampabayjay: (March 26, 2010 6:46am)

So lets get it straight...The "cash buyer co." goes through all the bullshit the banks put them through to get an approved price and they make a lousy 1500 to 2500. I wouldn't deal with their crap for that! So I say good for them....and the Realtor gets an approved price before marketing the property (Helloooo, can we say "obvious")that seems like an intelligent thing to do. This technique should help expedite the short sale process, I don't see any fraud as long as everything is disclosed.

frankgaray: (March 26, 2010 6:46am)

Tahoe.. good point, however these companies are set up specifically with no intent to buy. They are simply contracted to sign the cash offer for a fee at the end.

frankgaray: (March 26, 2010 6:44am)

Ric - Thanks - And to all the rest.. I wonder how the new Obama HAFA short sale deal will improve the situation since establishing a price up front is part of the program... remember... it kicks in on April 5th as well.

Tahoe Loan Guy: (March 26, 2010 6:43am)

Why are the assumptions no intent to purchase? There is no assignee, but the investor is stuck with the house or at least the earnest money for non performance if the transaction does not close. Not only legalk, acceptable, but it has been a valid strategy since sales started! I have investors line up to buy properties at 90% of fair market, if the bank accepts they close, if someone wants to buy the contract it's assigned, If the bank declines then no issue. The intent is clear and fraud is absent. It's when the buyer is not real and a contract is drawn that fraud is present but

PJ: (March 26, 2010 6:41am)

Guys, I do not see the downside. Real owner occupant buyers do not or cannot hang on for 3 to 9 months or more to wait for the bank to aggree to an offer. They have leases with landlords that are not interested in a month to month rental. And they probably do not want to put funiture in storage and move in with family for who knows how long. The 'straw' buyer is simply an investor that is buying the property and either selling before he closes or will have to close, foot the carrying charges and sell later. If the bank sees the clause and agrees, that is their businness to get it off the books at a justifiable price. It gets a home off the market and a family into a property. How is that different from the old days when flippers bought and sold and the realtor knew he was dealing with a flipper. Was the realtor or anyone supposed to feel like a criminal because a seller was selling cheap to a investor?

BoKnowsClosings: (March 26, 2010 6:39am)

Can't believe that the current numbers on the poll say 16% believe that it is legal and ethical to defraud a bank (call it what it is--no matter how much you hate said bank, it's fraud).

Ric: (March 26, 2010 6:38am)

Glad you guys aren't above criticizm cause it is clear you have never negotiated a short sale. The Bank won't approve a short sale price without an offer (new govt program purports to change this). No re agent in his right mind will show a short sale when "neither price nor commission are approved by lender" is in the MLS. Why would you show a property, use up a perfectly good buyer, wait 3 months for an answer, and then find the lender won't approve the price AND cuts your commission. So, you only show a short sale when the price is soooo low, your client insists. Thus, because the lender won't pre-approve the price without an offer, they are getting lower prices. Putting in an immediate offer, gets a higher end price for the lender because, when the price is approved, you can change the MLS to "price and commission already lender approved". Now agents will show the property and the sale will be at a higher price. How is this fraudulent when it is disclosed in the contract?

frankgaray: (March 26, 2010 6:33am)

Mortgage scribe.. you are exactly right.. the cash offer is getting a lower price, which makes it easier to "re-sell" for the agent.

Investigator: (March 26, 2010 6:33am)

I am working on a case were a agent has both sides of the sale(no one to slit the commission with)as we all know short sale lenders will not give one agent all the commiss. Sooooo this agent and agency has decided to add a name that has not performed in any way to the sales contract to pretend there are two agents involved... now they have both sides of commiss....

frankgaray: (March 26, 2010 6:30am)

Awesome conversation about this guys.. ok here's my two cents... we got this story from a national title company that will not insure a transaction like this now.. if it says "or assignee" on it, it's toast. Also, the real question is this.. is it ethical? As real estate professionals, we are held to a code of ethics... is knowingly misleading the bank, since you KNOW the original buyer is just a "straw" ethical within anyone's code of ethics? I, personally, don't feel it is, even if it is technically legal. Check the poll question for what others think. Have a great weekend everyone!

Sioux: (March 26, 2010 6:13am)

I have to agree with Pedsman, the "assignor" is a straw party. It is creative but I wouldn't touch it nor want my 18 year reputation attached to these type of deals when the hammer comes down.

mortgage scribe: (March 26, 2010 6:07am)

Short sale fraud. It's fraud because the "straw" buyer has no intent to purchase the property and there is NO buyer at the time the A/S is written. And what are the financing terms the "straw" buyer is offering? Is he a cash-buyer that might demand a better price than a buyer that needs financing?

Anonymous: (March 26, 2010 6:03am)

I have to agree here. Banks are not ignorant. If they accept a contract with the terms "And/or Assigns" then it is a legal and binding agreement. And that cash buyer, whoever it may be, is on the hook for the purchase. If they don't find a suitable buyer then they still have to execute the contract themselves. It's a huge risk for the cash buyer for not a large payout. They potentially could end up with empty pockets and a house that they now have to market and sell themselves since the "bank" isn't footing the bill anymore.

NEGOTIATOR: (March 26, 2010 5:46am)

Are these guys dumb or are they on lender payrolls? i dont get it. Since when does "assignee" on contracts constitute fraud???? So, if i reasd this right, they put Assignee on a contract, the bank doesnt catch it or doesnt care until what?, someone makes a few bucks reselling the property after the lender has been paid what they agreed to take? First, if this is disclosed to a homeowner (who doesntand cannot receive any monies and is upside down) and they dont have a problem with it, why not? Why is it the banks ( and Govt) believes we need to bail they out and sell off their inventory but we cannot make a profit doing it? Im tired if being a damn charity for the Govt and who they deem worthy. Im for any forward thinking and creative INVESTOR / REALTORS WHO CANT MOVE PROPERTY AND MAKE A FEW BUCKS DOING IT!

shortsalegalaxy: (March 26, 2010 5:37am)

Assignments of contracts are perfectly legal, but to assert fraud--intent has to be proven. If there really is a short sale buyer, but the bank and the buyer cannot come to an agreement on price, then a new buyer can step in. It is much cleaner if a new contract is created with the new buyer, and plugged directly into the lender. If there really never was a buyer--then that to me is fraudulent. Weird, because they didn't have to fabricate a buyer. As an investor and a realtor, I have buyers (especially investors) crawling out of the wood work to be a REAL buyer for the right price. However, it is not inherently illegal to place the verbiage "and/or assigns" on the contract and to assign those rights. The banks are big boys and many of them ask for that verbiage to be removed In PA, the law was changed in the last couple of years so that contract assignments are subject to transfer tax--making that approach less attractive these days.

Anonymous: (March 26, 2010 5:30am)

This is not going on where I live. You make an offer to the bank and they will not sell the property for less than 95% of appraisal value. When you first put an offer in they get about 3 other agents to do BPO's on the property. So I really do not believe this is happening. Also, assigning contracts is legal as long as it is written that way. I wish the banks would get their act together and make a decide something much sooner than they do.

dmorgan: (March 26, 2010 5:24am)

I just wanted to let you guys know that you can also go to www.statece.com/universalce and get 25% off of any CE classes, training, or anything you might need for licensing!! That's an extra 10% off of what Frank and Brian mentioned yesterday!!!

justanotheropion: (March 26, 2010 5:17am)

existence of a "and or assigns" clause in an agreement that the bank accepts can hardly be fraudulent. It is contractual.

tms: (March 26, 2010 5:14am)

What is the difference between this and the banks "flipping" the mortgages? They skim on the top of the original mortgage and then sell it to another bank.

stantheman: (March 26, 2010 5:09am)

Can a independent loan processing company order an appraisal for a loan broker companies? HVCC does not require the use of an appraisal management company. Or would a indepentent processor be part of the brokers production staff.

Flipper: (March 26, 2010 5:02am)

and/or assigns ... flip the house or flip the contract... the contract is real, don't perform and lose the deposit. Disney World was aquired through options and assignments... It's American!! The only issue I have is the investors who want to assign the contracts for cash on the sly ($20,000 to $50,000) $2,500 documented in the transaction seems a bargain to all for the stimulas to bring it together.

kdills: (March 26, 2010 5:00am)

Agree with clever as long as fully disclosed.

LetsGoFishing: (March 26, 2010 4:56am)

An assignment of contract is a fundamental right of the one who owns the contract unless there is contractual agreement to the contrary. Assingments are neither illegal nor faud. realtorsue wrote: "I see this situation as fraud only because of non disclosure." The fact is, there is disclosure the Mr. Buyer, or assinged, will close. That is fair and honest.

pedsman: (March 26, 2010 4:45am)

it's called a straw buyer and it's illegal.

Carolinaboy: (March 26, 2010 4:42am)

I agree with "clever" or free market, not fraud. The banks are out to make money anyway they can. To consider this fraud would be like saying a person who bought a house could never sell it for more than they paid. And Hoosier appraiser, seems to have a large chip on someones shoulder. Appraisers have a job and not all of them are as perfect as hoosier, but sadly they all get in the same bucket just as realtors, bnakers and builders.

realtorsue: (March 26, 2010 4:38am)

I see this situation as fraud only because of non disclosure

loanguy: (March 26, 2010 4:34am)

What part of the country is this happening. Non of my investors allow assignees in NH and MA??????

ryant2k: (March 26, 2010 4:31am)

If someone who signs the contract on the short sale purchase is a real person, why couldn't the person assign their interest to another buyer? This is simple contract law that has existed for hundreds of years and hasn't changed. I see nothing wrong with this. Contract assignments happen every day in real estate. Now if the buyer didn't exist, then it's fraud. This is just some creative real estate technique that's helping to move properties quicker. Why shouldn't we allow it?

Happy Camper!: (March 26, 2010 4:25am)

If the banks would respond in a reasonable time (under 30 days) then this door would close. It's the banks fault for taking 6-12 months (BofA & Countrywide) to get back to the listing agent on short sale contracts. And they are complete jerks to the homeowner along the way. They never look out for the home owner - EVER!!! So The home owner is left to languish while the bank takes their sweet time to respond to contracts.

hoosier appraiser: (March 26, 2010 4:21am)

And this is another reason why REALTORS should NOT be doing PBO's

hoosier appraiser: (March 26, 2010 4:20am)

And this is another reason why REALTORS should NOT be doing PBO's

streekout: (March 26, 2010 4:04am)

I agree, I think it's "clever" not fraud. look at the situation from the buyer and seller for that matter. they are required to put the home on the market (usually below what their mtg amount is) and THEN submit everything to the bank for approval. We all know this takes forever, and at the end of everything, the seller might still have to pay the additional loss back to the bank..... that was just given a billions from the gov mind you. I think the process of short selling needs to have some thought put into, and the person who thought of adding that verbiage is a quite clever.

Anonymous: (March 26, 2010 3:49am)

Look at the bank's fraud!! WHo cares if we can a a property sold in a timely mannner re;short sale... THe american people have been defrauded for ages....

njdlmkr: (March 26, 2010 3:41am)

I'm not as appalled as you guys are over the short sale “fraud” issue. It has to be so frustrating, having buyers and a.) Waiting forever for the banks to get back to you when you submit offers for a short sale, or b.) When you finally do get a response from the lender it's not the figure you need. This so called fraud just cuts to the chase and eliminates the waiting and wondering. It's no different than making an offer to a home owner, having the owner accept the offer, and then the deal falls thru. At that point you know what sale price the owner will accept. What they're doing is similar with the banks. Once an acceptable dollar amount has been revealed you can them go out and find a buyer for the property. The banks, with their slow response to offers, have only themselves to blame. I like the idea and consider it “clever”, not fraud.