As the number of short sales continues to increase, we're seeing more and more instances of creative methods to close complex and difficult transactions. Dealing with two, three, four or sometimes more lienholders who must sign off on the terms of a deal can be daunting. Those challenges sometimes prompt under-the-table payments to make a deal happen.
But agents, buyers and sellers beware: Undisclosed payments in short-sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws. Concealing from a federally insured senior lender that a payment was made to the seller’s junior lender may constitute loan fraud, which is a crime punishable by 30 years of imprisonment and a $1 million fine. Depending on the specific circumstances, carrying out these payment requests also may violate other laws and regulations.
Agent participation could result in fines, prison and license revocation. Home sellers and buyers who participate could also face fines and prison.
The key word here is DISCLOSURE. It's not illegal for the buyer or any other party in the transaction to send extra funds to pay off a lienholder, as long as everyone knows about it.
Most home sellers and buyers have no idea what's legal or illegal when it comes to short sales. Sadly, many agents do not know either. But if any term of a deal goes undisclosed, you can bet there's a reason -- and one of the other parties won't like it. If you get caught doing it, you won't like it either.
Trust your gut. Err on the side of disclosure to stay ethical, moral and legal.
Scott Chappell and Brian Bean
Real Estate Brokers
http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula
