Short sales of homes are becoming more common in Arizona as a means of avoiding foreclosure. But these transactions, where a home is sold for less that its mortgage balance, can be exploited by investors or agents looking for a quick profit—hurting other home values in the process.
Homeowners, desperate to avoid foreclosure, are prime targets for short sale fraud because the those sellers and their bank are more likely to accept a low-ball offer. FBI Special Agent Eric Spingler says, "Someone will come to them and say, 'I can help you negotiate a short sale with your bank and get you out of this.'" Spingler adds, "But what they don't tell the bank is that they have an investor on the back side that is ready to purchase the house for a much higher price."
Arizona Real Estate Commissioner Judy Lowe says, "There is a dramatic trend toward this [kind of mortgage fraud]" in the Valley. Lowe points out that the low-ball price in the first sale of the home makes a larger deficiency in paying the mortgage balance—and therefore may mean the seller owes a larger tax burden for the deficiency. The low price also hurts home values for everyone in the neighborhood.
The Arizona Department of Real Estate and the Arizona Association of Realtors have put together a short sale seller advisory with links to web sites that have information on the process of short selling and how to avoid potential pitfalls.Read more: http://www.azcentral.com/12news/news/articles/2010/07/27/20100727shortsalefraud.html#ixzz0veuMOOit