I have helped short sale clients who once had millions and closed transactions for folks that never had much and perhaps should not have bought property to begin with. Distress affects us all. Few things are as difficult as financial stress. Illness or a crisis with our children certainly could be worse, but facing foreclosure truly sucks. It can bring out desperation, and it can also bring the scam artists to the front door.
On a number of occasions, one of our agents has listed a property for a short sale and brought an offer to the client. Most of the time the seller is ecstatic. There is light at the end of the tunnel. On a few sad occasions, the seller has gotten into the web of some pretty brazen scam artists who promise them things that cannot possibly be delivered. Instead of realizing that if it sounds to be too good to be true that it isn’t, the seller went along with the scammer’s plan. It follows a pattern:
- The short sale gets listed
- One of these bad people harvests the short sale listings and solicits them for their “better option.”
- The seller client, desperate and stressed, agrees to fire their agent, ignore perfectly good offers, and agrees to sell to the scammer for significantly below market value.
- In exchange for the sale, the scam buyer promises the seller tens of thousands of dollars that would otherwise go to their lender to defray the shortfall.
- The end game is, as an example, to sell a $400,000 property for $100,000 to the scammer. They have no skin in the game if the bank isn’t deceived; if the bank is fooled into the lowball deal, the scammer re-sells the property for $350,000 and pays the seller $40,000. Maybe. I don’t know how one would ensure their performance. That would be like running to the cops and complaining that the dope dealer shorted you a few ounces of crank.
In the above example, the lender is defrauded; a consumer is complicit with bank fraud; a valid listing contract with a reputable broker is broken. Worse, the consumer has no recourse if they aren’t paid off.
This has occurred with clients of modest means with an uninhabitable property they abandoned years before, and clients who had high net worth portfolios who fell on difficult times. The modus operandi is the same. The scammer approaches the owner of a listed property, promises them a big payday when they would ordinarily have little or no proceeds, and gets their cooperation in bank fraud. This plays right into the Achilles heel of lenders who do a poor job of valuing the distressed property. That valuation problem is for another day’s discussion.
