Seller Beware of Short Sale Scams
Today, a real estate investor called me to ask about a home for sale, which he thought I was the agent for. I don’t have the home listed, he was using my Indianapolis Homes search site to find homes and assumed I was the listing agent. I wasn’t, but helped him find the address he was looking for. He begins to tell me he has been an investor for about 6 months working on wholesaling properties and does some private lending. He has a few homes he can’t get leased, so he is thinking about doing short sales on them.
Here’s the deal – he doesn’t know what he is doing! He has a lease option on several homes, which he is trying to find a lessee for. Unfortunately, he hasn’t been able to. How does this happen? He finds someone who is behind on their payments, then contracts with them for a lease/option agreement. He then finds someone else who will lease option the home from him. But the home and mortgage are still in the original owner’s name. What happens if the lessee doesn’t make a payment, or if the investor doesn’t pay the bank? The owner of record is in serious trouble. I had a recent seller who went through this very thing. We ended up completing a short sale on her home after the so-called investor left her with huge deficit and a home which needed repair.
Another story he told me was about an older lady who is a few months behind, with a home worth about $120,000, but she only owes $68,000. He wants to short sale or should I say, short buy the home for about $60,000. I truly dislike stories like this. As a REALTOR, I am bound by my Code of Ethics to do what is in the best interest of my clients. Honestly, I don’t need a Code of Ethics to tell me this is plain wrong! He wants to buy the home for about $60,000 and simultaneously close on the home with another buyer. In his perfect world, the bank accepts his offer of $60,000 and he has it set up so he can sell it at the same time to someone else for a lot more. I wonder if the current owner knows how much the home is worth, because that difference could be money in her pocket, her equity. Then, he asks if I can teach him how to do a short sale. ARGHH!!! I will not be teaching him how to do short sales! I’d rather be sitting in the living room of this elderly woman’s home and helping her sell for a profit. That’s what I would like to do.
I’m glad he didn’t tell me anymore of his stories, because I had enough. Markets like our current real estate market bring out the best and the worst of people. I know some great investors. I also know there are many out there who do not know what they are doing. They thought this was a great market to get rich in, so they became investors. Seller Beware!