Many agents seem to believe investors fit the definition of straw buyers. This is not true.

A straw buyer is actually someone who will not take ownership in the home but whose name, SS# and credit will be used to obtain a loan/property for someone who would not otherwise qualify for a loan on their own. This leaves the straw buyer in a world of hurt when the owner defaults on the loan and ruins the straw buyer’s credit. This also leads to huge losses for lenders who were misled into loaning money on a false premise.

The FBI is looking out for illegal activities around mortgage fraud where it is NOT disclosed that the buyer/investor is actually going to just flip the home for a profit in a double close.

Keep in mind that my customers are investors, they are in the business of making money, so I am not begrudging anyone for making a profit. I am just saying that you want to be sure that you are getting yourself involved in anything illegal or improper. NOT disclosing all the financing facts and details of a transaction to the bank during a short sale can be and has been shown to be mortgage fraud, which the FBI is very interested in these days.

I think it is irresponsible to state something with regard to what the FBI is discouraging without telling the whole story. There are many forms of short sale fraud. ALL involve some form of misrepresentation whether it takes on the form of falsified hardship, non arms length transactions, straw buyer schemes to hide the fact that the homeowner will retain ownership in the home etc.

A good read from someone who actually talked to the FBI.
http://www.thenorrisgroup.com/blog/radio/157-tng-radio-%e2%80%93-fbi-1-16-10/

A quote from the article.

“The FBI has no problem with a short sale in which the buyer pays for a home and is then able to sell it for a profit. Just as long as the deal did not involve lying…….”

Couple items:

1. This post is almost 18 months old. This straw buyer technique was new back then and no one really understood the legal aspects and so they did NOT disclose it to the bank. That is where I stick by my 99%.
2. I just had one about 2 months ago where they claimed that they had disclosed everything to the bank, but we really didn’t have any way to confirm this. As a licensed agent, I can’t participate in a deal that could be fraudulent, because I could lose my license. We walked away because the listing agent could not provide any written proof that the bank knew about the reselling of the property for a profit. No matter how much we asked for proof, they never provided it. If they would have sent something over that had some bank confirmation, yes, I would be fine with these deals.