Real estate agents indicted for sham short sales
By Oliver E. Frascona
A federal grand jury indicted several real estate agents for participating in fraudulent short sale transactions in Connecticut.
The agents bought properties by negotiating short sales with the bank holding the loans and then resold the properties to third party buyers for a profit.
One of the issues is that in one of the deals, the agent listing the property advised the distressed homeowner to stop making mortgage payments to Wells Fargo, the lender. Next, the agent negotiated a short sale with Wells Fargo.
During the short-sale negotiations, the agents did not reveal that they had another buyer waiting in the wings that had agreed to pay a higher price for the property. In one case, a New York trust created by the agents to hold title, bought the property at a short-sale price of $128,000 and quickly re-sold it to an investor for $150,000.
Prosecutors called the trust a “straw buyer,” noting that neither Wells Fargo nor the owner benefited from the higher price.