This kind of real estate transaction could send you to jail


A question I have been asked a few times this year is, “Can I purchase my relatives house if it is for sale as a Short Sale in Metro Detroit?” The answer is no. When a purchaser and seller go to the closing there is an affidavit that must be signed by both parties that states that the transaction is an arm’s length transaction and there is no relationship between the purchaser and seller.  Mortgage fraud falls under jurisdiction of the F.B.I. Here is a scenario that would explain this fraudulent act. A home owner is under water on their home mortgage, lets say their home in the Metro Detroit Real Estate market has a market value of $200,000 but there is an outstanding mortgage balance of $350,000. The home owner decides that they want to put the home up for sale as a short sale and have a relative who steps into the picture and agrees to purchase the home for $200,000. The Metro Detroit short sale is approved by the bank and forgives the debt and the sellers and buyers close the real estate transaction and commit fraud by stating there is no relationship between the two parties and state that this is an arms length transaction when clearly, it was not. Typically the affidavit that both parties sign and agree to states that the purchasers agree to not sell or lease the home back to the previous owners or ever transfer title back to them.  A report from Santa Ana-based CoreLogic concluded that 1.9% of all U.S. short sales over the past two years — roughly 15,000 nationwide — are fraudulent. That’s one out of every 53 deals. Bottom line, don’t commit mortgage fraud and you cannot buy a short sale from a relative.

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