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Officials Warn Against Short Sale Scams

Edmund Brown Jr., California’s Attorney General, along with the State Bar of California and the California Department of Real Estate, has warned homeowners about a worrying rise in short sale fraud cases in recent months.

Most of the scam artists present themselves as short sale “negotiators,” promising to speed up the short sale process and bargain for terms with lenders on the borrower’s part. Often, these companies are unlicensed, impose illegal charges, and use straw buyers—buyers working with the scammers themselves by standing in for others who cannot buy the home.

The DRE is currently looking into some 40 possible incidents of short sale fraud. Only three months ago—just before the launch of the government’s Home Affordable Foreclosure Alternative program—there were virtually no such cases.

Officials advise borrowers to watch out for common signs of short sale fraud. These include the lack of a license, charging of upfront fees, fees paid out of escrow, and insufficient contact information.

They have also warned that scammers may use any of a number of titles, such as loss mitigation agent, foreclosure negotiator, short sale coordinator, and debt resolution expert. Borrowers should not be fooled by such titles, according to them, and always look up the person’s name before agreeing to do business.

Jeff Davi, the state’s Real Estate Commissioner, says preventing such scams requires effort from all concerned parties. Lenders, borrowers, and agents must all work together, he says, to get the tools they need to put scammers out of business.