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How can I avoid short sale scams?

Tactics are being used by unethical short sale agents who are preying on the vulnerabilities of distressed homeowners. The most prevalent of these tactics is instant short sale flipping, which is known in the industry as short sale flops.

In a basic sense, a short sale flop occurs when an agent hides legitimate offers from buyers put in on short sale property. Instead, they tell the homeowner the house is not selling, but they have an investor who is willing to make an all cash offer for less than market value. The home is sold to the investor, who instantly sells it to one of the original buyers that put an offer in on the home previously. The short sale agent makes double commissions, plus takes a cut of the profit made by the investor.

The biggest red flag for an unethical short sale agent is one who does not keep you informed, and refuses to let you know when offers have been submitted. It is also important that the agent works for a company that disallows this type of activity. Also be aware of any agent or company who requires money upfront, as this is illegal. Investors should only be consulted by the short sale agent if the property is unsellable due to its current condition or uniqueness, or the home has an upcoming foreclosure date that won’t be postponed without a written offer.

Other Common Questions

California Association of Realtors

Important Notice

The Mortgage Forgiveness Debt Relief Act expires at the end of this year. Don’t get caught paying tax penalties by waiting to short sell. Click here to learn more.


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