issue to be very cautious and aware of is equity skimming schemes that can
accompany some short sale transactions. In such situations, distressed owners
are contacted by companies claiming to be able to help or assist the
homeowner. The company offers to negotiate with the existing lender in
exchange to title to the property from the distressed owner, negotiates a short
sale, then resells the property for a substantial
profit. That company’s agreement with the distressed owner may include a
share of the profit upon resale. These arrangements are not typically known
by the settlement agent.
the problem, other than this looks very much like an illegal flip, if the
existing lender is induced to accept a lower payoff than market forces might
otherwise indicate, the existing lender may subsequently seek to set aside
the short sale transaction and/or ask the court to impose a constructive
trust on the property. In these cases your title company needs to be sure
that the existing lender is in total agreement with the terms of the short
sale and should have an appropriate written communication in the file. They also
need to be certain that a release of the existing mortgage is obtained as
soon as possible after the closing.
the purchaser’s perspective, the transaction proceeds in the same manner as a
Any questions can be directed to Benchmark Title at 618-239-3750. Please feel free to call or email:
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