The Fight Against Undisclosed Short Sale Payments

kristaNo CommentsBuyer's Brew

The second lienholder needs $5,000 paid outside of escrow prior to close.

From time to time this happens and it is so frustrating for a buyer looking to buy a home.  If that home is a short sale, sometimes the 1st or the 2nd will ask for this  money to be paid out of escrow.

Can you do that?  Is it legal?

NO!

I have had buyers beg me to let them just pay the money.  But what are the issues with this?

First of all, since it would be “outside of escrow”, that means that it is often not documented.  Who’s hands is it going into?  What if the lender says “thank you very much” and you still don’t get the property? 

Let’s be honest, if they want to pay outside of escrow and have it undisclosed, doesn’t it seem like there must be a reason why?  Why not do what all other escrows do and disclose in escrow?

Not only could the bank take the money and run (literally) but concealing the payment from a federally insured senior lender constitutes fraud punishable by 30 years imprisonment plus a $1 million dollar fine. 

All charges involved have to be in the closing statement for the buyers and sellers.  Not disclosing an additional fee in that statement leads to violations of additional laws and regulations.

Sometimes it is tough since the buyer is actually willing to pay the money to get the house he wants.  The fact is, these laws exist because something happened and with or without all good intentions, someone got hurt.

Don’t let it be you.

If you need to speak with someone regarding fraudulent activities, contact one of the following agencies: