Big Banks Accused of Short Sale Fraud – CNBC (see the video on CNBC)

I’ve been involved in quite a few Short Sale transactions in the last few years. A short sale is when the home owner can no longer make their mortgage payments and must sell. The home’s value is less than the current mortgage so the home owner has to convince the bank to take less than is owned on the loan.

They should be called “long” sales as they are usually very long and frustrating for the buyers and sellers. I’ve blamed the length and confusion in the past on the fact that during the early 2000’s Banks Loss Mitigation Departments (the department that handles short sales and foreclosures) were very small. As more and more homeowners were hit by the economy downturn these Loss Mitigation Departments became overwhelmed. It’s taken a few years but the banks have ramped up and are now actually trying to make a little money on the side in some cases.

It is now common practice for the banks to ask for money from the seller, buyer or real estate agent. They will say if they don’t get a cashier’s check for $10,000 the sale won’t go through. They also may ask for the seller to sign a promissory note, say for $20,000 if no one will pay the $10,000.

I was contacted by Jeremy Brandt who has a real estate blog. He wanted to hear from agents who’ve dealt with this in the past. I was able to add my experiences to the multitude of Short Sale agents dealing with this every day. You can read Jeremy’s version of the story here.

Thanks to Jeremy Brandt for exposing this illegal practice!