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Did you know, that Undisclosed Payment in a Short Sale Transaction May be Illegal?

Posted on Mar 19, 2010 by in Active Rain | 0 comments

  Did you know that undisclosed payments in a Short Sale Transaction may be illegal? According to The California Association of Realtors undisclosed, specifically those payments that are paid outside of Escrow may violate the Law. In particular it could be a violation of RESPA, or it could be considered Lender Fraud and a violation of licensing laws just to name a few.

An example they site is, when a Short sale Seller’s Senior Lender authorizes a payment to eliminate a junior lien. This would seem OK, but then the junior lender demands that the buyer pays an additional Dollar Amount outside of escrow. This is a Risky scenario for the Buyer, but to conceal this additional payment from a federally-insured senior lender may constitute lender fraud.

My question is would you want your buyer to get this property? Understanding the fact that there are criminal penalties that go along with this maneuver, I would be very reluctant to advise my buyers to move forward with such a transaction.

According to California Association of Realtors agents and their clients are encouraged to file complaints regarding this type of fraudulent activities to the authorities. Would you believe the Attorney General’s Office, HUD and even the Federal Bureau of Investigation? The fines are very strong not just monetarily but also punishable by imprisonment. I do not see that there is any house worth that. What do you say?

 If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at  or visit one of my websites at  Your Pet Friendly Realtor. I contribute a portion of my commission to Local Animal Rescue Organizations.  


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