I am surprised no one else posted on this today! This is some scary stuff. It seems that non-disclosure to the respective lenders in short sales flips has already gotten the feds involved - and some investors will be sentenced to prison because of it: http://www.connpost.com/ci_13523546 I know investors are not lawyers (Thank God!), but, given this latest news, how on earth now will an ethical, law-abiding investor know if he or she is breaking federal law when it's been vague as to what disclosures need to be made in order to avoid an "intent to defraud", in this case, the short sale lender. Where does one cross the line from what is considered free enterprise and the essence of capitalism to what is outright intent to defraud??? Even the guys doing simultaneous "dry closings" didn't go to jail. All I've heard is that the title cos. have put a moratorium on these transactions, but that's about it! Though I've read a great deal about it being a good idea to disclose the resale price to the short sale lienholder, where does it say in the law that it's mandatory? Again, isn't that what capitalism is all about - buy low, sell high? If the investors in this example were using "wet funds" closing on the buy and then simultaneously selling to end buyer they already pigeon-holed as the end buyer - isn't that how most investors are doing these? And even if you disclose to the bank taking the loss on short selling, what happens if the feds decide all of a sudden to indict investors who failed to disclose the facts of the transaction to the other side of the deal - the end buyer's bank? You might think it's a non-issue and completely legal and within your right and none of the end buyer's bank's business when all of a sudden the feds think it should be - and boom, you're screwed! When you really look at it objectively and in general terms, how is this transaction any different than one in which the investor ( or any buyer) would have held, say, a few months and then re-sold for a profit??? Someone tell me what I'm missing here! :roll: :roll: :roll: :roll: :roll:

JD, I'm not sure what you asking. Can you please clarify? Andrew - I assume you are still referring to the trust method. A-B Transaction is "hidden" in the trust. The recorded transaction is when the homeowner transfer the house into the trust which is done at the very beginning of the short sale process. When you pay off the bank loans, the beneficiary of the trust is transferred to you instead of the homeowner. The B-C is a recorded transaction when the property is bought from the trust to the end buyer. Also, on short sales you never buy anything from the bank. The transaction is the same as any other normal transaction, you just need the bank to say okay because they are losing a bunch of money. You still buy it from the homeowner.

I just had Wells Fargo send me an addendum for all parties to sign that stated there were NO other transactions of any kind happening except for this sale and there were no other buyers waiting to purchase the property, and the home owner in no way or arrangement will be allowed to stay in the property.

I do have to say it does depend on who you use, personally the company I work for employs a 3rd party negotiator who works all of our short sales. I have run across alot of those agents who do their own negotation and they really don't do a good job (not to offend anyone, just from what I have seen) and yes to agree with Justin that many wont lend on a flip but there still are those who do

Many. But not all. You can find them.

Many Conventional and Government Lending sources won't lend on a flip or anything that has been sold withing the last 90 days.

SHORT SALE FLIPS ILLEGAL NOW?

Scott Hubbard

Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes

SHORT SALE FLIPS ILLEGAL NOW?

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