Home Buying in Cape Coral>Question Details

Mike, Home Buyer in Cape Coral, FL

Can you buy back your own short sale property legally if it goes up for sale again?

Asked by Mike, Cape Coral, FL Wed Jan 7, 2009

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19
this is a felony and is mortgage fraud. Avoid this transaction at all cost
1 vote Thank Flag Link Tue Oct 23, 2012
How is this woman and her husband able to do it, not likely this Judge will get burned for it?
http://www.wxyz.com/dpp/news/local_news/investigations/did-michigan-supreme-court-justice-play-a-shell-game-to-get-out-from-underwater-home
Flag Fri Jan 11, 2013
It is illegal for you to buy back your own house at a short sale price. It's not an arm's length transaction and you are technically defrauding the lender on the difference. So for example, if you have a house with a $500,000 mortgage and the current market value is $300,000 and that means, you are "upside down" by $200,000, you can not simply offer the bank $300,000 the current value and let me the "eat the loss". The debt forgiven by them is a loss on their books, is treated as income for you the borrower, on your books. That is to say, they would "forgive you" the $200,000 but now it's considered ordinary income. Although you no longer owe it to the lender, you will owe to the IRS. The law that allows you to not pay taxes on this "negative equity" expires December 31st, 2012. Please see this link : So this law :http://www.irs.gov/individuals/article/0,,id=179414,00.html
is what is called the "mortgage tax relief act". It was signed by President Bush before he left office, and extended by President Obama and Congress. It was originally set to expire in 2010 but will instead expire in 2012. So if you want to short sale, do it now, before this law expires.

Now, if you chose to borrow money from a hard money lender, and come up with the short sale price in cash, and buy back your house from the bank, with a non-family member acting as the "buyer" and then he deed the property over back to you, this would re-attach the negative difference back to you once the bank finds out. This is considered mortgage fraud. The "forgiven amount' would be re-attached to you, the borrower.
1 vote Thank Flag Link Fri Oct 19, 2012
Mike,

I'm sure that it is painful to be losing your home, but in the long run, you'll be better off if you play by the rules. Find a buyer for the property, and let it go. Move on and start rebuilding your credit, and hopefully in just a few years, you'll be able to buy again.

If you do decide to go ahead with this, you absolutely must consult a real estate attorney, who can provide an independent opinion on the legality of this option. (Note: independent, find this attorney yourself).

Ann
1 vote Thank Flag Link Wed Sep 26, 2012
This woman doesn't think so, ask her how to be a cheat.
http://www.wxyz.com/dpp/news/local_news/investigations/did-michigan-supreme-court-justice-play-a-shell-game-to-get-out-from-underwater-home
Flag Fri Jan 11, 2013
Mike,

Proceed with caution - if you signed an "arm's length transaction agreement" when you did the short sale you can NOT buy the property back.
1 vote Thank Flag Link Mon Jul 9, 2012
Hello Mike,

Realtors are not lawyers and can not give out legal advice, BUT. It is totally not legal to buy back a property that you've sold via short sale in the past.
0 votes Thank Flag Link Tue Sep 23, 2014
NO! Although it would be nice to be able to buy back your property at a big discount, a short sale cannot be purchased back by the owner or a family member. All short sales need to be 'arms length transactions' where the home owner who is doing the short sale can't be the purchaser or related to the purchaser or have a business relationship with the purchaser.

Be aware of scams and "quick fixes" people may offer you in your situation.
http://www.virginiashortsalespecialist.com/aware-foreclosure…
0 votes Thank Flag Link Wed Sep 17, 2014
so how would you explain the shortsale lease back?
0 votes Thank Flag Link Sat Mar 23, 2013
NO! Although it would be nice to be able to buy back your property at a big discount, a short sale cannot be purchased back by the owner or a family member. All short sales need to be 'arms length transactions' where the home owner who is doing the short sale can't be the purchaser or related to the purchaser or have a business relationship with the purchaser.

Be aware of scams and "quick fixes" people may offer you in your situation.
http://www.virginiashortsalespecialist.com/aware-foreclosure-scams/
Flag Wed Sep 17, 2014
No clear on this situation. If you have positive equity than it's not a short sale. If you simply desire to sell and are no longer able to pay, it's still not a short sale, unless you have a loan that exceeds value of the property. As a general statement, junior lien holder (the second mortgage) gets nearly fully wiped out and the first lien holder gets paid in full, and in a short sale case, at least 80% of the amount offered. If you are able to negotiate a loan modification, you should. If you can't, and are temporarily un-employed, and your other creditors are hounding you, your other option is a Chapter 13 Bankrptusy. You would temporarily get a stay of foreclosure on your first mortgage, and your junior lien holder, the second mortgage, would be wiped out. Your other creditors would also be paid far less than what you owe on all your un-secured debts.

If on other hand, you're not financially in trouble and you are able to afford the payments and you are simply trying to short sale the house at present market value, and then yourself buy it back, to get principal reduction, than that is a whole different question. That is mortgage fraud. A sale must be an arms-length transaction. Therefore, you can't have your cousin Vinny buy it and then deed it back to you. That is collussion to defraud the lender.

So I'm not clear on your question. If you're in trouble, you have options. If you are not trouble, then stay and pay.
0 votes Thank Flag Link Fri Jan 11, 2013
@shyscape, if there is equity in the home (the offer is worth more than you owe the bank) by definition this is not a short sale (which is when you owe the bank more than the home is worth.)

If you current mortgage balance is $189K, and your offer is $167K, the amount you're short would be $22K.

(You may also want to weigh the pros and cons of doing a short sale here... there will be some consequences to your credit. If I could make the payments, I'd try to hold out.)

Now you also say the house is worth $230K, which is curious. Is that the list price the agent put on the house? Because if that is where the number came from, I wouldn't count on it.

In any case, there's no guarantee the banks will approve any short sale. If you think this offer is well out of the acceptable range for a sale price on this home, then I'd say to wait for another offer that's higher (unless you've already received a notice of foreclosure sale. Remember, you only need to get an offer for at least your mortgage balance to come away with your credit unscathed. Heck, if I got an offer of $187, I'd pay the $2K up front to close the transaction without the damage to my credit.
0 votes Thank Flag Link Fri Jan 11, 2013
Hello,
I need your insight Please:

Equity in the house $40k ( owes 1st mortgage 140k since 2011 , 2nd mortgage 49k (85% OF LOAN) HOW DOES THE MONEY GET DISTRIBUTED? First vs second. Scenario $230k. If 2nd mortgage didn’t get all their money what happen to the different amount that I owes?

House price in the market is worth $230k but buyer offer $167k. I owed total off $202k. Will the bank approve for $167k? What are the most important factors of the short sale being approved and what happens if the short sale is not approved?
:0)Thank you
0 votes Thank Flag Link Thu Jan 10, 2013
Call me 727-455-2993 Karen Young Charles Rutenberg Realty Florida
Flag Mon May 13, 2013
As an asset manager that handles all my investors foreclosures I can say if their is a 2nd you must satisfy that 2nd as well. Usually the 2nd w some proper negotiating can be satisfied for a few thousand. You must educate 2nd lien holder that if foreclosure happens he gets notta. Also you need to make sure no judgements are against the asset as well. If short sale is not approved then lender will just foreclose and get asset that way.Not everyone qualifies for a short sale. Feel free to cantact me w any questions.

Regards,

Kevin
Sunshine Realty
239-333-9991
Flag Mon Apr 8, 2013
here is my scenario, I'm working with a realtor: I put my house up for short sale, at the last minute when waiting for escrow to close the buyer backs out, Now my realtor is offering me the opportunity to apply for a shortsale buy back program "sponsored by the goverment" so this is the deal. I give a deposit to a non-profrit buyer, whom is going to purchase the house for me at market value of 113,500 but I must immediately come up with that deposit of aprox 17,000 by monday to be precise. so after this org buys the house I lease it from them for 3 yrs after the 3 yrs I have the option of buying the house back at 113,500 or walking away and forfeiting my deposit, but if i keep up with the payments with no default for 3 yrs at the end of the 3 yrs contract they return my deposit and sell the house back to me, by me applying for a mortgage loan,
0 votes Thank Flag Link Thu Sep 20, 2012
It's good advice to work with a real estate attorney, but be sure he/she is a REPUTABLE attorney. Ask for referrals from a title company, realtor, bank, someone you know. Check with your state bar association for problems. There are attorneys who are doing things just this side of legal that are questionable ethically. There are others who can comment on this particular program as I don't have any experience in that area. You might consider asking your question on a new "thread" as you've asked this question under an original question that was posted in 2009.
Flag Thu Sep 20, 2012
YES: HAFA has a new program. See my website http://www.hafabuyback.com
Web Reference: http://hafabuyback.com
0 votes Thank Flag Link Sat Feb 4, 2012
anytime you speak with a buyer about buying your property through a short sale then you negotiate to buy the property back, that is not a hands off transaction. Anytime you make a second deal then you have what is called a relationship which is hands on.

Contact an attorney.
0 votes Thank Flag Link Tue Jan 18, 2011
I do this very procedure but through the procedure of an RE Lawyer. What we say is this, our Cash, is ours, it does not know the previous homeowner, we purchase the Real Estate FREE and CLEAR, through an Short Sale which is approved by the Bank. We will only discuss after the 2nd End Buyer purchases it with Cash, the opportunity of making the previous homeowner the "Manager" of the Asset Protection Tool we enter the Real Estate into after we, the 1st Cash buyer purchases it, FREE and CLEAR. So, after we place the Real Estate into an Irrevocable Trust, the 1st Cash buyer and 2nd Cash Buyer, assign the Title to each other, the Beneficuary now has ownership of the through the Trust but the Trustee administers the Trust. We only give the previous homeowner the opportunity to participate in a Land Contract, upon what those contractual conditions are, is confidencial, between the Manager, Trustee and the Beneficuary. We create the Trusts ourselves, we control the Asset and protect it in the minutes. This is exclusives process, we will for a fee, disclose the program through our RE Attorney at Law, we are in Phoenix, Arizona.
http://www.stayaftershortsale.com
0 votes Thank Flag Link Sun Jan 3, 2010
Yes, but how can you ever get Title Insurance? You are describing essentially a back-to-back closing, with a cash buyer buying it from the foreclosing lender at the approved short sale price, and then, selling the instrument, the real estate held inside a trust, back to the original owner. The problem is that the original owner has damaged credit and can't qualify for financing, so unless they have massive cash, they don't have the ability to buy it back later, immediately. But, they do qualify for financing 3 years later. So you are essentially selling it back to them, once they again can get financing, 3 years down the road, while they are leasing it back from you on an option-to-buy contract. However, it's still a back-to-back transaction,instead with a 3 year space in between.. There is no way for the previous owner to get title insurance and close escrow 3 years later, if their name was on the deed 3 years ago. Even if they take title as corporation.
Flag Fri Oct 19, 2012
If the short sale buyer is related to you or connected to you in any way, buying the property back would not be a "hands-off" transaction. Your purchase could be interpreted by the lender as fraudulent collusion to eliminate debt. And any federal or state debt forgiveness tax relief would no longer apply.

Assuming your financial situation improves months or years later - and you can prove where the money comes from - you could purchase the property as long as the owner is unrelated and unconnected to you.

To be safe if you decide to go there, be sure to consult a lawyer. Better yet, buy something else.
0 votes Thank Flag Link Wed Jan 7, 2009
You would need to qualify for a loan in order purchase. However banks underwriter seeing you are property owner, and buyer could send up red flags. Bank could see that you could not make your mortgage payments filed a hardship statement for short sale request, NOW what to purchase it.

More than likely answer would be NO however confer with mortgage broker.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Wed Jan 7, 2009
This is still a grey area. Many lenders have the buyer and seller sign an affidavit that they are not friends or relatives of the "defaulting" seller. Obviously, buying the property back for "pennies" on the dollar would be a smart move!

It seems that MANY people are getting into this aspect of buying property back [or trying to] It looks and smells like potential bank fraud.

IF, everything is disclosed- I'm sure it could be acceptable.
0 votes Thank Flag Link Wed Jan 7, 2009
carefull

fraud is a 4 letter word

see a lawyer fast.
0 votes Thank Flag Link Wed Jan 7, 2009
Mike,

Realtor are not attorney. Short sale means, a bank is willing to take less than what is owned on the property. It is not a foreclosure. Call an real estate attorney in your area to get your answer.

Deborah
0 votes Thank Flag Link Wed Jan 7, 2009
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