That’s it, greed.
A couple of years ago, I was at a clients home for dinner. I sold this woman the home we were in the year before. Her whole family was there. I like these people. They are nice. They had always invited me over for dinner.
At some point during the evening this woman and her aunt approached me about a way to buy homes and get your mortgage paid for you. In other words, buy a home and have someone else pay the mortgage.
They went on to explain how you buy a home for more than it is worth and then get the seller to write you a check, after settlement, for the difference. A buyer would tell the seller to raise his $300K sales price to $350K. The buyer’s appraiser gives the home the value of $350,000. The seller now gets his sales price and agrees to cut a check for $50,000 to the buyer after settlement.
The buyer now has the house and a check for $50K. The buyer gives this check to a company that claims they will pay the mortgage for the $50,000 investment the buyer just gave them.
As I listened, to this I was amazed that my buyers’ seem to not understand they were committing loan fraud. I quickly explained, I wanted no part of the scheme. I also explained to them that they were committing loan fraud.
Six months later, my former buyer calls me up and wants me to see her new house that she bought with this new plan. I explained that I would not be able to visit her due to the method she used to buy the home.
Eventually, the masterminds of the scheme were caught, my former buyer lost her home. I just read in the paper the company that invented this scheme have been indited on loan fraud.
Why did my buyers participate in something they knew was illegal?