Short sale strucutre

[Kiel Cannon]

Hey guys and gals,
Im struggling here a bit. Ive been working for another company in my area for the past few years with the intent of branching off and opening my own company which i did a few months back.

I don't know if im paranoid or simply the way they structured their business entities to complete a shortsale is just throwing me off.

Here is what they did. They have a brokerage firm, who handles the listing. They have a "bank relations company" who negotiates the short sale. And they have a phantom llc who is purchasing the property on the A-B side. There are two people who manage each of the 3 entities involved. They even have a girl sign a phantom name while speaking on behalf of one of the entities.

So, here is my question. I am one man, have my license and own an investment company. How can I take the listing, negotiate the short sale, buy and then sell for a profit? Is it possible? Do I need an agent to represent me to fix this issue. How are all of you structuring your deals entity wise?

As much info would be helpful. Thank you all in advance

[Scott Hubbard]

Originally posted by Kiel Cannon:

Here is what they did. They have a brokerage firm, who handles the listing. They have a "bank relations company" who negotiates the short sale. And they have a phantom llc who is purchasing the property on the A-B side. There are two people who manage each of the 3 entities involved. They even have a girl sign a phantom name while speaking on behalf of one of the entities.

Having someone use their name without actually being authorized to do so is called a straw buyer. It is not only unethical, it can also be illegal depending on the state your states laws. Many of the approval letters from lenders restricts straw buying. If it had this language in the approval letter and they went ahead and flipped it, then they have committed mortgage fraud.

Currently, there are several people charged in my state for fraudulent schemes where they cooked up the very same thing. If the lender's they reportedly defrauded decides to file charges, it may move to Federal Court. To make matters worse, they are licensees and can receive further sanctions and/or be fined.

What your former employers are doing is called collusion. They are using their expertise of their market, a straw buyer to submit offers and create a spread, then selling at market value. As experts in real estate and licensees, they are expected to operate ethically and using their local knowledge of their markets against the lender is considered unfair practises.

To avoid this, all you need to do is disclose you intend to flip or sell the property for a profit. You also need to disclose your an RE Agent (if your the buyer or a principal).

There is no problem setting a company as a buyer, a second one as the service company, or even a third as a parent, but you need to have an authorized signatory on the offer and disclose your intentions to make a profit. If your an agent, per your assocaition rules, you need to disclose this also.

As a former agent, I quit wearing both hats at the advice of my attorney. You need to wear one or disclose everything. Otherwise, you will be headline news somewhere down the road.