Fraudulent Business Process

[Jason Dubien]

I have a question regarding turnkey SFRs.

Say a house is being rehabbed to be sold as a turnkey and the seller/rehabber gives a scope of work to a bank/appraisal company to show what’s being done or going to be done.

The house sells to an out of state investor before the rehab is complete so the appraiser provides an appraised value and qualifies it as “based on the completion of the scope of work.”

The rehabber provides the buyer with a much smaller SOW (50-70% less) and sells the house as turnkey for the appraised value. The buyer then compares the SOW given to the appraiser with the actual SOW provided by the seller directly to the buyer and notices a substantial difference.

What would be the issues with this type of transaction besides the obvious fact the buyer is overpaying for a property? Would this be considered fraud? This scenario seems very deceptive to the lender providing debt service to the buyer also.

How would you handle this scenario?