The purchase and sale of a property, or house flipping, is a big business with numerous types of residential and commercial property throughout the country. However, without mortgage lending restrictions that may include a type of insurance, the new owner may run into mortgage loan fraud with a single or multiple parties attached to the deal.
What Is Mortgage Loan Fraud?
Possible fraud with a mortgage loan may happen through numerous parties involved in the process to include a buyer. The fraudulent activity occurs through an intentional action of misrepresenting information, omitting certain details or inaccurate data on a loan application with the mortgage lending agency. The target is to obtain a larger amount in the loan than is necessary for the property or to acquire the funds for a non-existent property or deal. A buyer may initiate this process with a person flipping a house and then default on following through with the sale. When attempting to resell a house by flipping it, the seller may need a real estate lawyer to help along with the process.
Buying real estate, renovating the house or land and then selling it is house or property flipping. It is a procedure that many in the real estate market take advantage of through buying low and selling much higher to include the renovation costs. The improvements often increase the value of the house significantly depending on the zoning permissions and laws in the town or state. Most sellers will initiate the sale transaction with a buyer that requires a mortgage loan to buy the property. In some of these deals, the other party engages in mortgage loan fraud, and the sale may fall through.
Problems with Agents
When a person hires a real estate agent to find the best house to flip, he or she may encounter fraud at the very start. This often depends on the specific professional hired and where the house resides. If the agent is not willing to communicate at an office, has no connection to a firm or agency and attempts to have the buyer sign documents without reading them, the person attempting to flip a newly purchased property may suffer from fraudulent activity that halts the process immediately or that could lead to mortgage loan fraud with a potential new buyer or through the sale.
Some real estate brokers will also engage in fraud either directly as part of the deal or with another party in supplying fake buying or selling opportunities. Some brokers have another person participate in the process and act as a lender or obtain a loan with a real buyer only to default on the sale. Another potential situation occurs when the broker engages another buyer with a low or high amount and takes additional profits from the person flipping the house by fraudulent third parties and loan interactions. The more the broker is able to take, the less money the house flipper will earn through the transaction.
There are multiple ways for a house flipper to engage in illegal activity. If he or she participates in similar loan fraud with mortgages either in acquiring the house initially or to sell it to another party, he or she could face criminal fraud charges. Additionally, the individual may face other criminal charges when buying the house, inflating the price for sale and not accomplishing any improvements. By involving an appraiser in these activities, the house flipper may disclose a valuation of the property that is much higher than it should have. These scams may trap some buyers into the sale.
Other scams that some house flippers will engage in are part of the mortgage loan fraud schemes to attract new buyers to the property for sales with property that went through significant improvement for the deal. The scam may involve a guarantee of purchase with a mortgage loan no matter what credit score the buyer has. Then, the flipper may finalize everything with a signature and not disclose any loan details. The activity may also include higher mortgage loans than necessary for the seller to increase his or her revenue.
Legal Help with Mortgage Fraud
To prevent criminal charges and avoid mortgage land fraud, the house flipper may need to hire a business lawyer to help and assist throughout the initial purchase and subsequent sale to another person. Additional tasks the lawyer provides may increase the quality of the deals and prevent litigation and criminal charges.