sellers options dealing with mortgage fraud (sale, real estate, apartment) - Massachusetts (MA) - City-Data Forum

Austin023 · 06-15-2013, 06:11 PM

The sale of my house "fell through" a day before we were supposed to close. The closing was moved a few days up a week earlier and then I got a call from my agent the night before the new closing date stating what happened: (please bare with me as this is just the basic info told to me by my selling agent and his broker)

The buyer's loan was withheld when it was found he had a four-fold increase of income, from 30K to 120K over a one year period (from 2011-2012)...and the loan officer supposedly had not noticed this until last week, yet apparently did not notify anyone until the day before last, that the bank was not going to approve the loan due to this glaring issue.
The buyer works for his parents who are self-employed (they own three restaurants locally, are of Brazilian origin but have been in this country many years I was told)---they gave him the 15% down for the house, which was being sold at 165K. His financing seemed stellar, from what I and my agent were given anyway.

Once the questionable income increase was "discovered" and the loan was not approved, the buyer's mother stepped in and wants to co-sign the loan. I get the feeling that some kind of collusion or fraud on the buyer's end is going on here. Any suggestions? What typically happens with earnest money in a fraud situation? Can I sue if fraud was in fact committed? I have already moved out of the house into a temp. apartment, furniture is mostly in storage. I am taking a job a 1000 miles away this fall.

Weird Tolkienish Figure · 06-15-2013, 06:12 PM

You didn't have a deposit? We were required to put one down before beginning the process.

Austin023 · 06-15-2013, 06:15 PM

yes there was a deposit and also I am wondering what happens with that in such a situation typically.

MikePRU · 06-15-2013, 09:33 PM

Read your contract as it governs the transaction. Next consult an attorney. Finally, don't take legal advice from free internet forums because you get what you pay for.

I'm not trying to be harsh but you're really looking in the wrong place for help.

Austin023 · 06-16-2013, 10:33 AM

Oh I am not looking for legal advice here---I certainly would consult a lawyer for any advice I would take into serious consideration....I guess it is more venting/see what people will say, etc...but it really caught me by surprise the other day when this was told to me.

Weird Tolkienish Figure · 06-16-2013, 02:55 PM

I'd be surprised if you didn't get to keep the deposit if the deal fell through due to fraud.

MikePRU · 06-16-2013, 06:02 PM

Quote:

Originally Posted by Weird Tolkienish Figure

I'd be surprised if you didn't get to keep the deposit if the deal fell through due to fraud.

To be honest, the way the system is setup it's difficult for a seller to keep a deposit unless they want to go to court or the buyer allows them to keep it.

parentologist · 06-16-2013, 07:49 PM

It's very simple. The buyer is surely past the mortgage contingency period in the contract. Mortgage fraud is the lender's business - not yours. Your only concern is whether he has the money to close by the closing date. If the buyer cannot close by the closing date, due to not having the money to buy the house, the deal is off. You absolutely get to keep his deposit (hope it was at least 5%) because you kept the house off the market for him, expecting to close, and now the house is empty, and so will be harder to sell at a fair price. It now looks like a "distressed" property. Let your agent know right now that you expect to keep that deposit if they cannot close, so the agent better make sure her company is holding it. Meanwhile, you now have to market an empty house, which is harder to sell, so you're certainly justified in keeping the deposit.

If the buyer can come up with the money by closing time, you close. I bet they can, because restaurants do a lot of cash business, especially those owned by immigrant families. They drastically underreport their income, thus evading taxes. That's why his income went from 30K to 120K so suddenly - they've been underreporting, so just to qualify for the mortgage, they inflated his income. Who knows what the income really is - it could be that high. By drastically underreporting their income, they often also fraudulently qualify for Medicaid and food stamps. I know this because I see their children on Medicaid, and the parents are too, while they live an upper middle class lifestyle. So they probably can come up with the entire amount in cash in time to close, in order not to lose the deposit.

If he does fail to close, you put the house back on the market. In my area, the market is rapidly rising, and there is also not a lot of inventory. So you might get lucky and sell the house pronto, maybe even at a higher price.

Good luck to you. Things are not as bad as you might think. In this market, it will all work out okay for you, since the market is rising, and will probably continue to rise for several years.

miu · 06-17-2013, 08:21 AM

Quote:

Originally Posted by Austin023

Once the questionable income increase was "discovered" and the loan was not approved, the buyer's mother stepped in and wants to co-sign the loan. I get the feeling that some kind of collusion or fraud on the buyer's end is going on here. Any suggestions? What typically happens with earnest money in a fraud situation? Can I sue if fraud was in fact committed? I have already moved out of the house into a temp. apartment, furniture is mostly in storage. I am taking a job a 1000 miles away this fall.

Why not let the mother co-sign for the loan and move forward? I don't think that the buyer was planning to swindle you. His parents just wanted to help him buy his first home. The family has a successful business and they can well afford to buy your house. Mortgage companies are very leery of giving loans out to people who are self-employed and would prefer their applicants just have W-2 forms showing a high income from the same company for several years. But not every real estate buyer fits into this "safe" category.

Don't you just want to sell your house and move on already? Or did you have another buyer wanting your house for the same money?

Parsec · 06-19-2013, 07:13 AM

Sounds to me the buyer doesn't really have a $120k income, but his parents surely do. I would also suggest letting his mother co-sign and see if the mortgage gets approved. It should only take another 1-2 weeks to see what happens with this, rather than putting the house back on the market and waiting another 3 months.