How can I avoid short sale scams?

Tactics are being used by unethical short sale agents who are preying on the vulnerabilities of distressed homeowners. The most prevalent of these tactics is instant short sale flipping, which is known in the industry as short sale flops.

In a basic sense, a short sale flop occurs when an agent hides legitimate offers from the property owner. Instead, they use an investor to purchase the property who then instantly sells using the previous short sale agent and buyers who put previous offers on the home. The short sale agent makes double commissions, plus takes a cut of the profit made by the investor. In an effort to curb this practice, lenders have been requiring buyers to keep the property for a certain amount of time before attempting to resell.

The biggest red flag for an unethical short sale agent is one who does not keep you informed and refuses to let you know when offers have been submitted. It is also important that the agent works for a company that disallows this type of activity. Also be aware of any agent or company who requires money upfront, as this is illegal. Investors should only be consulted by the short sale agent if the property is unsellable due to its current condition or uniqueness, or if the home has an upcoming foreclosure date that won't be postponed without a valid offer.