Builder Bailout Scheme

Here's the next brilliant scheme in our library:  A builder scheme.  Check it out:
1.  A builder offers incentives to buyers: such as cash back at closing or payment for mortgage or home-owner association fees.
2.  These incentives are not revealed to the buyer's lender.
3.  The builder provides the incentives after the sale has closed.

Many lenders put a cap on the value of incentives that a buyer can accept, so the fraud is surrounding disclosure here.

Another builder scheme invloves the builders offering a buyer incentive of a mortgage with no down payment.
1.  A builder wants to sell the property for, let's say $200,000.
2.  The builder inflates the price to $240,000 when he finds a buyer.
3.  The buyer's lender funds the loan of $200,000, believing that the downpayment will be paid at closing.
4.  The builder gets the $200,000 from the sale of the home, pays off his building costs, FORGIVES the buyer's $40,000 downpayment and keeps the rest as profit.
5.  The buyer's lender is lead to believe that there is equity in the home (in their eyes, the buyer put a 20% downpayment down).
6.  If the buyer forecloses, the lender has no equity and must pay all foreclosure expenses.

So...if you are working with a builder: ASK QUESTIONS!!!!!!!!!!!!!!  Talk to other agents who  were involved in other transactions with that builder.  This is a HUGE reason why, even when purchasing a new construction home, it is important for buyers to have their OWN representation.

Agents are licensed professionals, they need to make responsible decisions.  As always: go into every transaction with your eyes open.

Up next: Reverse mortgage schemes.