Here is the question…

“Before closing on property I was selling for $519,000, the buyer requested that I increase the purchase price to $600,000 & give $36,000 in seller concessions because they were having some cash flow issues.

Subsequently, they got a mortgage for $592,000. Since the increased purchase price was less than the appraised value and the concession did not exceed 6%, my lawyer said that it was legal. Since the amount that I was supposed to walk away with as the seller did not change, I didn’t see it as problem to do them this favor.

It became a problem when I asked a broker friend of mine to sit in on the closing because…
a) the buyer expected to walk away with cash after closing which my friend said was illegal;
b) because the sale resulted from some other litigation & consequent stipulations, the buyer was responsible for the state & federal capital gains tax that I was to pay.

In addition, there are no sales/broker commissions listed on the HUD-1, but I KNOW they had a broker present whose commission increased along w/ the purchase price. Needless to say, we are STILL in litigation ($41,000 is being held in escrow) and after some research, I’m afraid I’ve been pulled into mortgage fraud.

How can I get out of this tangled mess without fine, jail time, & a hefty tax bill?”

My Answer

Yikes…where to start…

First, raising the sales price of one’s home to accommodate cash strapped buyers happens all the time.

However, it’s is done like this..

1. Original Sales Price - $519,000 X Max Concession Allowed By Buyers Mortgage Program (6% in this case)

2. New Sales Price = $519,000 x 6% = $51,900 + $519,000 = $570,900

So your new Max Sales Price if you were only “doing the buyer a favor” should not have exceeded $571,000.

Why was your Sales Price $600,000?

You said you were not profiting anymore than if you had sold for $519,000 so who was supposed to get the additional almost $30,000 above the concession-only based sales price?

Did this crooked buyer promise you a “cut of the $30,000″ if you’d go along?

You mention,

“Since the increased purchase price was less than the appraised value and the concession did not exceed 6%, my lawyer said that it was legal.”

Your lawyer is wrong….once the home was sold for more than the 6% needed, a fraud was committed. Somebody was picking up a $30,000 windfall over and above the concessions.

The trick will be figuring out “who was in on it”.

Clearly the authorities will start with the buyer and the appraiser sweating each of them for their role in the conspiracy to commit fraud.

  • Hopefully the appraiser was used many times by this con artist buyer and will roll on him to protect himself.
  • Hopefully, this con artist buyer can be linked to many such transactions establishing a history of criminal behavior with unwitting victims.

    • However, if this con artist buyer has not done this before or they can’t establish a pattern, the appraiser doesn’t role, and they both decide to lay this at your feet…you could be in real trouble.

    Dump the idiot lawyer you currently have and get a criminal attorney immediately. Do not consent to any interviews without this new attorney present.

    And hope to God above, you were never tape recorded saying to your con artist buyer,

    “You get the surplus at closing and we’ll split up with the appraiser the day after”

    I really hope you had nothing to do with this…but even if that is true, follow my advice. Get a good trial lawyer. Being innocent is no protection if the two of them finger you.

    Good Luck!

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