If a buyer has poor credit and is unable to obtain financing for a large purchase like a home, ?a ?straw?buyer? is ?sometimes used. ?A ??straw buyer? is a person who makes a purchase on behalf of another person. ?It is not necessarily illegal to use a straw buyer, except when the transaction involves fraud.
The real buyer promises to make all the payments and may pay the straw buyer for the use of his or her credit. Banks dislike the use of straw buyers because the arrangement increases the risk of default on the loan without the bank?s prior knowledge of that risk. The activity is also risky for straw buyers, who may be held legally responsible for the debt they incurred on behalf of others.
Straw buyer schemes are one of many types of California real estate fraud. ? What typically happens is a real estate agent or broker finds an individual with good credit. ?This person is ?known ?as the ?straw?. The Straw Buyer is willing ?to buy a home for another person. This other person may be a friend, family member, stranger, or even a fictitious individual who the agent explains simply cannot acquire a loan because of ?poor credit.
The real estate agent ?or broker might ?offer the ?straw buyer? a large amount of money (sometimes between $5,000 and $10,000) to sign the paperwork using his/her name and other personal information to secure the loan. The straw buyer has no intention of ever living in the home or making payments on the home. Some straw buyers actually ?believe they are ?doing good? by simply helping another less fortunate person (similar to a cosigner).
Straw buying becomes illegal when the agent or broker sells the home to the straw at an inflated price to achieve the goal of increasing his/her commission. ?Or the agent / broker will convince the straw ?buyer that he/she is helping a buyer purchase the home for a great deal. ? This ?deal? will allow the straw buyer ?the opportunity to split the profit when the agent and owner resell the property at a much higher price. This type of scam may also be referred to as illegal property flipping.
Mortgage brokers might also use false documents that allow the straw to purchase the property, even if his/her income wouldn?t otherwise allow him/her to be able to make the purchase. ?The straw buyer then signs paperwork not knowing that even the notary may in in on the scam. ?This allows the notary to answer any questions so that the transaction appears to be legitimate, when an unsuspecting straw has questions.
The result of this scam gives the real estate agent / broker, mortgage broker, notary, and anyone else who was involved the loan proceeds while the straw unknowingly assumes the mortgage. When he/she doesn?t pay, the bank forecloses on the property, and the straw buyer ends up with losing his/her good credit, possibly declare bankruptcy, and faces possible criminal charges.
For questions about California straw buyer schemes or scams, or to discuss your case confidentially do not hesitate to contact us The Law Office of Peter S. Cameron, APC at 877-603-8473. ?? If you prefer, simply fill out the the secure online case review and we will respond without delay.
This article is for educational and marketing purposes only. ?It does not create an attorney-client relationship.
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