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Is this illegal? Sounds like it!!

Posted by antonyeo (My Page) on
Tue, Nov 18, 08 at 13:06

My brother-in-law own a home and will purposely allow it to go into forclosure. And then have his mother to buy it at a lower cost. He's doing this because the house is worth less now than when he bought it. Doesn't sound right any thoughts?


Follow-Up Postings:

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RE: Is this illegal? Sounds like it!!

He can try however it's my understanding that once it goes into foreclosure it is up to the bank to decide who may or may not buy it.
Me thinks BIL better rethink his plan.


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RE: Is this illegal? Sounds like it!!

Sounds very unethical,at the very least..I also don't believe he has any say in who will purchase it at foreclosure...This kind of nonsense is what infuriates people like myself,and hence very little sympathy for people like your brother-in-law


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RE: Is this illegal? Sounds like it!!

He's a creep and he's money hungry. I wish I could afford another home I would buy it and rent it out to my mother in law.


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RE: Is this illegal? Sounds like it!!

I dont see much difference He can let the house go and his mother can buy another house. Probably lots to choose from since lots of folks are walking away.

This is an interesting time Ethically its a terrible thing to do to walk away from a debt. However, from a strictly financial point of view, it could be the best decision for the family.

When it comes to ethics vs. huge financial loss, especially since the worst that will happen is a bad credit report for a few years, I think finance will win. I also think it will become socially acceptable


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RE: Is this illegal? Sounds like it!!

We are in the process of trying to purchase a short sale now and in the fist volley of documents the bank sent us (even before the contract) there were some disclosure statements. One of them (Affidavit of "Arm's Length Transaction") stated that I do not know the seller of the short sale property by family or business associate and will not allow the owner to rent back or purchase or transfer the property.

Even if the bank does not have a form like this, what your BIL is trying to do is unethical and could probably be sued by the bank if they every found out.


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RE: Is this illegal? Sounds like it!!

I believe that in such a circumstance, the lender will submit a 1099-Misc to the IRS for the difference between what he owes and what they receive on the sale of the property. The only way to avoid paying taxes on that amount will be for him to declare bankruptcy.
Has he figured that into his calculations?


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RE: Is this illegal? Sounds like it!!

Cindyb, you mirrored my thoughts. I had heard that the difference between the sale and the debt would be reported as income to the seller also. But maybe these days it wouldn't, our moral compass is getting so turned around, it's sickening.


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RE: Is this illegal? Sounds like it!!

The IRS is eating the income tax on the imputed in come from short sales since around the beginning of 2008.

They are not allowed to tax it.


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RE: Is this illegal? Sounds like it!!

If the owner can get his hands on cash, he can purchase the home for less. We just bought a house at a sheriff's sale that the owner paid $455000 for in 2007 and the bank sold it to us for about 1/3 of that. If the owners can come up with a loan or someone to lend them the cash they have the legal right to redeem the property from us for what we paid plus interest and expenses.


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RE: Is this illegal? Sounds like it!!

Doesnt sound right, sounds like fraud to me.


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RE: Is this illegal? Sounds like it!!

If these people bought the house at the height of the bubble (let's say for $600,000) and similar homes are now selling slowly for $350,000 (as is the case in some areas), it's doubtful that the homeowners are going to make it for 30 years with being so upside down. They will have to do something and that probably will be to let the bank foreclose.

If the bank puts the home on the market, someone will eventually buy it for today's market vaue, or under. That may or may not be the mother.

It seems to me that this situation is based on reality and not by ethics or integrity.
Maybe if the lender would redo the mortgage to today's market for the owner, but that is not likely.
Susan

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RE: Is this illegal? Sounds like it!!

it's doubtful that the homeowners are going to make it for 30 years with being so upside down.

Why not? If they could afford their mortgage in the first place what does the current value of the property have to do with it? I also seriously doubt that they will be "upside down" for 30 years. The market will come back.
And what about when you buy a new car? It starts depreciating the minute you drive it off the lot, but I don't hear everyone whining about making their car payments because of that.


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RE: Is this illegal? Sounds like it!!

From my days in REO sales at a bank in the early 90's, I really doubt that the bank would accept an offer from anyone related to the former borrower if they knew about the relationship. It isn't just about money, it's about the precedent that would be set for other borrowers. I hope Mom wasn't going to ask the bank to finance her acquisition -- LOL!


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