Are you a straw buyer? If you are you are helping to perpetuate loan fraud. Sure signs you may be a straw buyer;
- You are approached to help someone else buy a house for investment purposes
- You are told you’ll have to do nothing but take out the mortgage in your name
- You will be paid several thousand dollars upon a successful closing
- You will share in the backside rewards of appreciation once the house is sold
On the surface, none of the items listed above is illegal. In fact, all can be done individually or grouped together in very legal fashion. But many, many times it’s a wide-open door for you to be defrauded.
Listen, YOU have to do YOUR due diligence. No one can do it for you save a very TRUSTED and TESTED source. Most straw buyers have never seen the houses they helped to purchase. That should be a warning sign right there.
Read more about straw buyers here and here. Then check with legal counsel before you do anything similar. Again, this can all be done on the up and up. But usually, it seems, it’s not.
BBQ Capital | Kansas City Real Estate Investing 
Chris,
I am doing a deal right now that seems to me to be loan fraud – perpetrated by the lender themselves. They are offering an end loan wrapped with a rehab loan. Meaning they are paying for the purchase and the rehab and will the buyer will end up with an rehabbed house, with an end loan, and a rental. But here’s the rub, they don’t have the set up to manage checking up on the rehab and paying the draws out in steps. So their plan is to place the rehab money in escrow with the title company at the begining, then when the buyer says the rehab is done, the buyer can tell the title company to pay the contractor. My question was to them, what would happen if the buyer and the contractor were in cahoots and got the rehab money released and went on off to Vegas. Then bank then ends up with an unrehabbed house with a fully rehabbed loan. You have to wonder about the lenders these days.
Oy.