Buyer Beware: Short Sale Scams

The real estate market has recovered significantly from the downturn of the mid-2000s, but selling a home can still be tough going for some sellers. If you’re trying to sell, you many have heard of investors who purchase houses from homeowners in a transaction known as a “short sale”. You may have even been contacted directly by one of these companies.


Though some of the people behind these advertisements are legitimate real estate investors, many more are simply scammers out to make money at your expense.

How Real Estate Short Sale Scams Work

In some situations, the investor does not actually buy the home. Instead, the investor convinces the home owner to make a trust and then title the home in the trust’s name. The “investor” then promises to market the property to find an eligible buyer. The investor also promises to pay the mortgage. It’s no surprise that sellers burdened by a house payment they can’t afford are willing to accept this offer.


Some time after, the investor persuades the home owner to transfer his interest in the trust to a third-party business, which is actually managed or owned by the investor. This permits the investor to acquire title to the home without actually purchasing it.


In the end, the original seller no longer has any ownership interest in the property yet still owes the entire mortgage. This leaves the door open for the investor to locate a new owner by offering in-house financing. In the majority of cases, the prospective owners these investors attract are people with poor credit who are unable to buy a home with a conventional lender. When the new owner inevitably stops paying, the investor simply forecloses and begins the process all over again with a new owner. Throughout all of this, the original seller continues to be responsible for the mortgage payments.

Protect Yourself

Before you negotiate with any buyer, contact an experienced real estate attorney first. At Hoffman Law Group, we can help you research prospective investors to determine if they are trustworthy. We can also help you review your options if you need to sell right away.


In many cases, sellers who are behind on their mortgage can negotiate a short sale directly with their lender. In a legitimate short sale, the lender agrees to accept less than the outstanding obligation due on the home in exchange for the seller locating a qualified buyer within a specific period of time. It is critically important to work with an experienced attorney when navigating the short sale process.

California Real Estate and Eviction Law

Kirkman J. Hoffman has more than 20 years’ experience representing commercial and residential landlords, owners, and property managers in Silicon Valley and the surrounding regions. Contact the team at Hoffman Law Group today at (408) 241-9620 to discuss your eviction matter.


This website has been prepared by Hoffman Law Group, APC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.