patrick.net

You are dealing with a crook. Move on if the price is not right.

It seems illegal doesn't it? My aunt who is an agent in Las Vegas said it is absolutely illegal and to report that agent to the board, my brother is a RE Atty and said California is like the wild west with RE and the laws here are not modern so it is possible that paying a bank outside of escrow might be legal.

If this becomes the 'trend" for short sales, then the prices will never go down as long as people are willing to pay extra for the house.

I realize it's besides the point, but I'm curious - is there a picture of said house? I always get a kick out of seeing what a million dollars gets you these days, but especially in California.

The house went off the market already. He accepted offers on sunday and apparently one went pending already. This is all I could find: http://www.trulia.com/homes/California/Alamo/sold/1460967-101-VIA-COPLA-ALAMO-CA-94507

I also saw this house was originally listed for 1,439,000 in April of this year. I saw this place last week. I would have a hard time paying 900k for the place let alone 1.4M. It did have a solar heated pool, but the interior had minimal updates. It looked like a house from the 60's. Nothing special. The yard also had a weird layout. It was a pretty generic rancher built in the mid 60's. Its location is west side Alamo which is supposedly the more desirable side of town. Not too sure why...I cannot really tell the difference. The houses are actually older and more run down in many cases.

If you think it is illegal (fraudulent, I assume you mean), what is the law that is being broken? Who is the party that is being defrauded?

My guess is that the 1st mortgage holder is the party that is being defrauded. Basically they have the right to all payments up to what they are owed, before the 2nd mortgage holder should get paid anything. The first offering the 2nd $10k as a sweetener to make them rescind their claim as well.

>>the buyer had to agree to pay the 2nd lender 60k outside of escrow.

Now this sounds suspect. Out of escrow sounds fishy, because it means 1st mortgager does not know, and may be owed more than what they are getting.

exactly. The 2nd bank asked for 60k outside of escrow to close the deal so the 1st bank wouldn't get that money. If you reread my post, the home was listed as a short sale for 900k. The 1st bank is actually owed 1,050,000 and the 2nd is owed 275k.

Apparently in short sales, when there are 2 banks, the 1st bank keeps all the money and the 2nd bank gets screwed out of their share.

I still don't know if it is illegal to pay the 2nd bank outside of escrow or how you would do this? Would it be on top of your downpayment and bank loan?

I'm thinking that, if you are paying outside of escrow, it's extra to the loan and downpayment. It seems like it's screwing the first lender and I'm not a lawyer, but it seems like collusion to commit fraud. A realtor with any ethics wouldn't do it, but a realtor with ethics is a contradiction in terms anyway.

We were presented a similar situation where the seller wanted some cash on the side during a shortsale. The bank was owed $800k, but was willing to accept $700k in a short sale. The seller then wanted $20k cash out of escrow to pay some bills. Our agent said we had to do the side deal without her, and it wouldn't be in the contract. (To me, obviously if the agent didn't want to deal with it, it's probably sketchy at best, if not illegal.) I remember looking up some CA codes...I think it could easily fall under fraud. Our plan was to offer to buy the furniture as a side deal. To me, the bank would have a hard time proving fraud if we actually got something for our money. The situation you mention is obviously different since the 2nd mortgage company has nothing to give. I'd bet it is fraud, but as the saying goes, "it's not a crime if you don't get caught." If they do it intelligently, it should be difficult to prove. I always had a bad feeling about our situation, so we didn't actually go through with it.

And yes, it is separate from the down payment and bank loan. You'd need the downpayment plus the $60k and still have a large mortgage.

Outside of escrow, and undisclosed, the 60K is not related to buying the house. It would be fraud and illegal for the seller to do so, under the terms of the first mortgage. You would be colluding with that fraud

You are either making a personal loan or gift to the seller (depending on how you chose to do this), who then pays the second bank.

If the transaction falls through, you will have to get the money back from the seller (if its deemed a loan). You have no means of getting it back from the second bank. Good luck doing that with someone who cant pay their mortgage and is underwater.

If its deemed a gift,.. ha ha ha.

If it's a gift, the seller would have to pay taxes unless the checks were written $12k at a time to different seller family members. I guess it's a moot point anyway...

I would tell the 2nd lender to take a hike.

I did not pursue the house since the whole deal sounded fishy, but apparently someone else thought it was ok to pay the 2nd bank outside of escrow. The house went pending after less than 1 week on the market.

The good news is the sale will be recorded at 900k and not 960k, so for comp purposes, the sale works to my advantage on a future purchase if I decide to buy a place in that area. Especially if the neighbors all think their similar house is still worth 1.4 or 1.5MM.

Now I see another place that was listed at $1,250,000 just last week relist for 749k in Orinda, which is a fortress area. Not listed as foreclosure or SS, but still seems fishy: http://www.redfin.com/CA/Orinda/14-Beaconsfield-Ct-94563/home/1615284/ebrd-40401853

Why are you paying close to $1 million for a house anyway? Have you lost all common sense? These houses are still overpriced by about 50%

I was born and raised in California and I love quite a few areas in this state. The bay area is meh real estate wise, but we are stuck here due to my husbands career relocating us here.

Before moving up here, we had a beach house in LA with perfect weather and 20 minute commutes for both of us.

I dont really get why the prices are so high up here? Maybe because it is commuting distance to Silicon Valley where there are a lot of high paying jobs?

Truth be told, my husband is lucky I dont divorce him for convincing me to give up my career and sell my gorgeous home walking distance to a clean, somewhat private beach to move here. Now we are stuck renting and it makes me sick to think what we will have to spend on a very average, ugly home in a boring suburb where it takes 30 minutes plus traffic to get anywhere from here.