Contract Fraud in Ft Laud/Miami - Posted by Sandy FL


#1

Posted by Irwin on January 16, 1999 at 07:03:33:

I doubt that this guy is doing this on any kind of regular basis. Most lenders, especially in Jumbo Loans, would look behind a simple subordination clause in the boiler plate section of a contract before they close a loan. They would see that he has no equity in the property right off the bat. Also, sellers of seven figure properties usually have their lawyers handle these details, so I wouldn’t sweat this situation too much.


#2

Contract Fraud in Ft Laud/Miami - Posted by Sandy FL

Posted by Sandy FL on January 15, 1999 at 11:35:51:

Hey, fellow Broward area investors–

Got a “Heads up” warning from a RE Atty at the lunch meeting yesterday…

Seems there is an investor going around making offers on property with a “duped” FLA-Bar Association Contract. It looks just like the real one, with the aqua stripe at the top, but where it says “This contract has been approved by the Florida Association of Realtors”, he has snuck in the word “not”, so it reads “This contract has not been approved by the Florida Association of Realtors”.

Furthermore, he has made provisions in the contract to subordinate the sellers first mortgage, to only be held liable for $1 in damages, and on and on. Its incredible, the gall of this person.

He will surely be caught, but in the meantime, if you get an offer on your property written on the hallowed FLA-BAR contract, as always, check it out very closely before you sign it!

Sandy FL

P.S. Email me if you are local for more details.

P.P.S. For all you JD’s in the room, I don’t know if ‘contract fraud’ is the right term. Apparently the sellers who signed this contract are - um, SOL. But this person is at least violating some copyright laws or something!


#3

Thanks Sandy - Posted by Mark R in KCMO

Posted by Mark R in KCMO on January 15, 1999 at 17:13:23:

Sandy,

That is a good remider to not take things at thier face value, and to take the time to actually read the contracts that are presented.

Mark R in KCMO


#4

Seen This Advocated On Here - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on January 15, 1999 at 12:52:32:

I’ve seen that strategy advocated on here as well as in several courses. It looks just like the standard form used in the state, but with investor-favorable provisions added in. Most people never check it out.

Sneaking in the “not” isn’t something I’ve seen or heard about though.

Not commenting on the ethics…just that it’s used pretty frequently.

Michael


#5

Re: Clarification - Posted by Sandy FL

Posted by Sandy FL on January 15, 1999 at 13:26:01:

The form I guess this guy is using has been typeset and formatted to look like it has not been changed. (Not his own phrases added in like an addendum or fill-in-the-blank). The investor is using the subordination clause to over finance the property, take cash out at closing, and disappear.


#6

Re: Clarification - Posted by Rob FL

Posted by Rob FL on January 16, 1999 at 19:51:30:

Actually this automatic subordination stuff has been tried many times here in Florida. The courts have said that the automatic subordination does not automatically subordinate but if properly worded could require the seller to sign a subordination agreement. This subordination verbage must be carried over into any mortgage to the seller. Working at a title company I can tell you that no title company will issue a mortgagee policy without an acutal recorded subordination agreement regardless of any automatic subordination verbage in their mortgage.


#7

Clarify subordination - Posted by MilNC

Posted by MilNC on January 15, 1999 at 13:39:14:

How can the first be subordinated without the permission of the first? Are there not clauses in the first to prevent this? Who subordinates it? I think I’m missing a few beats here.

Is this a “silent second” (illegal) or is that not related.

I don’t want to run into this!


#8

Re: Clarification - Posted by Redline

Posted by Redline on January 15, 1999 at 13:34:46:

Well, that’s something else. But making the contract look exactly unchanged while actually adding your own bits in there is perfectly fine from my point of view. That’s why you READ a contract before you sign it.

RL


#9

Re: Clarification - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on January 15, 1999 at 13:31:40:

So are the ones I’m talking about. Their designed to look exactly like the standard forms. No addendums, no nothing. Just slight changes to the wording to make it investor favorable.

Now, over financing and running…well, that just doesn’t sound win/win to me. :slight_smile:

Michael


#10

OK here is the scoop. - Posted by New Mafia Target?

Posted by New Mafia Target? on January 15, 1999 at 15:55:50:

OK, I had to call the attorney to get the details correct!

First, the Broward Association of Realtors contract has a faint watermark printed diagonally across it in aqua, that says “This contract is … blah blah” It has a distinguishing aqua banner and logo at the top that designates it as the contract approved by this Board. If this guy is getting his own contracts made up to resemble the aforementioned contract, including banner and logo and watermark and all, with 400 out of 411 lines using the same verbiage, he could be guilty of plagiarizing, and possibly, attempt to defraud.

Here is the thing with the subordination. These are owner financed properties. Lets say its for a 100k house. The buyer gets the seller to carry 70% loan for him (70K). In his contract it states that any owner financing will be subordinated to new financing. The buyer then goes out and gets a new 70LTV loan on the property, for 70K. He comes to closing, pays the seller their 30K cash, pockets 40k cash, and now owns a house worth 100k with financing of 140K. He doesn’t care that the property is overfinanced, he is after the cash. The sellers interest in the property is subordinated to the new loan. The bank who issued the new loan is OK. The party which is not ok, is the seller, who now has neither a property, nor any money coming in.

Only thing is, these are big deals. Move the decimal point over one notch, he is actually buying 1 million dollar properties, putting 700k new financing on them, pocketing the 400k and doing this over and over. It takes the title companies about a month to record the new loans, and by then he’ll probably be in Cayman.

Now do you get it? I do! Whew! I am having my dang attorney look over everything from now on.

You would think sellers of million dollar properties would …