Fraud is like Pornography…I can’t always define it, but I know it when I see it!

I was talking with a real estate investor recently and he presented me with an unusual scenario, hypothetical I hope! I’ll change the names just to protect the innocent… so let’s just call this real estate investor, Mr T.Patrick the Starfish

So Mr T is wondering this…. If he finds a homeowner in foreclosure with no chance of recovery and offers to buy the home for $1000 subject to the existing mortgage. He gets the deed and records it, then looks for a tenant or otherwise homeless person to rent the house to with no intention of bringing the mortgage current. Let’s assume for the sake of argument that the home seller and the tenant are fully aware of the situation and they’re ok with it…. although they’re probably idiots, but let’s not ruin our fun just yet.

He rents the house until the bank forecloses and then walks away. The bank will likely offer the tenant a renewal lease or cash for keys to move out. Everyone’s happy?

Maybe I’m having a brain fart right now, but I can’t think of an actual law that’s being broken….. Can you?? I know there’s fraud in there somewhere, I just can’t define it. What law is actually being broken and will this backfire on Mr T ?

Posted in Buyers, Investment Property, Sellers Tagged with:
2 comments on “Fraud is like Pornography…I can’t always define it, but I know it when I see it!
  1. Paul Howard says:

    Hi Joe,

    It seem to me that since he bought the house he is going to be the one being foreclosed and that will be on his record. If he can even record the deed. If a lis pendens has already been filed I’m not so sure he will be able to record the deed though.

    The existing mortgage probably has a due on sale clause but that won’t stop a sale if he is willing to buy subject to. The lender will just call the loan – but they are doing that anyway.

    I think your investor buddy needs to talk to an attorney before he screws himself.

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