Legal Question in Real Estate Law in California
A dear friend is filing for a short sale on his home because he has found it difficult to pay his mortgage recently, despite the lack of any change to his financial situation. He has asked me to place a bid on the home as an interested buyer in the event that the short sale is approved.
Although my credit status is excellent, I have no interest in purchasing a home of my own at this time, yet I would love to help my friend. My major concern is that I would forgo my first-time-buyer status if I take on this purchase for my friend. His real estate agent assured me that when I do decide to purchase a home of my own in a few years I will be able to qualify for those benefits as long as I provide evidence that my friend has been making all the payments (check receipts) and that I deny any tax benefits from the short sale purchase.
I honestly don't believe my friend's real estate agent. I just wanted to ask what the legal implications of the transaction would have to be considered before making my decision. I will rather not be entangled in a host of legal problems and I'm wondering if this is just a loop hole she is working, especially not filing for the tax exemptions if I'm the legal lien holder.
1 Answer from Attorneys
Run, do not walk away from this. First, if you have no desire to buy the home, why would you do so? Second, this is essentially an attempt to defraud the lender. I cannot tell you for sure that it is criminal and that you would be prosecuted for doing so, but why on earth would you risk criminal and/or civil liability, even for a dear friend.
The upshot of what you are doing is this. He doesn't want to pay the bank what he agreed to in his original loan. If he's had no change in circumstances, either he bought a home that he couldn't afford in the first place, or he has just decided that he can use you to get a better deal. By selling it to you in a short sale, then effectively "buying" it right back from you, he has defrauded the bank out of the "short." Again, I don't care how good a friend this is, you are making possibly the biggest mistake of your life if you go along with this.
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