In addition to providing adequate disclosure to all of the other involved parties to a back to back short sale transaction the short sale investor needs to take other steps in order to avoid committing fraud or avoid the appearance of committing fraud. One of those key things is for the short sale investor to make sure that each transaction is a separate and independent transaction that stands on its own.
The essential element of doing that is each transaction must have its own funding. The era of “pass through funding” or “dry closings” is done. This type of “funding” involves manipulating the escrow account of the closing or title company. This results in misrepresentations, breach of fiduciary duty and “good funds” requirement. Each major title underwriter is frequently forbidden this type of “closing”.
Each transaction should be separate and distinct. It has its own particular parties, source of funding, escrow and title fees, documents and adequate document prep fees. The transaction should include title insurance and be detailed on the HUD-1.
Check out www.topshortsalelawyer.com for more information on doing short sales the right way from Practicing Attorney Jeff Watson Esq.