What is a Straw Buyer?

Hey D.C. here,

Here’s today’s question of the day from Don.

Q: What is a straw buyer?

A: A straw buyer is a person who purchases real property
on behalf of another person. A straw buyer is used when
the real buyer cannot complete the transaction for some
reason.

Mortgage fraud is an epidemic that still continues to be
around even after the past few years that we have been
through. It can take form in many different ways whether
it be foreclosure rescue schemes, illegal flipping to straw
buyer scheme. Property flips are not inherently illegal and
not all transactions involving a rapid purchase and resell
are improper.

Straw buying is used in buying homes, where the real buyer
of the property may have poor credit and is unable to obtain
a loan. The real buyer promises to make all the payments and
may compensate the buyer for the use of his or her credit.
Straw buyers are loan applicants used by fraud perpetrators
to obtain mortgage and are used to disguise the true buyer
or the true nature of the transaction. In this case, there
is a mortgage loan on the property and the payments are made
by an entity or person other than the borrower. In some
cases the property is transferred to the straw buyer then it
is rented out to the homeowner who sold the property.

The straw buyer may be a friend, family member or even a
stranger. On an average the straw buyer is paid between
$5,000 to $15,000 to sign the paperwork using his name and
personal information to secure the loan. This individual
has no intention to live in the property or make payments on
the home.

There are many individuals that are involved in this kind of
transaction. Some of them are a realtor, a seller, a
homebuyer, a straw buyer and a mortgage broker. So how does
the straw buyer scam work?

The real estate agent sells the home to a buyer that does
not have good credit and cannot obtain a loan. So the
realtor convinces a different buyer (the straw buyer) to
purchase the home that is in foreclosure and offers him or
her thousands of dollars as a compensation for the use of
their name and credit. The straw buyer then qualifies for
the loan and closes on the property all the while assuming
that the real buyer of the property is going to be making
payments.

Once the real buyer defaults on the payments, it is the
straw buyer(s) credit and that will be ruined. The property
will go in to foreclosure and will have a negative effect on
the other houses in the neighborhood.

That was a great question! I hope my answer gave you
a detailed description of what a straw buyer is.

  Thanks for another great session of Ask DC.
Keep those  questions coming and I’ll keep the
information rolling!  

Until next time,  

  P.S. Module 1 of my Foreclosure Investing System  has
great advice and detailed training that will help you  reach
your goals in the shortest amount of time.
 Members—make sure you don’t skip this one!

  Not a member yet? What are you waiting for? 
Click here to get started.

  If you want to share this valuable information, forward it on
to your friends and colleagues. If you have  comments,
leave them on my blog.   

Can’t wait until the next email?
 Join my Facebook Fanpage and let’s chat:
 dcfawcett.com/facebook

Or follow me on Twitter 

Share and Enjoy Real Estate Investing Strategies: