When a person buys real estate on behalf of someone else, the law may consider them a “straw buyer” if they have no intention of using the property themselves. For example, an individual with good credit may secure a mortgage and purchase a piece of real estate for another person who may have poor credit or multiple existing loans.
If the actual buyer does not intend to make payments on the loan and the owner could not have made the purchase legally, this type of real estate scheme may be a criminal offense.
What types of charges might straw buyers face?
Straw buyers and other parties involved in this type of unlawful transaction may face charges of mortgage fraud as well as mail fraud, wire fraud, tax fraud and money laundering. These charges may lead to either misdemeanor or felony convictions, substantial monetary penalties and possible jail or prison time.
How might the market impact straw purchases?
Investors sometimes use straw buyers when they already have multiple mortgages that might prevent them from qualifying for further loans. If an unexpected downturn in the real estate market prevents investors from reselling properties as intended, that may lead to a default on loans and potential charges of mortgage fraud.
With the recent crackdown on potential cases of mortgage and real estate fraud in Florida, many local investors may be facing increased government scrutiny. Those who think that they may be under investigation or may come under investigation may want to seek legal counsel at the earliest opportunity.