If a person makes a purchase of real estate for someone else rather than himself or herself, they may technically count as a “straw buyer” in the eyes of the law.
If the true owner of the home could not make the purchase legally and the straw buyer stands in so that they can, this could actually break the law.
Can straw buyers face charges?
Unfortunately for those facing accusations of serving as a straw buyer, the Financial Crimes Enforcement Network states that numerous fraud-related charges may apply to straw buyers. This includes charges of mortgage fraud, wire fraud, mail fraud, tax fraud and even money laundering.
These charges could potentially end in misdemeanor or even felony convictions. They may also come with hefty fines and fees, as well as time in prison.
Why does straw buying happen?
In some cases, investors will use straw buyers to purchase more properties if they already have multiple mortgages. Having too many will often prevent them from qualifying for more, which is why they have a person step in to act on their behalf.
In other cases, a person may genuinely have poor credit or not qualify for the mortgage they need. They could ask for a favor from a friend, colleague or family member to step in and qualify on their behalf.
Unfortunately, some people may end up participating in straw buyer schemes without even realizing that what they have done is a breach of law. This is why it is important to understand the term and its legal repercussions.