Nothing. If the seller is compensated in any way for doing a short sale you risk a felony conviction for mortgage fraud.

Mortgage fraud is a term used to describe a broad variety of actions where the intent is to materially misrepresent information on a mortgage loan application, in order to obtain a loan or when one or more individuals defraud a financial institution. A mortgage fraud conviction is a felony.

In a short sale the lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagee. Because the lender is accepting a loss on their loan it is their position that the seller should not profit from a short sale in any manner. A common part of the short sale agreement is “the seller is to receive no compensation or proceeds from this transaction” or words to that effect. In accepting a short sale the lender is relying on the representations made in the short sale package which includes the settlement statement that normally shows the seller receiving no proceeds or having to bring some money to the closing for the short sale.

Many investors and so called “gurus” get the seller funds by purchasing personal property from the seller then using a bill of sale as proof of purchasing personal property. Example. Investor may purchase a washer and dryer for $1,000 or a rare gun for $5,000 from the seller. Doing this could land you in jail for mortgage fraud!

The problem is you may have just committed mortgage fraud and bought yourself a felony conviction and a trip to jail. It’s obvious you would not have been purchasing personal property if it were not for the short sale transaction. Is it really worth risking a felony conviction? Not for me!