We’ve written on this blog before about various scams that homeowners can get caught up in if they aren’t wary. Often, unscrupulous real estate specialists, property investors, and self-styled “short sale negotiators” are the instigators. But sometimes, sellers know exactly what they are getting into and have no one to blame but themselves. One couple is facing up to three decades in prison and a $1 million dollar fine for an allegedly fraudulent short sale in Nevada.

Why Are They in Trouble?

The husband and wife are accused of making false statements to their bank to gain approval for the short sale of their house. The authorities claim that the Hosbrooks committed bank fraud when they signed and submitted paperwork stating that the prospective buyer for their home was an unrelated party. Apparently, the buyer was actually a relative. They were buying the house but had no intention of living in it (although they allegedly signed paperwork stating that they planned to take up residence there). Such an arrangement would violate:

· Full disclosure of any relationship between the parties in a short sale

· The general requirement that short sales be “arms-length” transactions

· The rules that the seller can’t remain in the home after the short sale

· The laws against perjury for submitting a false affidavit (a warning against making a false statement is found on most short sale approval request forms)

What’s missing from the story is how the couple and their relative eventually got caught. Of course, with the amount of personally identifying information that’s collected in a typical short sale transaction, it wouldn’t have taken much investigating for someone to connect the dots.

Don’t Try This at Home

Being in a tough spot financially can make it tempting to bend the rules a little to keep your home. It might also seem like an act of charity to tell a lie to help out a relative in trouble. But this case shows that circumventing the law in a short sale doesn’t have a happy ending. A prison term as long as the average home mortgage is nothing to sneeze at, and ending up with a cool million in fines doesn’t do much for your credit score.