Can I sell my house to someone then buy it back from them if the sale of the house was a short sale?

My house has lost about 40% of its value and the sole income of the family has left. I have placed my house up for a short sale. I was wondering if a friend, or a family member bought my house, and I got the money to buy it back from them could I? I’ve heard that it is considered fraud, but wasn’t sure. I was also wondering how long after a short sale can I buy a house, and is that just financing a house of buying one outright?

Asked on October 21, 2011 under Real Estate Law, Colorado


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you simply sell the house short without getting bank approval and getting the bank to foregive the remaining balance of the loan--i.e. you  sell it short and you're still responsible for the remaining balance--you can do as you like. But if you sell it short with bank approval and the bank writes off the balance of the loan, then you buy the home back, that would almost certainly be fraud: you did not disclose critical information. You could be sued and even possibly face criminal prosecution.

As long as you are not buying the *same* short sale house back, you could buy a new home immediately if you like--if you can afford one. You will not be legally barred from getting financing, but it's also unlikely you'll qualif for a loan shortly after a short sale--you can try, but banks don't have to loan you if they feel you're a bad risk.

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