How can someone sell a non-existent property?

UPDATED: Aug 10, 2018

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How can someone sell a non-existent property?

A property in our neighborhood became available after foreclosure. Several neighbors expressed interest in purchasing it at the auction. Somehow, it was never auctioned but instead was sold without being put on the market. The new owner built a 4 bedroom 3 bath house on the property and the house was put up for sale. After it been on the market it while, Zillow showed that a second unit studio on the property sold for $212,000. We were curious about this, since the property is only 3 acres and it is quite plain that there is no other unit on the property. When we asked at the county offices about what exactly had been sold, no one seemed particularly interested. When we inquired at the title company, they said it was a cash sale and they had done no verification.

The house itself is still on the market. I realize that Im just being nosy but I do not understand either how or why one can sell a fictitious second unit.

Asked on August 10, 2018 under Real Estate Law, Oregon


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

You can sell a "future" unit--something that will be built in the future--and in fact that is common; so long as it is adequately disclosed to the buyer that it is pending and does not currently exist, and so long as the intention to build it is sincere (not fraud), it is legal.
But you cannot sell that something that does not and is no planned to exist: doing so would be, for example, fraud or a form of theft (e.g. theft by deception, or trickery). Of course, if there are no third parties involved to verify matters (e.g. no mortgagee, who requires proof before lending), but just a cash transaction between buyer and seller, if buyer does not do his/her homework, buyer may not become aware of the true state of facts in time to avoid paying for something which does not exist. 
There is also another possibility: some form of money laundering. A either wants to launder money which is the result of illegal activity and B is willing to help (such as in exchange for a piece of the transaction), or wants/needs to pay B for something illegal (e.g. drugs; a bribe; etc.), so A and B enter into deal in which A will pay B for something which does not exist, but which would be legal if it did exist.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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