DEFINITION of 'Straw Buying'

When an individual makes a purchase on behalf of someone who otherwise would be unable to make the purchase, and the purchaser has no intention of using or controlling the purchased item. In many cases, straw buying is an illegal activity.

BREAKING DOWN 'Straw Buying'

Straw buying can take place in a variety of situations. One type of straw buying is a form of mortgage fraud, where a "straw buyer" applies for a mortgage for a property that someone else will actually control and live in. The straw buyer typically has better credit, so he or she poses as the buyer and is approved for the loan. A monetary award is usually provided to the straw buyer in exchange for his or her participation in the fraud.

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