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.

RELATED TERMS
  1. Straw Buyer

    A person who makes a purchase on behalf of another person. A ...
  2. Air Loan

    A mortgage fraud scheme in which a mortgage broker invents a ...
  3. Assumable Mortgage

    A type of financing arrangement in which the outstanding mortgage ...
  4. Mortgage Fraud

    Intentionally falsifying information on a mortgage loan application. ...
  5. Buyer's Credit

    A loan facility extended to an importer by a bank or financial ...
  6. Financial Buyer

    A type of buyer in an acquisition that is primarily interested ...
Related Articles
  1. Personal Finance

    Mortgage Fraud: Understanding and Avoiding It

    Mortgage fraud is dangerous, learn how to detect it.
  2. Investing

    BOE Seen Set to Cut Rates as Brexit Fallout Widens

    The Bank of England is seen set to cut interest rates tomorrow as the economy is showing signs of weakness in the wake of the Brexit vote.
  3. Managing Wealth

    Rent-To-Own Homes: How The Process Works

    Here's what to watch for when negotiating a contract for a rent-to-own home – and who is a good candidate for this option.
  4. Small Business

    How Do Internal Controls Work?

    Essentially, internal controls limit fraud and other illegal activities.
  5. Insurance

    What You Need To Know About Insurance Fraud

    Insurance fraud is as old as commerce. Discover the types of life insurance fraud and how they affect you.
  6. Investing

    Rent-To-Own Homes: How The Process Works

    Sometimes there is an alternative way to buy a home: a rent-to-own agreement, also called lease option or lease-to-own. Lease now and pay later can work – for a select few.
  7. Investing

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
  8. Personal Finance

    Are You Living Too Close to the Edge?

    If a missed paycheck would make your finances cave in, here's how to get back on track.
  9. Investing

    The Ins And Outs Of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  10. Investing

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
RELATED FAQS
  1. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  2. Does the buyer or the seller control a call option?

    Buy call options and maintain control over the price you pay and when to buy a given stock. Learn how to maintain control ... Read Answer >>
  3. What are the benefits of an assumable mortgage?

    An assumable mortgage allows the purchaser of a property to assume the mortgage from the property's seller. The benefits ... Read Answer >>
  4. What is the smallest amount of shares I can buy?

    Understand the steps needed for an investor to open a brokerage account and make a trade. Learn what the smallest amount ... Read Answer >>
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center