....are bad. This one's not even very clever. The "bad guys" write up two contracts. One contract is the "real deal." The other contract goes to the end lender. Sometimes it is the real estate agent who comes up with this scheme, sometimes the buyer, sometimes the mortgage broker. Sometimes even the attorney. But the effect is the same. Maybe the buyer wants to put some cash in his pocket. Maybe the real estate agent or the mortgage broker want to pad their commission.
Say the seller wants $100,000 for the house. There will be a contract which specifies this price--the real deal. Then we have the second contract. This will either be a completely separate contract or just an extra page which will be conveniently removed before the appraiser and/or end lender get hold of it. This contract will say the purchase price is $140,000 and the buyer will "refund" the extra $40,000 to the seller, either under the table or via a "flexible" closing agent.
Again, not even clever. This is fraud, pure and simple. If the lender does not know the whole transaction, you are committing fraud. Hope you look good in orange....