California Tops In Short Sale Fraud
First the FBI announced a crackdown on short sale fraud, and then Freddie Mac they are teaming up to go after bad real estate agents. Freddie Mac short sales have increased from 4% of completed workouts in 2000 to nearly 14% in 2010. The California Department of Real Estate has also issued a consumer alert.
As you can see from the image above, California is in the top states for short sale fraud.
Why are they going after real estate agents?
Since short sale fraud requires the cooperation of one or more real estate professionals involved in the transactions, we have begun reaching out to Realtor associations in target markets to educate them about the latest trends in short sale fraud, the red flags to watch for, and what actions they can take to stop it. We strongly believe responsible Realtors are America’s natural first line of defense against such scams.
There should be a special circle of H*ll for agents that participate in such deception. The article goes on to give examples of possible short sale fraud.
Falsely indicating on a new short sale listing that there is an offer on a property in order to discourage legitimate offers and protect an accomplice’s planned low bid.
Manipulating the short sale listing price by making the house look more distressed than it really is (“reverse staging”), inflating repair estimates, or using similar tactics designed to obtain an artificially low home value on the Broker Price Opinion. (Our requirements prohibit the buyer, buyer’s agent, buyer’s attorney, or a third-party short sale negotiator to be the contact point for the agents preparing the BPO.)
“Flipping” schemes where the fraudster “buys” a house at a short sale without putting down any of his own money and then sells it a few hours (or days) later to a legitimate buyer at a much higher price. These are complex multi-step schemes that use falsified title and/or loan documents to fool a lender into approving the ultimate buyer’s mortgage, which the fraudster uses to settle the earlier closing on the house he “acquired” at the short sale for a much lower price.
Manipulating the HUD-1 settlement statement so the fraudster can skim away net proceeds from the sale for himself or other parties in the transaction without the seller’s or investor’s knowledge. (The HUD-1 is the document that itemizes all fees, charges, and other funds involved in a home sale.)
Download full FBI report by clicking image below: