More Real Estate Fraud -- Short Sales

[chinaco]

Anyone Surprised?

And some people were wondering why banks were slow or reluctant to accept short sale offers.

In this latest twist on short sale fraud, scammers have found a way to rip off mortgage lenders by tens of thousands of dollars -- sometimes in a matter of hours.The scam artists, usually real estate agents, will secure a legitimate bid on a home, one where the borrower owes far more on the mortgage than the home is worth. Then they arrange for an accomplice investor to make a lower offer on the home....

Short sale fraud plagues the housing market - Jul. 14, 2011


I would think this would be an easy thing to audit and investigate electronically using property tax records.

 

[Gatordoc50]

Anyone Surprised?

And some people were wondering why banks were slow or reluctant to accept short sale offers.

Short sale fraud plagues the housing market - Jul. 14, 2011

I would think this would be an easy thing to audit and investigate electronically using property tax records.

I read the article and don't see anything that could be construed as illegal. Sounds like the banks are getting taken because of their lack of knowledge about real estate. Sort of like what they do to their customers with hidden fees and ludicrous interest rates on mortgages and credit cards. Payback is a bitch.

 

[chinaco]

I read the article and don't see anything that could be construed as illegal. Sounds like the banks are getting taken because of their lack of knowledge about real estate. Sort of like what they do to their customers with hidden fees and ludicrous interest rates on mortgages and credit cards. Payback is a bitch.

from the article:

In the Bridgeport, Conn. scam, two real estate agents were arrested. It was just one of four similar frauds that were listed in their indictment, which netted them a total of more than $180,000. They pled guilty and are awaiting sentence

 

[GregLee]

I don't see what's wrong with such short sales. I make no judgment about whether they're illegal (being ignorant of the law), but if they are illegal, I don't understand why they should be.

 

[Gatordoc50]

from the article:

The government and the banks are in bed together. Always have been. When you mess with the bank, you are messing with uncle Sam. Not a good idea. But what these real estate people are doing is in my opinion no different than repackaging and reselling mortgages.

 

[73ss454]

Are these the same banks that were jamming mortgages down peoples throats that weren't elligible for them. What goes around comes around.

 

[2B]

My house is for sale. Make an offer. We're renting but WTF.

 

[Retch The Grate]

Yeah, I'm not seeing why it is illegal to make an offer of X to buy a property when you have an offer of 1.5X to buy it from you from a third party. Assuming each seller is happy along the way, it seems fair. Anybody know why this is fraud? I can see creating false information by faking damage to the property and misleading inspectors as being fraudulent, but I see nothing wrong with the straightforward low ball purchase offer...

 

[arebelspy]

How does everyone not see this as fraud? Did you guys read the article?

If they are the real estate agent supposed to be selling the house and taking offers and submitting them to the bank, but they don't submit the highest and best offer, just a lower one from their friend, then have their friend resell it to the highest and best, that's taking money from the bank.

Now I can see how you might not feel sympathy for the bank, but that's another issue.

If I agree to sell your car for a commission, and I get an offer for 30k, and I don't tell you that, but I tell you the best offer is 20k from my friend, you agree to sell it for the 20k, and then my friend immediately resells it for the 30k, haven't I broken my fiduciary duty as the person agreeing to sell your car?

 

[arebelspy]

If you were a buyer of the property, and you had someone else that was going to buy it from you for more, that's fine.

Say, for example, I'm going to buy a short sale for 100k and resell it to my friend for 120k because he can't qualify for a loan, no problem. Totally fine.

If I'm the realtor selling it though, and I tell the bank the highest offer is 100k when there is a 120k offer (that can actually get financing and purchase it), so they accept my buddy's offer for 100k, and we immediately resell it for that 120k, that's fraud.

 

[clifp]

How does everyone not see this as fraud? Did you guys read the article?

If they are the real estate agent supposed to be selling the house and taking offers and submitting them to the bank, but they don't submit the highest and best offer, just a lower one from their friend, then have their friend resell it to the highest and best, that's taking money from the bank.

I agree.

The selling realtors has a fiduciary duty to the bank to get the best price. The banks are overwhelmed at this point so if agent puts in an offer that is real low ball, they maybe under pressure to move the inventory. If it was a real home owner with real equity you wouldn't sell a home for 30% discount 5% sure 10% maybe, but 30% no way.

 

[youbet]

Are these the same banks that were jamming mortgages down peoples throats that weren't elligible for them. What goes around comes around.

Yep. It's time for legislation insuring that no one gets a mortgage without a minimum of 20% down and a solid income history. No VA, no FHA, no zero or 5% conventional loans, no borrowing the down payment, etc. No do-gooder social programs designed to get people into homes that can't afford them conventionally.

 

[Nords]

Say, for example, I'm going to buy a short sale for 100k and resell it to my friend for 120k because he can't qualify for a loan, no problem. Totally fine.

I agree that the realtors have a fiduciary duty to the guy who's paying their commission, but I can completely understand the slippery slope.

Besides, the karmic vengeance of sticking it to an unscrupulous lender comes awfully close to two wrongs ~= one right...

 

[tryan]

Interesting ... this has been going for years in my hood. My realtor spoke of a competitor (broker) who is using his mother and bothers as the investors. He fronts the cash for them and flips the house at a higher price after negotiating a VERY short sale.

The same game is played on ebay and craigslist with every product under the sun.

A fool and his money will soon be parted.

 

[Gatordoc50]

Interesting ... this has been going for years in my hood. My realtor spoke of a competitor (broker) who is using his mother and bothers as the investors. He fronts the cash for them and flips the house at a higher price after negotiating a VERY short sale.

The same game is played on ebay and craigslist with every product under the sun.

A fool and his money will soon be parted.

Reminds me of when I bought my truck. There was a kid buying the exact same truck and I overheard he paid about 4 grand more than me. Also, realtors are not professionals so they have no fiduciary responsibility to anyone. They are like bankers in that respect. An agent under contract is a different story, obviously. Looks like the bottom feeders are eating of there own flesh.

 

[clifp]

Reminds me of when I bought my truck. There was a kid buying the exact same truck and I overheard he paid about 4 grand more than me. Also, realtors are not professionals so they have no fiduciary responsibility to anyone. They are like bankers in that respect. An agent under contract is a different story, obviously. Looks like the bottom feeders are eating of there own flesh.

I know we have some licensed Realtors(R) agents on the board, so I'll deferred to the one of them. But my understanding is that if bank signs an agreement with a Realtor to list a property that agent does have a fiduciary to present all offers to the seller. I am not sure if what the agent is doing is illegal, but I'm pretty confident they should lose their license.

 

[tryan]

I am not sure if what the agent is doing is illegal, but I'm pretty confident they should lose their license.

Yeah ... unethical "yes" ... jail time "no".

Just to make things "even" ... my realtor also said the banks are double dipping. Collecting the 20% PMI offers then artificially holding the price of the house high ... selling at short sale for something less than 20% after foreclosure.

Might explain why prices have not adjusted enough ... 6 years n'counting.

 

[Retire Soon]

I know we have some licensed Realtors(R) agents on the board, so I'll deferred to the one of them. But my understanding is that if bank signs an agreement with a Realtor to list a property that agent does have a fiduciary to present all offers to the seller. I am not sure if what the agent is doing is illegal, but I'm pretty confident they should lose their license.

This is absolutely correct. Any offer, no matter how ridiculous must be presented to the seller. To present a "phony" lower offer only to deliberately present a higher legitimate offer, and then to ultimately sell the property to the fake lower offer is illegal. The seller has been ripped off--BIG Time! This is without question---blatant fraud.

 

[sheehs1]

This is absolutely correct. Any offer, no matter how ridiculous must be presented to the seller. To present a "phony" lower offer only to deliberately present a higher legitimate offer, and then to ultimately sell the property to the fake lower offer is illegal. The seller has been ripped off--BIG Time! This is without question---blatant fraud.

At first blush...I thought ..this most certainly is fraud. But then I thought about it a bit. I agree that an agent has a duty to present all offers. Seems to me the timing of the offers is what draws the line between questionable ethics and downright fraud. I would think technically both offers have to be submitted in the same time and the agent has to deliberately not submit one of the offers for it to be fraud. The burden of proof...comes in here.

If the agent submits the lowball offer and it is the only legitimate offer at that time and the selling bank agrees to it and the sale is completed....before...any higher offer is technically on the table for the same property ...well...all I can say is Seller Beware. The Seller agreed to the price....so is it technically fraud?
Scamming, scheming...for sure...but is it fraud and can they prove it. Obviously in this case they could. But not in all I am sure. It's not right but a lot of stuff that goes on out there is not right. Doesn't stop anyone.

Wouldn't feel sorry for the banks....because on short sales and foreclosures on federally guaranteed mortgages....the banks are getting paid 80% of the original loan value from the FDIC in addition to what they sell the property for. Ex: original loan value of underwater owner = $1m. Short Sale price is $800k. Selling bank gets $800K payment from FDIC plus $800K from new buyer which totals 1.6M for the property. Of course they have to deduct their expenses from that...but...

 

[clifp]

Wouldn't feel sorry for the banks....because on short sales and foreclosures on federally guaranteed mortgages....the banks are getting paid 80% of the original loan value from the FDIC in addition to what they sell the property for. Ex: original loan value of underwater owner = $1m. Short Sale price is $800k. Selling bank gets $800K payment from FDIC plus $800K from new buyer which totals 1.6M for the property. Of course they have to deduct their expenses from that...but...

Really? I thought that they got the higher of 80% or the short selling price. Also I think it is Fannie or Freddie that covers the banks with failed mortgage not FDIC.

 

[sheehs1]

Really? I thought that they got the higher of 80% or the short selling price. Also I think it is Fannie or Freddie that covers the banks with failed mortgage not FDIC.

All I can say clifg is that while looking at property the last 3 months, some of them being foreclosures and short sales, this is what all of the real estate agents have been telling us. My husbands brother and wife....who were about to loose their house last year...told us the same thing.
Try these links for starters....

Is The FDIC Killing Short Sales?

FDIC: Loss-Share Questions and Answers

 

[arebelspy]

At first blush...I thought ..this most certainly is fraud. But then I thought about it a bit. I agree that an agent has a duty to present all offers. Seems to me the timing of the offers is what draws the line between questionable ethics and downright fraud. I would think technically both offers have to be submitted in the same time and the agent has to deliberately not submit one of the offers for it to be fraud. The burden of proof...comes in here.

If the agent submits the lowball offer and it is the only legitimate offer at that time and the selling bank agrees to it and the sale is completed....before...any higher offer is technically on the table for the same property ...well...all I can say is Seller Beware. The Seller agreed to the price....so is it technically fraud?

I've thought about it more.

I have to stick with my original position in this thread.

Yeah, that's fraud.

If a realtor with a fiduciary duty to the bank gets a high offer on a property, holds on to the offer and doesn't submit it, and then has their friend submit a low offer and get it accepted because it's the only offer the bank has, then at the last minute shows the higher offer when it's too late for the bank, then has their friend resell to the higher offer, that's fraud.

Trying to play cute semantics games with "well technically they submitted the offer" doesn't absolve anyone of doing the immoral and likely illegal action of not submitting a higher offer so they could fraudulently get it cheaper and resell to that same higher offer.

Plenty of people nowadays seem to want to blame their actions and behavior on others. Oh the banks made me take out that terrible arm loan for a way overpriced property. The realtors in this case may want to justify their actions as the bank deserving it, but two wrongs don't make a right. Banks don't "deserve" to be defrauded and have money stolen from them, regardless of their actions during the housing crisis.

 

[ChiliPepr]

Part of the issue is that the Realtor is under contract with the bank to present all offers. When I purchased my short sale, the Realtor also had to sign a legal document to the bank stating that my offer was as good as they could expect.

The issue here is it was the Realtor doing the straw buying/selling. It also seems that the purchase and sale happened the same day, so they KNEW the offer they presented to the bank was not the best one.

Yes, this is fraud.

 

[slingshot]

the bank has a listing agent the buyers have their own agent, so the buying agent does NOT have to present all offers

 

[ChiliPepr]

If the bank's agent knew nothing about the about the deal, I would agree with you, that agent is guilty of nothing but incompetence. This case involved the listing agent.

Here is the FBI's website.

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that SERGIO NATERA, 35, a licensed real estate agent residing in Bridgeport, pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bank fraud stemming from his involvement in a “short sale” mortgage fraud scheme.

A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

According to court documents and statements made in court, NATERA worked with another real estate agent to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On December 5, 2007, the other real estate agent, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, NATERA subsequently communicated to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management, LLC, an entity that NATERA controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property.

On June 9, 2008, NATERA, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property.