Westernskies
Thinks s/he gets paid by the post
- Joined
- May 5, 2008
- Messages
- 3,864
We have been looking into buying bank owned/distressed assets/foreclosure properties, and recently ran into an interesting situation that I thought I’d post here since there are a lot of folks here with a wealth of RE knowledge.
There has been a lot of press recently about homeowners falling victim to foreclosure scams. I believe we stumbled into the reverse of this, where a homeowner was scamming his lender.
Situation is this:
High-end home, appraised at 1.3 million. The owner has lived in it for 30+ years, owned it outright in 2004, when he suddenly began using it as an ATM machine. Borrowed 1.2 million against the property- 5 different loans; 2 lenders.
Bottom fell out of the market, home is now only worth ~1.00 million
Owner stops in middle of a minor interior remodel and quits paying his mortgage.
House lists for 1.3 million. Of course, no offers. After 90 days, gets relisted it, but drops price to 1.2 million. Still no offers. Another 90 days, gets re-listed as a short sale at 730K... We get real interested, submit an offer the next AM at 93% of asking price- MLS average sale price for the area. Listing agent is very vague, does not even respond to offer before expiry. Our agent follows up, is told there is another offer at "close to full price". We counter at 6K over asking price, no contingencies, and offer the 6K as non-refundable earnest money. The agents response was "oh, no..." In the middle of our negotiations, the MLS listing price suddenly drops to 710K (never mentioned by the seller during negotiations) and suddenly the house is under contract with another buyer. Our offer was rejected because " we were from out of town" and we are told not to bother documenting our higher offer.
What really makes this interesting is that the owner of record is a Real Estate Broker. (This little fact was not disclosed in the listing or by the listing agent who happens to work for him...DW did some online sleuthing on the assessor’s website and then googled the owners name...) We subsequently discover the house is actually being sold to a "professional loss mitigation firm" who is going to negotiate a short sale with the lenders, with a back to back close to the contracted buyer.
Looking at the house, it was apparent that the owners, having lived there for over 30 years and facing foreclosure in less than 30 days have not packed a thing; in fact it appears they have no intention of leaving. The house had unfinished remodeling, was poorly presented (only the listing agent could show it; no lockbox; any potential buyer had to be pre-approved by a specific lender; appointments were difficult to schedule; uncooperative agent- remember, the owner is a RE Broker who presumably knows how to sell homes...everything that could possibly be implemented to queer a deal was used.
It appears to us that the MLS listings were put up to create an unsuccessful sales history that their short-sale specialists can take to the lenders with a tale of woe... The lenders, anxious to unload toxic assets, are pressured to short sell this "unsellable" house to the "loss mitigation specialist" for ~650K: the owner buys his $1.3million house back for ~700K (or probably has a trust, llc, friend, or family member buy it for him) and the lenders/taxpayers eat his inflated equity losses. And, to make the deal even sweeter, the owner/broker collects a 6% commission on the sale!
Questions:
Look forward to hearing what others think of it.
There has been a lot of press recently about homeowners falling victim to foreclosure scams. I believe we stumbled into the reverse of this, where a homeowner was scamming his lender.
Situation is this:
High-end home, appraised at 1.3 million. The owner has lived in it for 30+ years, owned it outright in 2004, when he suddenly began using it as an ATM machine. Borrowed 1.2 million against the property- 5 different loans; 2 lenders.
Bottom fell out of the market, home is now only worth ~1.00 million
Owner stops in middle of a minor interior remodel and quits paying his mortgage.
House lists for 1.3 million. Of course, no offers. After 90 days, gets relisted it, but drops price to 1.2 million. Still no offers. Another 90 days, gets re-listed as a short sale at 730K... We get real interested, submit an offer the next AM at 93% of asking price- MLS average sale price for the area. Listing agent is very vague, does not even respond to offer before expiry. Our agent follows up, is told there is another offer at "close to full price". We counter at 6K over asking price, no contingencies, and offer the 6K as non-refundable earnest money. The agents response was "oh, no..." In the middle of our negotiations, the MLS listing price suddenly drops to 710K (never mentioned by the seller during negotiations) and suddenly the house is under contract with another buyer. Our offer was rejected because " we were from out of town" and we are told not to bother documenting our higher offer.
What really makes this interesting is that the owner of record is a Real Estate Broker. (This little fact was not disclosed in the listing or by the listing agent who happens to work for him...DW did some online sleuthing on the assessor’s website and then googled the owners name...) We subsequently discover the house is actually being sold to a "professional loss mitigation firm" who is going to negotiate a short sale with the lenders, with a back to back close to the contracted buyer.
Looking at the house, it was apparent that the owners, having lived there for over 30 years and facing foreclosure in less than 30 days have not packed a thing; in fact it appears they have no intention of leaving. The house had unfinished remodeling, was poorly presented (only the listing agent could show it; no lockbox; any potential buyer had to be pre-approved by a specific lender; appointments were difficult to schedule; uncooperative agent- remember, the owner is a RE Broker who presumably knows how to sell homes...everything that could possibly be implemented to queer a deal was used.
It appears to us that the MLS listings were put up to create an unsuccessful sales history that their short-sale specialists can take to the lenders with a tale of woe... The lenders, anxious to unload toxic assets, are pressured to short sell this "unsellable" house to the "loss mitigation specialist" for ~650K: the owner buys his $1.3million house back for ~700K (or probably has a trust, llc, friend, or family member buy it for him) and the lenders/taxpayers eat his inflated equity losses. And, to make the deal even sweeter, the owner/broker collects a 6% commission on the sale!
Questions:
- Does this constitute mortgage fraud?
- What laws has the owner broken?
- What RE code of ethics has he violated?
- Who do we share this info with? I’m mad as hell and would like nothing better than to see this scumbag go to jail for, not back to his house with 500K of my hard-earned taxes in his pocket.
Look forward to hearing what others think of it.
