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.Just one more reason not to trust Realtors®.
The agent then presents the lower bid to the lender and asks them to forgive any remaining balance owed — without disclosing that there was a higher bid made on the home. Once the short sale is approved, the scammer then sells the home to the higher bidder, often on the same day. ...
Such transactions are expected to cost lenders more than $375 million this year, up more than 20% from last year, according to CoreLogic. ...
To get the banks to approve low bids, appraisals or broker price opinions are manipulated. ... Sometimes, said Hagberg, fraudsters bribe appraisers or brokers to get the prices they want but they can employ sneakier methods as well. ... Sometimes an agent will point out every defect in the home to get appraisers to reduce their values, according to Hagberg.
The impact of short sale fraud goes well beyond the direct losses to banks. These frauds have become so common, it has become more difficult for legitimate short-sale transactions to go through. That hurts sellers because it forces more of them into foreclosure.
Friday, July 15, 2011
Real estate fraud is alive and well
It appears fraud didn't just exist on the up side of the bubble, it exists on the down side as well. CNN Money explains short sale fraud: