[quote=ucodegen]
The possible fraud was in mis-representing the value and sale in the short sale. If the short sale went for $1mil, but the actual sale price it would have commanded if the sale was ‘open market’ was $2mil, it is a fraudulent short sale.
It would almost be like your broker representing your house on a sale conspiring with another ‘investor/broker’ and stating “I know this guy(you in this case) really doesn’t know what this house is worth so I will tell him it is worth half what we know we can get for it and I’ll get him to sell it to you. We then hold on to the house for a short period of time and then sell it for the real price and split up the difference between us. Your broker (the sellers broker) is supposed to be representing you, the seller, in this transaction.
The fact that it listed exactly 1 day past the ‘watch period’ makes the short sale possibly questionable.
Hard to tell how much was just cleaning up and staging. The initial sale didn’t seem that serious. Only 4 photogs on the listing and no attempt at ‘cleanup’. The flip has 29 photogs. Looks like mostly ‘cleanup’ and ‘declutter’, but it is hard to tell because of the lack of photogs on the first listing. The difference might be worth a few 100K, but not 1.5mil.[/quote]
I see that the price shot up but if the info in the first listing (pre-flip short sale fixer) is accurate, then this would not necessarily tickle my radar.
Those aspects often drive market value down dramatically in areas where the location value is high.
Here is an example:
3675 Villa Terrace is in the middle of Morley Field. It is 2/1.5 and comps around 550k-625k (in summer, probably 5% lower in winter).
This unit is currently on the market for $300k.
Why?
Because the former owner was an autistic shut in who live there for several years without utilities and used the yard and bathtub as a toilet. At some point, months or years ago, he died. Nobody knew about it for some time (unclear how long).
There are Medical Examiner and Biohazard tags on the front and the back door. The landscaping looks like something out of Little Shop of Horrors.
The cleaning job needed will be epic.
But seriously, spend 5k on cleaning, cutting, and painting and you will increase the market value more than $100k.
Lets take another example:
In 2009 4227 Alder in Kensington sold for $389k as a short sale.
Current comps show this as worth $600k-$700k in good shape.
Why?
The angry homeowners had pulled every plumbing fixture and cabinet out.
So probably a cash buyer came along and spent an additional $20k replacing toilets, sinks and cabinets and ended up with a free and clear house in one of the most desirable neighborhoods in SD.
I don’t think either of these involves fraud.
As far as the Malibu house in question, I would need more information before making that assessment.
The red flags for me:
-Agents double ending on the short sale
-Same agent used on the flip
-Seller connections to buyer
-Personal property sales contemporaneous with real estate sale.
