It is really unfortunate. The most common scheme happens as a flip. That is, the seller accepts a well below market value from some buyer who is simply going to flip the home. More often then not the offers are cash offers to help justify the lower price. Generally the listing agent either has a deal with the buyers to represent them after the rehab is done so that they can list the home and get that commission.

If the servicing organizations did a comprehensive appraisal before authorizing the short sale, then they would not accept the low offer and demand full market value for the home.