False comps? Fraud?

[SD Realtor]

Ozzie –

If you look back I posted about a transaction that I have currently in escrow where we did receive an offer with a substantial amount, (well over 3%) back. As I said they wanted to make the home handicap accessible. I was looking out for the best interest of my client. It had nothing to do with not being able to do the extra work needed. It had everything to do with my advise that this looked shady, and had a high probability of crashing and fraud. When I asked some pertinent questions to the selling agent, he not only could not answer them but ended up withdrawing the offer.

Two weeks later we got into escrow from another offer and contingencies have already been removed.

The post also referred to cash back being done in a manner of fraud, without full disclosure in the contract or anywhere else.

Also I doubt the lenders would have any problems with exceptional credits being made in escrow as long as the payments were made directly to the contractors that the buyer had. Bugs had commented on this in a thread awhile back.

I am not an appraiser, or a mortgage broker but I haven’t seen lender approvals of cash back directly to buyers for more then 3% for single family residential purposes. That doesn’t mean they are not out there as you have stated you have seen plenty of them. I assume that those were for single family residential homes, not land. I have seen payments approved to the contractors where estimates and invoices have to be submitted.

SD Realtor

[Bugs]

I really wish I didn’t have to say this, but a deal like this doesn’t get done without an appraiser enabling it. Whether it’s as a result of stupidity – appraiser can’t tell when a sales price is higher than the list – or outright dishonesty, the results are the same.

The appraiser is REQUIRED to review the sales contract and analyze the sales transaction as part of the appraisal process for those mortgages. Even if an agent hands an appraiser a doctored sales contract, the appraiser should be able to tell when a sales price exceeds a listing price, and when the sale price itself is not supported by the comps.

After all, the whole point of getting a 3rd party appraisal is (supposedly) to help the lender avoid making loans that aren’t entirely secured by the collateral.

Most likely the appraisal for that loan is a POS, and it’s equally likely that the lender’s underwriting process failed in not catching it. The appraiser is at fault for enabling the lie, the Lender is at fault for not checking up on the appraisal, the loan originator is at fault because they’re probably the one who coerced the appraiser to enable the deal, and the agents who conspired to put this whole thing together are at fault. Of these parties, it is the appraiser who deserves the most punishment because their sole job is to be honest and tell the truth. We expect the advocates to advocate; we expect the appraiser to be unbiased and tell it like it is.

[sdrealtor]

SD R,
You understand what Ozzie does not. Price while important is not everything. The terms of the offer can be as or even more important than the price. If a buyer cant perform, your seller has lost valuable market time. This hasnt been more true for quite a while.

sdr

[the dingo]

This is happening all over my neighborhood of Encinitas. 244 Leucadia BLVD is just one example. This house was listed at 599k after xmas, taken off the mls and listed back a few weeks later at 610k. This house just closed at 640k. I have flyers from other houses that have had the same scam running. Does anybody know what can be done about this?

[greekfire]

This is nothing other than a shell game with money – shifting it around from one entity to the next in an effort to obfuscate and prop-up something that isn’t really there.

Let not your heart be troubled. This tactic is employed for short-term gain and will have grave consequences when it is eventually prosecuted under law. As I have said countless times before, there are many who benefit from the last housing bubble and will do everything in their power, including death threats, to see that it continues.

[lniles]

The first thing which comes to my mind that can be done about it is BUYERS: USE YOUR BRAINS!!! YOU’RE F’ING IT UP FOR US ALL!

[temeculaguy]

I think lenders are going to start scrutinizing appraisals more as we move forward and may use only specific trusted appraisers. I remember in the mid 90’s a lender wouldn’t accept an appraisal in a purchase I made because they didn’t know him and was afraid he was the realtors buddy (which he was), maybe Bugs can confirm this practice. There was no deception in that deal, but R/E wasn’t going up at the time and they are not in the business of losing money so they felt safer with someone they trusted. Money hasn’t completely tightened but it does so more every day, I think these transactions will become less prevelant. BTW the Murrieta scam was very similar in appearance and it alarmed the reputable realtors enough to refuse to do business with them and to report it. Big cashback at closing, never make a payment, run with the money on someone else’s credit.

[SD Realtor]

Dingo I am not doubting you but here is what I dug up on the MLS. On the MLS listing history report for the property at 244 Leucadia I see the following:

Original list date 6/29/06 priced at 680-710
Revise Price on 9/5/06 to 599.9 – 649
Change to Pending (entered escrow) 11/9/06
Change back to Active (defaulted escrow) 12/4/06
Change CBB from 2.5 down to 2.25% on 12/12/06
Change to Pending (entered escrow) 12/16/06
Change back to Active (defaulted escrow) 1/12/07
Change Price from 599.9 – 649 to 610-649 on 1/12/07
Change to Pending (entered escrow) on 2/9/07
Change back to Active (entered escrow) on 2/12/07
Change to Pending (entered escrow) on 3/2/07
Change to Sold (closed escrow) on 4/11/07

Buyers took out a first for 512 and a second for 63.8. So they actually came in with a non trivial amount of cash. Listing agent was from Windermere Properties and the selling agent was from Del Mar Realty Association. To be honest I do not feel there is any fraud involved with this particular transaction. There did not seem to be any peculiar pricing, and there were plenty of offers. Also this property was subject to a short sale so I find it VERY hard to believe this was a case of fraud.

[sdrealtor]

I think too many conspiracy theorists are out there amongst us these days. As SD R said, the one on leucadia Blvd appears pretty much on the level. The agents on both sides of the transaction are very experienced, reputable folks and I sincerely doubt there is fraud involved. Even if it was financed 100%, which it wasnt, I would give these agents a pass.

Too many of you are so convinced that no one in their right mind would buy RE today so it must be fraud. That just isnt they way it is. For the last 2 months I have gotten a referral for a new client on nearly a weekly basis for a well qualified buyer looking for a nice property. If there was more inventory on the market I would be having a career year. Hopefully, there will be more quality inventory coming at reasonable prices in todays market because right now we are pretty much left with the same crap thats been around for months which would have a hard time selling at any price.

[the dingo]

Interesting information on the 244 Leucadia. The flyer I have does not list the range, so that make sense. But today I looked at another property in my neighborhood (Leucadia) and was offered by the owner to close 60k higher, which he would kick back to me at the close. This was an offer of fraud. I don’t want to burn the guy, by giving his address as he was trying to be cool and seemed like a nice guy, but this would have been a clear example of a price that would have landed higher on the comps then the actual price.

[SD Realtor]

Dingo,

Once more I cannot prove or disprove the new Leucadia case you bring up unless I dug into it.

The interesting thing you have noted is this fraud was offered by the owner. Not the realtor, not the appraiser, not the lender.

The single most way to prevent fraud is for the sellers and buyers not to attempt it.

SD Realtor

[the dingo]

True. Thanks for the dialog.

[PerryChase]

“After monitoring San Diego County’s falling home prices, sluggish sales and a surge in foreclosures, real estate analysts are warning that the potential for mortgage fraud is on the rise.”

http://www.signonsandiego.com/uniontrib/20070422/news_lz1h22lender.html

http://www.signonsandiego.com/uniontrib/20070422/news_1h22prevent.html

Thanks to ocrenter for posting on his blog.
http://bubbletracking.blogspot.com/2007/04/union-tribune-finally-caught-on.html

[sdrealtor]

Just like the UT to report on the potential for something to happen after the worst already happened.

[Author]

Posts