Short-sale flopping scams: when will it stop?

[SD Squatter]

With San Diego inventory at all time lows, I find it disturbing that short-sale flopping is still happening right in the open:

http://www.redfin.com/CA/San-Diego/10782-Viacha-Dr-92124/home/5403989

• 1-minute midnight listing at way-below market price marked pending check!
• Crappy pictures with discouraging description check!
• Agent not answering phone, nor accepting other offers check!
• Listing agent also representing the buyer check!
• The bank not giving a … about it check!

When will it stop?

[bearishgurl]

It will stop when the lenders stop getting paid by the PTB to play this game and not one moment sooner.

[Coronita]

NLD…

(Never.

Life ain’t fair.

Deal with it.)

[bobby]

not sure what flopping is (except in soccer).
can OP please explain.

[spdrun]

Flopping = using dirty tricks to get a bank to accept a SS for much less than real value. Once it’s re-sold by the buyer, the listing broker may (or may not) get a kickback from the buyer.

[outtamojo]

[quote=spdrun]Flopping = using dirty tricks to get a bank to accept a SS for much less than real value. Once it’s re-sold by the buyer, the listing broker may (or may not) get a kickback from the buyer.[/quote]

I hear from 2nd and 3rd hand
sources that some realtors form investor groups and take turns giving each other’s investor group short sale bargains while completely shutting out real buyers with higher offers. Yeah I know- boo hoo cry me a river….

[SD Realtor]

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.

[NotCranky]

I have seen some short selling to family members and friends. Not a lot, but I don’t get out much either. Double commission for realtor…just the same.

The banks probably turn a blind eye to these things because of the high close rate.

[SD Squatter]

I think it’s ridiculous that banks accept such obvious fake attempts at salesmanship as legit. It’s right there in the open, all it takes is to look at the listing.

[Coronita]

I think folks need to decide whether you can live with the ethical issues versus getting slim shady deals.

If you can live with the ethical issues, I’d suggest finding a shady RE agent and get in on the shady deal..

No point in getting all bent out of shape because some people are essentially stealing homes…Either decide if you’re in or out..

Just like no point in griping over people that HELOC’ed the hell out of their home and can stay rent free in their places for a few years…

It’s what it is…

Morale hazard? No such thing…Except for the people that have morales…

Me? I’m out.I have no recommendation, because I don’t deal with slim shady people…

FWIW: based on some more recent observations… Banks aren’t nearly as dumb as they were a year or two years ago.. I’ve been seeing some short sales that end up being comparable to FMV these days… Just look at Mira Mesa.

[spdrun]

Moral issues aside, if you get caught you could end up being sued or even prosecuted.

[outtamojo]

Nobody seems to care about the obvious paper trail
these shady deals leave behind for eternity- I wonder why.

[Coronita]

[quote=spdrun]Moral issues aside, if you get caught you could end up being sued or even prosecuted.[/quote]

Agreed. But doubt that will happen….

[spdrun]

Once the statute of limitations expires, what does it matter?

[bearishgurl]

[quote=SD Squatter]I think it’s ridiculous that banks accept such obvious fake attempts at salesmanship as legit. It’s right there in the open, all it takes is to look at the listing.[/quote]

They don’t CARE because they’re being paid (or are going to be paid) for the defaulted loan by the PTB. They are planning on giving any jr lienholders <=6% of what they're owed ... or nothing. Their mindset is, "Take it or leave it. Foreclose yourself." The "sellers" listing agent is only required to furnish the 1st TD holder (who will approve or not approve any SS offers) with a "legitimate" MLS number. They do not usually prove their "marketing strategy" because they were actually hired by the "sellers" and have no fiduciary relationship to the sellers lender. A MLS number is assigned to the property when the LA "markets" it online in the MLS at midnight for a minute and a half, at which time he/she e-mails the "online listing" to the defaulted-upon lender (or prints it out for later use). When LA's friend or relative's cash offer is miraculously presented to the lender the next day, the LA has used sold comps in their SS pkg that may be in the same zip code but are not legitimate comparables to the listed property sought to be deeply shorted. They may be of comparable sf but that is where the comparison stops. They are on busy streets, in much worse shape, are lacking garages, have unpermitted additions or have structural problems found by buyers' inspectors which caused them to be sold for much less. A distant lender doesn't know the difference and accepts the deeply shorted offer to get rid of the "deadbeat" sellers whom they have let squat for months/years. In doing so, the lenders themselves have created their own problem and were complicit in the depth and breadth of how bad they allowed the problem to get. I'm not currently active but this is my take on how a lender (usually distant and ignorant of the local market) is bamboozled into accepting an offer >=40% below market. Even if they order a “local broker opinion” before accepting offers, they are not completely in control of who that broker is and their relationship, if any with the LA. In each micro-market, most of the longtime brokers and agents are VERY well acquainted with one another and some even know each other from as far back as HS! A distant lender is in the dark about all this and just wants to get the deal done and get out of it.

There is a house a couple of blocks from me that sold for ~$620K in 2006 to a buyer whose family owned a quarry. Not only did the “sellers” do extensive iron and stonework inside and outside of the property, it was situated on a 10K+ lot and the extensive work done to it in recent years was really quality. The LA (a relative of the “sellers”) took pictures of a flooded easement that was NOT part of the property, set the sellers (and the neighbors) trash, recycle and yard waste bins in the front and lined them up in a row so as to block the stone facade on this ~100′ wide perfectly flat lot. Then they took two more photos of a deep hole dug in the unfinished backyard. Of course, no photos were shown of the fabulous granite kitchen with 12′ island, floor to ceiling stone FP and extensive wide-plank rustic wood flooring. Of course, those listing photos (mentioned above) were only displayed online in the MLS for a day. Miraculously, the property sold for $265K all cash in 2011 after a 22-day closing to a person who didn’t have the same last name of the “seller” but was likely another one of their “relatives.” The “sellers” still live there today. Obviously, they are now “renting” the property they used to own (and worked so hard on) from the new buyer. Maybe they are finishing the improvements in lieu of rent :=0

The subject’s lot alone (if vacant) was worth more than $265K. A property next door to the subject is worth approx $1.8M.

This type of fraudulent transaction deeply harms the value of the surrounding properties, at least for the six months the appraisal stemming from the bogus SS is used as a “sold comparable.” In this case, the surrounding properties varied widely in value from $400K to $2M. Until the PTB will no longer make up (or come close to making up) the short difference to 1st TD holders of FF mortgages, this travesty will be allowed to continue.

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