Short-sale flopping scams: when will it stop?

[CA renter]

FWIW, I called the FBI quite a few years ago regarding these short sale scams. They flat-out told me that they didn’t think it was prevalent enough, and that they didn’t have the resources to follow up on this type of crime.

It sucks, but there it is. Crime really does pay. 🙁

[spdrun]

Why bother calling the FBI? Reduced comps are good for ALL buy-to-rental investors . Enjoy it while it lasts, and kick the bums out!!

[scaredyclassic]

FBI is busy closing down medical marijuana clinics. call back later.

[bearishgurl]

[quote=CA renter]FWIW, I called the FBI quite a few years ago regarding these short sale scams. They flat-out told me that they didn’t think it was prevalent enough, and that they didn’t have the resources to follow up on this type of crime.

It sucks, but there it is. Crime really does pay. :([/quote]

In my example, this Chula Vista family simply borrowed too much off their property in order to vastly improve it. Most of of their cash-out refi/HELOC went into the property. The property was WORTH spending that kind of money on but they should have done the improvements slower, as they had the cash.

But it worked out so that their family had enough “connections” to get a family member to list it as a SS and another family member standing in the wings to quickly purchase it all cash and lease it back to the “owners” who were about to lose it.

The end result is property stayed in the family and essentially had 70-75% of it’s debt stripped from it! Wa-laa! All those expensive materials (aside from the “free” stonework from the family biz) were for free, they got a ~2500 sf rambling ranch cosmetic fixer for free and essentially just paid for the large flat lot in a coveted area.

How’s that for self-serving machinations (and no one even had to file for BK protection)?

Moral hazard or effect on neighbors values be damned!

Happy Thanksgiving, Piggs!

[bearishgurl]

[quote=spdrun]Why bother calling the FBI? Reduced comps are good for ALL buy-to-rental investors . Enjoy it while it lasts, and kick the bums out!![/quote]

The problem, spdrun, is that the “bums” aren’t “kicked out.” Many have been allowed to stay in “their” homes for free for 30-60 months. Then, instead of filing a notice of default, their first TD lenders try to do a “workout” with them. When that (invariably) doesn’t work, they are receptive to accepting a short payoff. The “bums” put their properties on the market in ANY condition because they DON’T CARE how much they get for it or how long it takes to sell it (remember, they’re living for free). After its finally sold, that “short sale comp” often comes out 20-60% lower than comparable neighboring properties are worth and sometimes just land value (as if the property was a vacant lot).

Piggs (as a microcosm of RE buyers in the general public) have been lamenting about lack of decent inventory to choose from for at least the last 20 months. The lack of inventory is a direct cause of too many recent sold comps from REOs and primarily short sales which were fraudulently sold FAR under what the property was worth … in ANY condition … and even FURTHER under build cost.

As a nearby homeowner to these shenanigans, if you didn’t HAVE to sell, would YOU put your property on the market with surrounding sold comps which were (often fraudulently) very deeply discounted?

[spdrun]

Neighbors’ values? Low housing values are a good thing in the long run. They allow Gen-Y folk to buy in comfortable areas and derive rental income, while kicking the butts of X’ers and boomers who overpaid anyway.

In short, people who rode the gravy train too long are getting the shaft and it’s karmic justice in my book. <3

And yes, a lot of the properties that are available are in poor shape. But if they end up sufficiently cheap, they can be fixed up -- investing should be about sweat equity AS WELL AS passive activities.

[bearishgurl]

[quote=spdrun]Neighbors’ values? Low housing values are a good thing in the long run. They allow Gen-Y folk to buy in comfortable areas and derive rental income, while kicking the butts of X’ers and boomers who overpaid anyway.

In short, people who rode the gravy train too long are getting the shaft and it’s karmic justice in my book. <3

And yes, a lot of the properties that are available are in poor shape. But if they end up sufficiently cheap, they can be fixed up -- investing should be about sweat equity AS WELL AS passive activities.[/quote]

Why do you think "Gen Y folks" should be entitled to buy only in "comfortable" areas? Do you think their predecessors all bought their first properties only in "comfortable" areas? How about their second property??

spdrun, I don't know how it is where you live, but in CA coastal counties, residential properties have traditionally been arranged in a “caste system.” Those who bought at a fair price for their particular buying era, kept the maintenance of their properties up over the years, made any necessary improvements, made all their mortgage payments on time and/or bought and sold sequentially buying a little higher-priced property each time were rewarded with a small, moderate or large profit when they finally sold. The size of this profit depended on area of property and amount of sweat equity the owner sunk into the property. Mortgage interest rates only had a low to moderate effect on home sales volume.

Except for the most highly-desirable areas (usually <5 mi from the coast), sweat equity was necessary to make a profit upon sale.

It isn’t the “boomers” who need “karmic justice.” It’s primarily the X-ers who rode that gravy train too long and its not entirely their fault. The long “gravy train problem” is entirely the fault of lender malaise. And MANY X-ers were advised by boomers and beyond NOT to buy during the millenium boom and they did so anyway, in fear they would be “shut out of buying a home forever.”

And your brethren, Gen Y, in general, does NOT WANT to ENGAGE in “sweat equity” in any way, shape or form. At least not around here.
That is w-a-a-a-a-y too much work for them.

You seem to be a little confused, spdrun. The vast majority of “boomers” didn’t borrow themselves into oblivion on their properties. Most took out their purchase-money mtgs long before the “millenium boom” and they didn’t need to borrow any more … ever. They now deserve to get a “fair price” for their properties (considering all the improvements they have made over the years) so they can retire somewhere less expensive and not be a burden on YOU!

A young adult in the US is entitled to WORK in a job they are qualified for. They are NOT entitled to any more than that. Whatever they acquire beyond that (barring any trust funds they might have) is the result of THEIR OWN earning capacity.

That’s the way it’s always been.

[spdrun]

Sorry, but bubble-level prices were not “fair” by any stretch of the imagination. And people who bought during the 80s and 90s can still sell now and make a profit, provided that they didn’t over-leverage. If they over-leveraged, they already DID pull out their profit. (i.e. cry me a river). So the smart boomers can still profit.

“Comfortable area” doesn’t mean La Jolla. It means a reasonably safe area with amenities that’s not 2 hr crawl in traffic from all decent jobs.

As far as Gen-Y folk, I know quite a few people on the East Coast who are buying, fixing, and renting out. They’re smart, mechanically adept, and willing to work a bit to make a buck. I don’t think that SoCal is all that different.

[CA renter]

[quote=spdrun]Sorry, but bubble-level prices were not “fair” by any stretch of the imagination. And people who bought during the 80s and 90s can still sell now and make a profit, provided that they didn’t over-leverage. If they over-leveraged, they already DID pull out their profit. (i.e. cry me a river). So the smart boomers can still profit.

“Comfortable area” doesn’t mean La Jolla. It means a reasonably safe area with amenities that’s not 2 hr crawl in traffic from all decent jobs.

As far as Gen-Y folk, I know quite a few people on the East Coast who are buying, fixing, and renting out. They’re smart, mechanically adept, and willing to work a bit to make a buck. I don’t think that SoCal is all that different.[/quote]

Agree with you, spdrun, that lower prices should be the goal. That’s one of the many reasons we refused to overpay for our house. It wasn’t just because we wanted to pay less; we also wanted to set a low comp for the next group of buyers. After “bubble-sitting” for eight years, it was frustrating to watch idiots overpay AND include “seller concessions” in the price that would end up artificially inflating comps for the next set of buyers. This has a cumulative effect which is totally unfair to future buyers.

[bobby]

[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]
thanks.
happy thanksgiving. off to dinner now.

[bobby]

[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]
thanks.
happy thanksgiving. off to dinner now.

[ocrenter]

unfortunately, once we got one of these realtor/flipper team going, game over for the rest of y’all.

I was recently talking to a flipper who was bragging about his 11 flips so far this year. how did he get 11 homes to flip when real buyers out there keep getting shot down? yup, this guy gets first dips on everything his realtor gets from the bank. you would think after may be the 5th transaction the bank would wise up to their game…

[CA renter]

Yet, some have argued that flippers don’t push up prices or cause any problems for real buyers.

I’ve argued forever that flippers are a HUGE problem. It would be best if we could enact a windfall profit tax that would make flipping totally unprofitable.

[bearishgurl]

[quote=CA renter]Yet, some have argued that flippers don’t push up prices or cause any problems for real buyers.

I’ve argued forever that flippers are a HUGE problem. It would be best if we could enact a windfall profit tax that would make flipping totally unprofitable.[/quote]

I for one appreciate the work that these flippers do. Especially the work that shows from the street (ie landscaping, fencing, concrete work, roof, etc).

Flippers improve the “eyesore on the block” and in doing so, lift ALL boats. We aren’t going to see any inventory to speak of UNLESS at least some of these boats are “lifted.”

The avg Joe6p that is able to buy that same property (at the lower “fixer” price) as a personal residence can often barely afford to cover the (often old and stuck) windows with something other than a sheet or towel after closing and scare up a used lawnmower from CL to mow down the weeds (several weeks after moving in).

Flippers buy and quickly rehab run down properties (usually fmr rentals) that would not otherwise sell to Gen X and Y UNLESS the typical improvements flippers make are already done. These buyers have neither the time, money or skills (and if they do, they lack the desire) to make the needed improvements themselves.

It’s so much easier for the young buyers to get an FHA loan, put 3.5% down and overpay for the “already flipped” house without having to put any additional cash in it to live in it.

Flippers provide a service to buyers and sellers alike. We can’t assume that some of these rundown properties would sell to ANYONE but an experienced flipper team and/or gen’l contractor or lifetime handyman/carpenter.

[spdrun]

Strangely enough, it’s the Gen Y folk that are rehabbing craptastic properties around here. Guess that East Coast people still expect to put in a bit of blood, sweat, and tears when they buy ANY house.

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