Short Sale Fraud Plagues Housing Market
NEW YORK -- Just as the housing market began to collapse near the end of 2007, a real estate agent in Bridgeport, Conn., asked Regions Bank if it would accept a $102,375 bid on a home that was underwater on its mortgage. Under the impression that this was the best offer on the home, Regions agreed to the short sale and released the it owned on the home.
Later that same day, the new owner -- an investment group owned by another real estate agent -- resold the home to a buyer who had been lined up before the transaction went through. The final sale price: $132,500, netting the seller a cool $30,000 -- a profit that should have gone to Regions.
In this latest twist on short sale fraud, scammers have found a way to rip off mortgage lenders by tens of thousands of dollars -- sometimes in a matter of hours.
The scam artists, usually real estate agents, will secure a legitimate bid on a home, one where the borrower owes far more on the mortgage than the home is worth. Then they arrange for an accomplice investor to make a lower offer on the home.
: Big Supply, Low Prices
The agent then presents the lower bid to the lender and asks them to forgive any remaining balance owed -- without disclosing that there was a higher bid made on the home. Once the short sale is approved, the scammer then to the higher bidder, often on the same day.
"These same-day resales are on average nearly $50,000 greater than the lender agreed upon short-sale price," said Tim Grace, senior vice president of product management and analytics at CoreLogic, a financial analytics company based in Santa Ana, Calif.
Such transactions are expected to cost lenders more than $375 million this year, up more than 20 percent from last year, according to CoreLogic.
CNNMoney has the full story.
More from CNNMoney:
- Sell Your House Faster in a Tough Market
- 10 Most Expensive Housing Markets
- Squatter Nation: Five Years With No Mortgage Payment
For more on short sales and related topics, see these AOL Real Estate Guides: