Floppers: realtors who profit by ripping off their lender clients

realtors scamming their lender clients is becoming epidemic in America. Banks are overwhelmed by the volume of distressed sales, and realtors are taking advantage of them.

Irvine Home Address … 1967 PORT RAMSGATE Pl Newport Beach, CA 92660

Resale Home Price …… $2,885,000

It's just a fake make no mistake

A rip off for you but a rolls for them

Sham 69 — Rip Off

I first covered the flopping phenomenon a few months ago in Flopping: unscrupulous realtors deceive lender clients and profit from fraud. Apparently, the occurrence is common enough the story is gaining traction in the mainstream media. The main reason I am covering it again is because a reader posted a property that looks like a particularly egregious case of flopping. I'll let you decide.

More short sales bring new scam: flopping

In 'flopping,' a home is purchased by insiders at a steep discount, then immediately sold for a big profit.

By Melinda Fulmer of MSN Real Estate

Real-estate agent Lynne Wright thought she had found the perfect home for her clients. The quiet house on a cul-de-sac in one of the most prestigious gated communities in Bakersfield, Calif., was offered in a short sale for $40,000 less than similar homes on the market.

Wright and the couple moved quickly and made an offer higher than the asking price, but were outmaneuvered by a husband-and-wife real-estate team in Wright's brokerage office who wanted to buy it for their own use. She didn't think much of it, until she saw that the property sold for $40,000 less than the $342,000 her clients had offered.

When she asked the listing agent why, she was told to “leave it alone.”

I wonder if she had to resist the temptation to punch them in the face.

Wright says she is still not sure if the servicer or owner of the property ever saw her clients' much higher offer.

Undoubtedly, the lender did not see the better offer. Why wouldn't they act on it if they did?

All she knows is that two agents picked up a luxury property for $80,000 less than market value, the banks took a big loss and the listing agent got both sides of the commission, representing his colleagues.

The realtors must consider that a win-win-win. They got a bargain, the listing commission, and the buyer's commission. They win three ways, and their client — the one they are supposed to have a duty to serve — is the loser.

“It's just robbery,” she says.

Yes, it is. It is brazen theft by a fiduciary.

“And I don't know how to stop the robbery.”

Apparently the nation's mortgage servicers don't, either. Suspicious real-estate transactions have surged in the past two years, analysts say, along with the number of short sales, in which a house is sold for less than the amount of its remaining mortgage.

Short sales are supposed to be “arms length” transactions without any relationship or collusion among the parties, all of whom must sign affidavits to that effect. But the parties often are connected.

The paper trail should make these crimes easy to prosecute if a district attorney wanted to. A few high profile cases should be prosecuted to set an example for others. Today's $900,000 flop would be a good candidate. If anyone knows the DA in Newport Beach or Orange County, please forward them a link to this post.

Many times, this fraud is committed through limited-liability companies to make it hard for servicers to see who is buying the property, says Robert Hagberg, associate director of mortgage-fraud investigations for Freddie Mac.

In some cases, this type of mortgage fraud involves buyers scooping up distressed properties for a portion of their value, either for themselves or to give back to a friend or relative.

The rest involve “flopping,” where an investor – with the help of an agent or middleman – persuades the bank to agree to a much steeper discount than it should, and immediately resells the property to another buyer for a significant profit without having made any improvements. The FBI says it has found numerous instances in which organized-crime groups were involved in short-sale fraud.

Isn't there something in the realtor code of ethics against this behavior?

According to a recent study by CoreLogic, short sales that were resold the same day averaged a 34% gain (or $54,947) between sale prices.

The gain from today's featured flop was over 50% after commissions.

One in every 52 short-sale transactions in the first half of last year appeared to be one of these “suspicious” resales, CoreLogic said. This year, it expects lenders, servicers and investors to incur more than $375 million in unnecessary losses from these shady deals, as the number of short sales surges an additional 25%.

“Short-sale fraud and other servicing-related fraud is definitely the fraud du jour and our greatest area of focus at the moment,” Hagberg says. In 2011, more than 50% of Freddie Mac's investigations were related to short sales.

Investigations are fine, but there should be prosecutions at the end of the investigations for any deterrent effect.

Who are the perpetrators?

For the most part, these deals involve insiders, from the underwater borrowers themselves to investors, listing agents, brokers providing valuations and so-called “facilitators,” or middlemen negotiating with the banks and buyers trying to flip the properties.

There is no way this can go on without collusion among insiders. In an arms-length transaction, the listing agent would have to be a complete idiot to miss the comps by over 30%… well, maybe some of these sales are flopping….

Banks, with a huge backlog of distressed properties, are under pressure to do a lot of transactions and to do them as quickly as possible, says Ann Fulmer (no relation to the reporter), vice president of industry relations for Interthinx, a company that helps lenders reduce their fraud risk.

Knowing this, these insiders are able to work the system and push through bogus valuations to set the price of the sale or fend off higher offers.

When lenders are overwhelmed, there is nobody carefully watching over their agents to double-check valuation. With no cross-verification in the system, fraud is bound to result.

Fulmer has seen listing agents involved in these scams post properties in multiple-listing services in the wrong city to avoid competition. Some post pictures of a completely different, junk-filled property. Or they stipulate that only people from the real-estate office will take offers on the property, so they can control the transaction.

In Wright's case, which was reported to the state but has not been prosecuted, real-estate agents controlled every aspect of the deal. An agent in her office was the distressed borrower; the listing agent who represented the property and buyer sat just desks away, as did the real-estate team who eventually wound up with their own luxury property for a song.

Everyone was in on the fraud. For them, it was just another day at the office.

“The thing that really bothered me was the lack of ethics,” Wright says. “Sure I can find my clients another house; what I couldn't explain to them very well was how (something like this) can happen.”

Gary Crabtree, an appraiser in the area, said he got calls from several agents whose offers were rebuffed for the rock-bottom inside bid.

“It set an all-time low for that neighborhood,” he says.

How much more compelling does the evidence need to be before prosecutors will act?

Price manipulation

To realize a big profit from this type of fraud, an investor, agent or middleman must first push down a home's price. That means driving down the broker price opinion (BPO), the estimate of value that servicers get agents to provide for short sales.

While the vast majority of these estimates are probably free of influence, many aren't. Short-sale facilitators or other middlemen often contact these agents with lowball comparable sales that they would like to see used in the valuation, such as mobile homes or major fixer-uppers. In one case, Hagberg says, he was told of a negotiator leaving two envelopes for the agent coming up with the BPO: One contained the comparables to be used in the valuation; a second contained two $100 bills.

Direct cash payoffs. That is flagrant.

Another way to drive down the price of a short sale and pack more profit into the flip is by making the house look as though it is in worse shape than it is. Borrowers or negotiators brought in by the borrower will submit false repair bills for shoddy pipes, wiring or lead paint.

“A lot of times these repairs are for things Realtors are not qualified to assess,” Hagberg says.

What are most realtors qualified to assess?

Hagberg has even seen cases of “anti-staging” or “reverse staging” in which a house is sabotaged to look weather-beaten, vandalized or smelly.

How can someone gain access to do this? Many times, an underwater borrower will give his negotiating rights – and access to his home – to a short-sale negotiator who will conduct all communications with the lender and allow other investors to manipulate the sale for a kickback.

Everyone involved is usually getting some kind of cash payoff.

“Many times, borrowers don't know about the flip” that's coming, Hagberg says. “And frankly I don't know if there's a whole lot of concern on their part. They are seeing the same loss anyway.”

Particularly now that borrowers are not on the hook for losses from the short sale, they don't care at all. Some of them were probably in on the deal as well trying to get a cash payoff after the short sale.

There haven't been very many indictments for this type of short-sale fraud. But such fraud can be punishable by up to 30 years in prison.

Sentencing a few to prison would certainly help.

To catch a thief

Servicers are slowly trying to improve their systems and give paperwork more scrutiny to prevent short-sale fraud, Fulmer says. Prevention is more practical than prosecution, given the limited resources of law enforcement.

And, in the past, it has been hard for investigators to get servicers to cooperate in efforts to crack down on this fraud.

Glenn Gulley, a real-estate fraud investigator with the district attorney's office in California's Stanislaus County – one of the nation's hot spots for mortgage fraud – recalls calling servicers repeatedly about fraudulent deals and never getting a call back.

“In 4½ years, I've never had a bank call me and say we've been defrauded,” he says, though he adds that they're slowly starting to respond as they put more staff in charge of mitigating these losses.

Wow! Law enforcement was being proactive by investigating these cases, and the lender's couldn't be bothered to call back. I wonder how many asset managers at the banks are in on the scam.

Instead, most of the calls he gets about this type of fraud are from thwarted homebuyers who read published sales transactions in the newspaper.

“I'm getting people calling and saying, 'I offered $300,000 for a house that sold for $200,000.'”

And those are the ones who actually make an offer. Many more people are discouraged from bidding when the listing agent for a short sale puts it up on the MLS at 9 a.m., only to list it as “sale pending” at 9:01.

“Then you know the same agent double-ended it” and is bringing in his own buyer, Gulley says.

So much for getting the best price for their client. Most lenders discourage listing agents from double ending deals, but it doesn't stop them from referring to friendly agents for a significant kickback.

Indeed, Hagberg says, some resales from the short-sale buyer to a third party actually close before the deal is negotiated with the bank, giving them the money to satisfy the lender on the short sale. In some cases, the buyer used a proof-of-funds letter generator found on the Internet to vouch for his ability to close the deal, Hagberg says, without actually having the money at the time.

Now we see how buyers are brought into the scam. If a broke buyer is facing a $30,000 bill for a spent HELOC, getting a $30,000 cash payment to pay off the debt is very enticing.

Of course, some lower-priced short sales are legitimate, pitting cash deals against homeowners with financing or repair demands.

The whole problem could be solved if lenders had a better idea what properties were worth, Gulley says. Fulmer and others say they aren't sure that BPOs should take the place of full-fledged appraisals.

“There are no real standards for how to pick the comps to establish the value that you receive,” Fulmer says. “You can pick the lowest of the low balls and skew the results.”

Any transaction is supposed to have an independent third-party appraisal. Since appraisers cannot have cozy relationships with realtors anymore, this is less of a problem.

Whom does it hurt?

After the recent mortgage meltdown, few are shedding tears for lenders over these short-sale losses. Fulmer says that when she talks about this type of fraud, a common reaction is, “So what?”

But people should care, she says, because we're all ultimately paying the tab for it.

“A lot of these loans are insured by the Federal Housing Administration or bought by Fannie (Mae) and Freddie,” Fulmer says. “These excess losses are translating into losses that taxpayers are going to have to make up for.”

Yes, we are going to pay for much of this fraud through bailouts.

Moreover, this type of fraud pushes down neighborhood values, potentially putting more people underwater on their loans. In other cases, the fraud is part of a larger network of schemes that leaves the house sitting empty and open to theft and vandalism.

“Once a neighborhood gets caught up in fraud, it can get recycled in fraud indefinitely,” Fulmer says. “I saw one house that was flipped and foreclosed, flipped and foreclosed for 10 years.”

Flopping is an amazing opportunity for unscrupulous realtors. They have opportunity to make thousands of extra dollars by double-ending commissions and getting kick-backs from the buyers getting a great deal. In fact, many of these agents probably list the flip and make a second commission on the deal for good measure. With the lack of oversight by overwhelmed banks, this scam will be rampant over the next several years.

Is this flopping?

Today's featured property looks suspicious. The property sells on July 8, 2010 for $1,800,000 — supposedly the highest price the market would bear — and then it goes pending less than a month later for $2,885,000. How does the first listing agent miss the market price by over a million dollars? Somebody please give me a plausible explanation other than fraud.

Property History for 1967 PORT RAMSGATE Pl

Date Event Price Appreciation
Sep 22, 2010 Sold (Public Records) $2,885,000 893.9%/yr
Sep 22, 2010 Sold (MLS) (Closed) $2,885,000
Sep 10, 2010 Pending
Aug 06, 2010 Pending (Backup Offers Accepted)
Jul 15, 2010 Listed (Active) $3,199,000
Jul 08, 2010 Sold (Public Records) $1,800,000 10.4%/yr
Jul 01, 2010 – Delisted (Withdrawn)
Feb 16, 2010 – Pending
Feb 05, 2010 – Delisted (Hold)
Feb 05, 2010 – Price Changed *
Feb 05, 2010 – Pending
Feb 04, 2010 – Listed (Active) *
Dec 27, 2000 Sold (Public Records) $700,000

In my opinion, this property should be investigated further by the authorities. Prosecution of a $1,000,000 flopping case would be high profile and serve to deter others.


This property is not available for sale via the MLS.

Please contact Shevy Akason, #01836707



Irvine House Address … 1967 PORT RAMSGATE Pl Newport Beach, CA 92660

Resale House Price …… $2,885,000

Beds: 5

Baths: 6

Sq. Ft.: 5450


Property Type: Residential, Single Family

Style: 3+ Levels, French Country

Year Built: 2007

Community: East Bluff/Harbor View

County: Orange

MLS#: U10003139

Source: SoCalMLS

Status: Closed


Completed in 2007, this impeccably maintained home was designed and finished with the finest materials and forethought for a Port Street family. The custom built home with 5,450 Sq. Ft. of living space includes 5 bedrooms, 5 1/2 baths, dedicated office with built-ins, and a full height subterranean basement. It is ideally located inside the Harbor View community just a few houses from the central greenbelt and a block away from the community pool and highly acclaimed Andersen Elementary School. The home features an exquisite kitchen any chef would admire with Wolf range, Sub-Zero refridgerator, freezer, crisper drawers, and center island adjacent to family room that opens up to a covered patio and fireplace in the back yard. Other features of the home include large laundry room with 2nd refriderator, oversized garage w/ storage loft, reclaimed beams, custom millwork throughout, a downstairs bedroom, and much much more. This home is truly unique and must be seen to be appreciated.


Proprietary IHB commentary and analysis

refridgerator? refriderator?

Resale Home Price …… $2,885,000

House Purchase Price … $1,800,000

House Purchase Date …. 6/8/2010

Net Gain (Loss) ………. $911,900

Percent Change ………. 50.7%

Annual Appreciation … 35.9%

Cost of Home Ownership


$2,885,000 ………. Asking Price

$577,000 ………. 20% Down Conventional

4.10% …………… Mortgage Interest Rate

$2,308,000 ………. 30-Year Mortgage

$574,978 ………. Income Requirement

$11,152 ………. Monthly Mortgage Payment

$2500 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$601 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$600 ………. Homeowners Association Fees


$14,854 ………. Monthly Cash Outlays

-$1657 ………. Tax Savings (% of Interest and Property Tax)

-$3267 ………. Equity Hidden in Payment (Amortization)

$833 ………. Lost Income to Down Payment (net of taxes)

$381 ………. Maintenance and Replacement Reserves


$11,144 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$28,850 ………. Furnishing and Move In @1%

$28,850 ………. Closing Costs @1%

$23,080 ………… Interest Points @1% of Loan

$577,000 ………. Down Payment


$657,780 ………. Total Cash Costs

$170,800 ………… Emergency Cash Reserves


$828,580 ………. Total Savings Needed


32 thoughts on “Floppers: realtors who profit by ripping off their lender clients

  1. winstongator

    Banks being overwhelmed is the laziest excuse they could come up with. Most of these, I would imagine, are happening at the largest banks. JPMorgan, holder of all the WaMu and Bear Stearns garbage loans, books profit in the neighborhood of $5B-per-quarter.

    Banks have pretty much abandoned bread and butter banking activities – carefully underwriting mortgages, following through with foreclosures, maintaining properties once foreclosed, looking for businesses to give new loans to, To a large degree, they have become casino houses, gambling trading their massive asset bases. The irony is that the traditional banking employs most of the workers, and provides the asset base for the traders. Everyone, minus the traders, would be well served if the banking activities were severed from the casino activities (bring back Glass-Steagall). The banking activities would improve, and the traders would be more careful because of where their assets were coming from.

    Looking at some property records in FL, there were a lot of shady deals I saw, considering how few deals I actually looked at. Florida leads in mortgage fraud. Bubble deals, on the cusp and just past peak looked different. Usually a straw buyer paying more than the previous, and then quickly defaulting. You have to ask yourself, ‘what are the realtors that facilitated those deals during the bubble doing today?’

    1. SanJoseRenter

      > Banks have pretty much abandoned bread and butter banking activities …

      The term I use is fee-whores.

      The ultimate in short-termism is collecting the origination fees, packaging and reselling the mortgage, then double-ending the deal by servicing the loans.

      Tons of fees with no capital required and no risk – except of course, when robosigning and fraudulent loan documents are used.

      You can see why no bankster could say no.

      The only exception was Warren Buffett, who was in the re-insurance business and knew what the downsides were.

  2. Laura Louzader

    Sounds to me like Lynn Wright and her clients have grounds for a suit, and if I were her client, I’d waste no time filing one against the listing agent.

    What the listing agent did is ILLEGAL. S/he obviously did not present the higher offer Wright’s client made to the seller, or the seller would surely have taken it.

    The listing agent and his/her employing agency should have to make restitution to Wright’s client and the agent should be formally disciplined for industry rule violations and/or violation of the law.

    1. Jr

      Why do you assume that the highest offer was not presented to the seller? Highest and best offer is great in a standard sale, as the seller would be receiving the excess proceeds. No excess proceeds at the end of a short sale.
      Why would a seller take a lower offer? Higher Offer is being financed. Lower offer is coming with all cash. Which offer is most likely to close? If the higher offer is accepted and the financing falls through, the seller is SOL. Seller spent all that time and no sale, now goes to trustee sale and foreclosure on their record.
      It is an agents fiduciary responsibility to do what is best in the clients interest. The highest offer may not be in the best interest of the seller.

      1. Walter

        Yep, that is what makes this topic so messy. There is fraud, I have seen it in properties I have looked at for clients. But there are times when the higher offer was weak, and the lower offer was strong.

        I have heard stories of cash buyers making the EM deposit the entire purchase price. That is a strong offer!

      2. wheresthebeef

        That may be true for the Bakersfield house where there was only a 40K difference between offers. Someone is going to have a hard time explaining the 1M difference on the feautured house today. I don’t care if the buyer was a cash buyer, there were definitely some shenanigans going on that need to be looked into. Are you listening FBI or OC DA?

        1. Walter

          Yep, I have seen even bigger low ball transactions on commercial property.

          I think this is also tough because when is the line of law breaking and violating ethics being crossed.

          Is it against the law when the seller accepted the offer and the bank approved it? It stinks to high heaven, but could you prosecute?

          Wish a DA could weigh in here…

      3. Milu

        Please note that in this case the seller and buyers were all in the same office. Appraiser Crabtree got calls from other agents who had submitted offers over selling price; there were MULTIPLE overlist offers.

        “Why would a seller take a lower offer?” Collusion, Jr.

  3. SantaAnaRenter

    The article goes into great detail explaining how a property can be “reverse staged” or advertised incorrectly to discourage bids. I don’t think that extra effort is even necessary!

    Say a property lists for $400,000 and attracts multiple bids at and above list price. So what… The agent can simply send their one fraudulent low-ball offer to the bank and say “sorry, only got this one offer”.

    Why don’t banks REQUIRE that all short-sale offer be sent DIRECTLY to the bank? If not, you can never avoid this:

    “”I’m getting people calling and saying, ‘I offered $300,000 for a house that sold for $200,000.'”

    1. Jr

      The bank is not a principal of the transaction. The contract is between the seller and the buyer. The bank can agree or not agree to the short sale. The bank has no right to see any offer that is not accepted by the seller.

      1. Shevy

        That’s a good point, the listing agents duty is to the seller and to help them avoid foreclosure. Unfortunately for owner occupant buyers, a listing agent and/or a good agent representing investor buyers can make a valid argument that submitting a lower offer from an investor may even be better for their client because chances are greater that the investor buyer will still be around by the time it’s approved. I estimate that well over 50% of the time when a short sale offer is submitted that is the most aggressive owner occupant buyer by the time it’s approved that buyer has already found something and moved on. When that happens it sets the short sale back and makes it more likely it will not be successful. As a result, taking the most aggressive owner occupant offer is likely a disservice to the listing agents client, the loan owner.

        1. Jr

          I totally agree with your post. There is so much going on with Short Sales, that there is room for all sorts of funny stuff to go on. Unfortunately, people that are helping their clients get overshadowed by the agents that are taking advantage of the mess. You hear the stories about how someone got cheated and not the ones where the client was happy to get out of the house and move on with their lives.

  4. Shevy

    This happened to us on a deal in east side Costa Mesa. The listing agent claimed that she was new to the business and “overwhelmed” it was sold to another agent in a different office who then flipped it. Ultimately, she had not done many deals at all and based upon the list price and how she reacted to the number of offers she got, she may very well have acted out of ignorance and not been paid off by the flipper/agent.

    What really angered me was right after the agent/buyer closed she called because she said she was looking at our offer and wondering if we were still interested. How did she get our offer?

    I spoke with attorneys and ultimately they said we had no grounds because the listing agent’s duty was to the seller not to the bank. This scenario is one of many reasons why short sales are such a nightmare and mess for regular buyers. It forces banks to be extra cautious and leads to an even longer process or even rejection of honest buyers offers.

    That said, many short sales are in terrible condition, and have other expense such as back taxes, back HOA’s, junior liens, negotiator fees that the new buyer is asked to pay. As a result, often deals that look like they close for way below market were not deals at all. Moreover, I bet there are a lot of situations like this that buyers that are using FHA or 20% down lose out on and think they were scammed out of the home when in reality the real cost of the property did not show up in the contract price but was paid to satisfy these other items.

  5. nrgtrader

    Sounds like the banks need to be in on it too. Pretty complicated scam when you get 4+ people involved. But (with sarcasm) what a great way for someone to get back their own portion of the taxpayer funded bank bailout that the Bernank forced up on us. Get in the game people, every man for himself!

  6. HydroCabron

    The malfeasance of every boom era is only limned by the collapse of that era: Madoff, the City of Bell, bribery of public unions through unsupportable benefit packages, and the crimes of 90% of the real estate, banking, and mortgage lending industry have really only come to light now that the supply of empty assets and bigger fools has dried up.

    It’s tempting to say that we’re living in and unprecedented age – as we always say when, every decade or so, some court case is labelled “The Trial of The Century,” but how many of these things are really unprecedented?

    All eras are full of crime and grasping malfeasance. I took a look at the history of narrow-gauge rail construction projects in 19th-Century Colorado the other day: a vast number of men in suits showed up, sold stock to civilians and took money from private and public entities, and then disappeared, year after year.

    Makes me wonder: why do many people believe that the world before 1960, or maybe before 1930, consisted of honest, hard-working “family” men whose word was golden, and who always got, and gave, a fair deal in every transaction? Unfathomable that many are so naive about the past: are classic movies to blame?

    I say this because I’m tempted, when faced with evidence of widespread realtor villainy, to see this as somehow unique to our age, but it definitely isn’t: it’s, to reverse the usual turn of phrase, completely precedented.

    Most people are just slimy and greedy, just as they have always been.

    1. newbie2008

      by HydroCabron
      As you and in Proverb, there’s nothing new under the sun ….

      People rare study history and are running under the assumption the man is either evolving into a higher being or lower being. People are people no matter at what time or place. Just different or varying the names and places.

      The banks are neglecting their responsibility in going out and seeing the place for an assessment. The bankers have eyes, data bases and experience to assess a property. Bankers, profession investors and many non-profession investors can get a fairly reliable value just by seeing the neighborhood and comps. An official appraisal CYA for the bankers.

      To admit that they were scammed so easily would be admitting not doing their job properly. Better to pay, than admit mistakes at the bank/trust. It’s always out of their control — changes in the market, external factors — didn’t do real appraisal or check the borrowers income or assumed 15% to 20% yearly returns.

      RE offers come with contingencies. I’ve seen an BoA REO go to a lower bidder. The higher cash offers had an appraisal contingency, while the lower priced offer used a pre-approved loan and without appraisal contingency. Buyer inceased down to make it a 95% loan.

  7. Anonymous

    Real estate needs to come out of the Dark Ages. instead of a handwritten bid submitted to one agent with no checks and balances, the whole thing needs an exchange with bids submitted electronically. And the seller and mortgage holding bank should be able to see those offers without going through a realtor gatekeeper. Now it’s like you want to see some stock, there is no published price in a stick exchange, so you have to call a broker and take his word for what it’s worth and hope he isn’t scamming you. Real estate needs to be dragged out of the 19th century and into this century.

    1. Shevy

      The electronic bid process is a good idea,some banks are doing this now. However, in many cases the banks bring it on themselves by refusing to process more than one offer at a time and making a specific point that they will only look at one offer. Many banks even have electronic systems in place that will not allow more than one offer to be submitted at a time. Moreover, if a better offer comes in that one wants to submit the process has to start over.

      Shareholders in these banks should stand up for change. I’ve had short sale listings with full market value asking price offers only to have the bank sit on them for months while the price drops tens of thousands of dollars.

    2. octal77

      Would such a system be fundamentally different than the way Ebay currently has it’s RE bid system setup?

      I really like such an idea as it would create (presumably by a disinterested 3rd party) an
      unbreakable, timestamped audit trail.

      1. Shevy

        There are a couple of systems like that. However, there are a lot of moving parts on a short sale including multiple liens, back taxes, back HOA’s,government incentive programs to try to encourage banks to do short sales, different investors that own the loan(s) etc.. I think that’s what’s preventing a system like that for short sales.

  8. Soylent Green Is People

    Curious on the Pendings who made the offers to purchase. Doesn’t the MLS show who might have offered?

    Need more detail on the prior listing Agents “work” done to market the property. This home is in the Port Streets area, a pretty desirable section of NPB.

    Isn’t there a “wayback” machine option for prior list and showing data? Do tell…

    Soylent Green Is People.

  9. Perspective

    Shevy or any realtors here:

    Is it a big deal to change your offer on a foreclosure a couple days after it was made in California?

    I’m trying to save my sister-in-law from a shady realtor. The original offer on a CA foreclosure was $250K (Central CA) with seller paying $8K in closing costs. She told me this after the offer was made. I explained to her that closing costs on that house should be dramatically lower – 30Y FHA at 3.75% = ~$3,000, or at 4% = $0.

    Her realtor is now acting like she can’t modify her offer, or at least that she shouldn’t. I don’t know the custom, so I’m asking…

  10. Shevy

    Perspective. It sounds like there is a communication breakdown with your sisters agent. It’s not customary to change an offer once it’s submitted; however,there is nothing that says it cannot be done, particularely if it has not been fully executed by both parties. Her agent could create an addendum changing the price and closing cost credit or withdraw the offer and resubmit.

    The only risk is if your sister’s agent does not communicate properly she could come across as unprofessional, or that she does not know what she’s doing, or that the buyer is flaky. However, with good communication there should not be a problem. In addition, it does become a bit more complicated if the offer has already been submitted to the asset manager but still nothing that cannot be overcome relatively easily with proper communication.

    Ultimately,if your sister’s buyers agent communicates properly the seller’s agent that they don’t need $8,000 in closing costs it will likely not matter.

    That said, although one would think that all that matters to banks is what they net so what’s the difference between $245,000 and $3,000 in closing costs credits and $250,000 and $8,000 in closing costs credits? However, I’ve seen deals where the bank would not take $500,000,however, they would take $515,000 with $15,000 in closing costs credited to the buyer.

    Finally, I would have your sister ask her agent or lender run some numbers, if the rate buy down alone is $3,000, she should review the break even analysis on that, it may not be worth the points to buy down the rate on FHA loan because the discount points are relatively expensive for this loan product. In addition, there are other closings costs for title, escrow, etc. that your sister will incur. We normally recommend buyer at that conventional buyers at that price point to budget 2% in closing costs besides their down payment therefore, 3.5% in closing cost credit on an FHA loan is not unreasonable because of extra costs associated with FHA loans.

  11. HenryE

    In the listing above, how come there is a sale in 2000 for $700,000 when the place got built in 2007? Am I missing something?

  12. Shevy

    A large number of homes in the Port Streets are purchased and torn down. This home was originally 1485 square feet and sold in 2000 for $700,000 and later torn down and a new 5450 square foot home was built in 2007.

  13. Anna R. Todaro

    I am an apraiser in Fredericksburg, VA. I stumbled on a flopping company (LLC) 3 years ago and have seen more than 50 flops over the years. Tried to report it to FBI….they don’t want to hear it. Told me to report it to another agency (I think FDIC or SEC) as a complaint. They don’t want to hear it.

    This happened during with another company in 2006 I tried to report for fraud. When they reached multi-million status, then the FBI did something- 2 years later.

  14. Bill

    A couple of months ago I was checking out houses on the HomePath.com website where Fannie Mae posts their REO’s. I found a small stater house for an affordable price on the site. I think it was listed for $135,000. I thought it would make a great starter home so I contacted the real estate agent that was listed on the Fannie Mae website. He promptly advised me that there were already cash offers on the home and didn’t seem very interested in dealing with me. I suspected that he already had an “investor” who he was going to give the deal to and I was just inquiring anyway, so I just forgot about. Today I was checking out Realtor.com and found the house listed for $209,000. The pictures indicated the tail tale sign of a typical flip: cheap upgrades and new paint. I checked the property appraiser’s website and found that the home was purchased for $135.009 by a LLC called Stellar Homes Opportunia. I would have definitely offered more for this home if given the time of day and I have the means to do so. I would have lived in it and not flipped it. This house would have been a great opportunity for a new family, now it’s just a rip off and money making scheme for “investors.” It’s even more sad that Fanne Mae was involved. I thought they’re supposed to make homes more obtainable for people, not make more money for flipping investors. I’ll post the links here for the house. Seems to be a “flopping” operation to me. I think lenders need to somehow take realtors (another private entity) out of the equation for obvious reasons. This is more than likely a national epidemic. Here are the links for the home I’m talking about:



  15. Shevy

    Bill- The market can be frustrating. Do you know if the home was missing flooring, the kitchen, or something else that would prevent it from financing eligibility? It’s rare that cheap upgrades and paint will bring a Homepath property from $135,000 to $200,000 plus.

    There are scams out there; however, most banks have systems in place to help prevent them. Opportunities for investors happen on properties that only work for cash buyers and most of them are buy, fix, and flip rather than by fix and hold investors. These buyers cannot compete on properties that qualify for financing because they get bid up to market value and cash buyers normally focus on properties that are not eligible for financing. Investors that buy these homes both at trustee sales and on the open market when they are not eligible for financing often play an important role in the market. Many buyers do not have the time, knowledge, capital, or risk tolerance to acquire these homes, fix them up, and live in them. If it was not for these investors many of these homes would sit the market.

    In addition, I see quit a few deals that give owner occupants the first shot and only open properties to investors if no owner occupant buyers step up. However, I think that a lot of agents do a poor job of properly communicating when a property is not eligible for financing, which naturally causes frustration for people looking for a home for their family.

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