My Real Estate Blog

Short Sale Soundoff: Lenders, sellers expected to lose $375 million due to short sales

A new study by CoreLogic shows banks and distressed home sellers will lose more than $375 million this year by selling undervalued houses to third-party buyers, which generally result in a quick sell and profit and tend to be fraudulent sales.

According to law enforcement and banking industry experts, the fraudulent work like this: Investor groups partner with local real estate agents whose job is to spot borrowers in financial distress and persuade the homeowners to sell to investors in a short sale at a low price. Then, the agent contacts the bank with the investors' short-sale offer.

Meanwhile, the agent finds legitimate buyers who are willing to pay more for the property, but the agent never presents their offers to the bank. To back up the investors' low offer, the agent produces an appraisal that confirms the low valuation. The bank then sells to the investment group. After the closing, the investors sell the house to legitimate purchasers at a higher price, then the agent and investors split the profits.

Reprinted From C.A.R.