Here is a glimpse behind the curtain of short-sales, and a very typical example of what is happening in the field.
Comment on what you think occured here:
http://piggington.com/short_sale_advice_needed
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
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CA DRE #01527365, CA DRE #00873197
The listing agent was planning to buy the property at 371 with someone else’s money. Then the listing agent and his investor planned to sell it to the ringer buyer for 450. Pocketing the listing agent 6% for double heading the deal and 75k for the 371 and 450 difference.
Basically the listing agent was screwing/scamming both the buyer and seller.
Happens every day to people who go direct to the listing agent.
Based on this Don was a long time agent..fairly successful….sounds like you can really trust no one.
JtR, can you go into more specific detail w/ Shadash’s comments? Trying to wrap my head around it, and don’t really understand how this fraud is pulled off. File my post under: “The only stupid question is one that isn’t asked”…
I should also mention that this happens every day when the buyer has his own representation, but the agent doesn’t catch the scam and gets duped.
I don’t know what happened in this case but I’ll give you the most common packages:
1. The listing agent spoons his lowball short-sale listing to an investor to begin processing the lender approval. Agent finds retail buyer, and once the investor closes at the lowball price, they sell it to retail buyer and pocket the difference.
2. The listing agent can’t close the lowball deal so he tacks on a five-figure processing fee or lien-release charge instead. The short-sale processor is complicit though usually paid by buyer so fiduciary conflict there too, though they will claim to be a neutral 3rd party.
3. The investor approcahes the listing agent and agrees to have the LA represent them on the purchase so agent makes 6%. But the investor gets to negotiate the deal with the bank, and they go in ultra-low with or without the agent’s knowledge. If the investor gets it approved, hooray, they put in the standard $15,000 flipper package and make $100,000+ by selling it to the retail buyer they find later. If not, the seller has to start over on a short-sale process before he gets foreclosed.
4. Listing agent appears to expose property to the open market, and fields several offers. Short-sale closes months later for far-under your offer price, and an insider represented the eventual buyer – usually an agent in the same office.
Tell-tale signs of hanky-panky left all over the MLS:
A. The five-second listing, where once the listing is inputted, it is immediately marked pending or contingent.
B. List-price reductions after marked pending/contingent, usually several smaller reductions over months of time.
C. Listing office represents both buyer and seller (listing agent gets a buddy in the office to help diffuse the obvious).
D. None or one photo, or a few terrible photos meant to throw people off the trail.
E. We saw in the news the idea of ‘negative staging’ where they beat up the house prior to appraisal.
F. Widespread abuse of fiduciary duty being inflicted by new and experienced agents, many of whom work at big-name legitimate firms whose managers look the other way.
Thanks, Jim! I knew I could count on you!
As a buyer if you get a copy of the bank approval letter as well as the hud-1, and the title report outlining all the liens, I would imagine then that the deal is clean?