These are the short-sale scams mentioned in yesterday’s comments that deserve their own post as a resource for people to use to protect themselves. If you have seen other tricks, include them in the comments so we stay aware!
The most common packages:
1. The listing agent spoons his lowball short-sale listing to an investor to start the lender-approval process. Agent then finds the retail buyer, and once the investor closes at the lowball price, they sell it to retail buyer and pocket the difference.
Once a SS investor chimed in here that this is legit because he discloses to the lender that he is buying for the purpose of immediate re-sale for profit. I’m not sure why a bank would agree to that, but we do know that some banks’ short-sale departments are so busy that they will approve sales just to move product, and may not care as much about getting top dollar.
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 evidence, usually 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.
Happened to us, here is the property, we offered way way over the close price. It was a fantastic property, bank got ripped off, but agent got a double ended deal. After checking with a few lawyers, we had no grounds to sue for a potential loss. That deal cost us a couple hundred grand if we could’ve closed: http://www.redfin.com/CA/Del-Mar/Marine-View-Ave-92014/home/7501470
Agent had an open house and everything to make it look legit.
Here we go, a perfect example:
http://www.redfin.com/CA/San-Diego/10782-Viacha-Dr-92124/home/5403989/crmls-T12125981
– listed Oct 10, 2012 for $430k marked immediately as pending
– a total of three crappy pictures (classic!)
– dual agent
– sold to an investor (“CT Homes from the Hit TV show ‘Flip This House'”) for $450k 9 days later
– Listed on Jan 9,2013 for $675k
– Flipped to a retail buyer on Jan 29, 2013 for $666k ($216k difference – almost 50% over!!!)
You can find these all over the MLS.
socalbuyer- Sorry to hear about your experience. Nice home but I would have worried about that freeway noise
SD Squatter- It doesn’t appear to have been a short sale, but do agree the agent could have taken more pics and waited a couple more days for offers, but I’m sure the buyers had very strong terms and offered quick deal.
I personally don’t think this is a scam as it wouldn’t have gone too much higher as it needed lots of work and sold before this current frenzy started. Like them or hate them flippers in our part of CA are high risk / high reward and they are very aggressive in pursuing deals and closing them.
This flipper updated just about the whole property and even though it sold for $216k more they made nowhere close to that much profit and the original seller would have had to put some major bucks into property to get much over $450k.
@ljinvestor
Freeway noise was non-existent….it was .5 acre flat in del mar, new construction 2006, almost 5000 sq ft single story, RV parking, thermador stove @$30k, rooftop deck with ocean views for $1M…this one will not be easily forgotten unfortunately. Also had a separate rental unit for cashflow. It’s worth $1.5-$1.8 today
I see # 4 from time to time. And “Flash” listings are a red flag, although not always a sign that something crooked happened. Upcoming listings are announced at my local Broker’s meeting, if your client gets an early look and makes a preemptive offer it can be legit. Dual agency always raises additional questions, and should.
What is the statute of limitations on this?