Depressed Home Value and Market Instability Make Short Sale Schemes More Common
Short selling, where a lending institution agrees to accept less from the borrower than the value of the bank-held mortgage or lien, is susceptible to shady practices by third parties, like real estate agents. It's a rather simple scenario: the borrower faces a foreclosure and opts to short sell. The bank, able to recover more than if they foreclosed on a borrower agrees, but at a net loss.
Housing market volatility prone to fraudulent practices
In a regular housing market, banks can easily value a property and determine if they are getting a square deal. Everyone involved, real estate agents included, knows the score. In a depressed home market, determining the market value of a property becomes much harder and price speculation becomes commonplace. Banks and borrowers, then, are more easily defrauded of thousands of dollars by shady real estate agents, investors and other third parties.
Determining home value more difficult in depressed market
If the depressed housing market is a localized problem, like in east Los Angeles, banks and borrowers have the resources at their command to accurately value a home. They can say that crime has increased or the school district underperforms, so homes are worth this much. The more €x factors' there are in the picture, the more a bank's and borrower's valuation resources are taxed, and the harder it becomes to determine home value. This kind of large-scale problem of valuation is prone to speculation and fraud.
Nefarious short sale practices have been cropping up across the country in the past few years.
In Connecticut, one real estate agent was recently sentenced for defrauding the bank of 30,000 dollars. In the scheme, the real estate agent had the house valued at 102,000 dollars and sold it at that price to a private investor. However, she had received a second bid for 132,000 dollars from another individual. As it turns out, the private brokerage that bought the home for 102k was a partner of the real estate agent. She and her partner at the €private investment' group planned on reselling the home once the deed was theirs for 30,000 less.
Interdependent national housing market easily exploited
Until there is consensus at a national level as to the median value of a home€"which is unlikely€"short sale scams will continue. Because of already beleaguered and overtaxed resources, banks and borrowers cannot easily detect short sale scams. Real estate agents are often responsible for determining the value of a home and have something of a €home field advantage' insomuch they have the connections and valuation resources within the communities they work.
What is more, real estate privateering is damaging to the stabilization of the housing market, and doubly so when charlatan investors and real estate agents collude to defraud banks and homeowners.
Housing market volatility prone to fraudulent practices
In a regular housing market, banks can easily value a property and determine if they are getting a square deal. Everyone involved, real estate agents included, knows the score. In a depressed home market, determining the market value of a property becomes much harder and price speculation becomes commonplace. Banks and borrowers, then, are more easily defrauded of thousands of dollars by shady real estate agents, investors and other third parties.
Determining home value more difficult in depressed market
If the depressed housing market is a localized problem, like in east Los Angeles, banks and borrowers have the resources at their command to accurately value a home. They can say that crime has increased or the school district underperforms, so homes are worth this much. The more €x factors' there are in the picture, the more a bank's and borrower's valuation resources are taxed, and the harder it becomes to determine home value. This kind of large-scale problem of valuation is prone to speculation and fraud.
Nefarious short sale practices have been cropping up across the country in the past few years.
In Connecticut, one real estate agent was recently sentenced for defrauding the bank of 30,000 dollars. In the scheme, the real estate agent had the house valued at 102,000 dollars and sold it at that price to a private investor. However, she had received a second bid for 132,000 dollars from another individual. As it turns out, the private brokerage that bought the home for 102k was a partner of the real estate agent. She and her partner at the €private investment' group planned on reselling the home once the deed was theirs for 30,000 less.
Interdependent national housing market easily exploited
Until there is consensus at a national level as to the median value of a home€"which is unlikely€"short sale scams will continue. Because of already beleaguered and overtaxed resources, banks and borrowers cannot easily detect short sale scams. Real estate agents are often responsible for determining the value of a home and have something of a €home field advantage' insomuch they have the connections and valuation resources within the communities they work.
What is more, real estate privateering is damaging to the stabilization of the housing market, and doubly so when charlatan investors and real estate agents collude to defraud banks and homeowners.