Seattle Residential: I Do That: Short Sale Fraud

Short Sale Fraud

Ken Harney writes and interesting post re Short Sale Fraud, but I didn't like the particular way it uses common terms. When he says

A comprehensive new study estimates they will lose more than $375 million this year alone when they sell undervalued houses to tag teams consisting of real-estate agents and investors

he seems to be targeting any and all real estate agents and investors. The article starts with "Are banks and distressed home sellers getting rooked" and they answer is, that they certainly are by a few unscrupulous agents and investors , but for the most part banks have screwed themselves by completely complicating the homes sale process with legal entanglements and ineptitude.

For two hundred years the real estate industry has been developing in this country and the industry has done all right, thanks. For years the banks have wanted to play a bigger role. Most of the industry has seen that having the loan originator, the title processor, the escrow closer, the realtor, the appraiser, and the inspector as separate unconnected businesses is a good thing and provides many levels of cross checking to keep fraud at bay.

There are big real estate companies which own title companies or have lending wings. Some companies even call themselves home and loan establishments in hope of convincing the consumer that one stop shopping is convenient and therefore better for the consumer.

Mexicano marioneta louSo what is going on with the banks and short sales. The bank gets to control the seller like a puppet on strings. A short seller's home can be put at a reasonable price and the minute the realtor discloses that it is a short sale, no savvy buyer that is buying a home to live in will touch it. Why? Because it will take 9 months or longer to close and these buyers are buying a home to live in now.

Besides taking nine months to close, the sale might not ever close. Why? Because the banks lose money on a short sale but if they foreclose, there is the insurance that will pay them for their loss. All of that time is wasted and the home goes into foreclosure.

So, about the fraud? The banks are totally inept at handling real estate transactions. Multiple listing Associations across the country have developed forms over the years that work regionally and within state and federal laws favoring neither the seller, nor the buyer, but anticipate bringing a mutually acceptable contract on real estate to closing. Banks on the other hand have taken the position that their obligation is to their stockholders, and the bank's attorneys have left no avenue unexplored on how to extract every dime from every real estate deal that they can get their hands on.

  • Banks feel they are above the MLS rules and regulations, so each bank has it's own rules to be followed.
  • Banks have no respect for anyone one so they pay everyone involved fees they would pay their entry level tellers.
  • Banks have to have control, and they get it when the have the right to approve a short sale.
  • Banks take forever to complete any task.

With all of these control issues the banks have created a system ripe for fraud and there are people who saw that and they became real estate agents and investors and are now all over the banks with their game. If any of these bounders is ever brought to trial and found guilty I am almost positive that you will find that as a whole these people got into the real estate industry after 2007, and that none of these people ever acted like a true real estate agent whose job is to help a seller market their home and to help a buyer find and buy a home.

Most agents have the best interests of their clients at heart. We've always had a few bad apples, like every profession. You know who the bank caters to by virtue of having investors. And that includes every big bank. Feel sorry for them if you must. I surely don't.

Also published on Seattle Real Estate with Glenn Roberts

 

 

 

 

Glenn Roberts
Retired

 

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Comment balloon 12 commentsGlenn Roberts • June 05 2011 01:11PM

Comments

Excellent post. It kind of reminds me of another large establishment/institution that thinks they are experts at EVERYTHING... the feds. However just like your post everything tey touch costs more, yields less, has pork and payoff in it and the whole mess just further compounds the problem. I do not understand why it is so difficult to let professionals do their jobs.

 

LeBron James is a stud basketball player but you don't see him playing football or on the soccer field and he is arguably one of the best PROFESSIONALS in his genre. So why do banks and feds think they are different???? very foolish and unfortunately we are stuck with the problems from their decisions.

Posted by David Shamansky, Creative, Aggressive & 560 FICO - OK, Colorado Mtg (US Mortgages - David Shamansky) over 6 years ago

Glenn, thanks for sharing your perspective from in the trenches. It really is amazing me to me that any short sales get approved at all by some of these banks!

Posted by Shannon Jones, Long Beach CA Real Estate (The Shannon Jones Team) over 6 years ago

David - The bigger a corporation gets the more they seem to ask themselves, "Where is more money?" with no thought to what processes have proved effective and perhaps controlling everything just isn't necessary.

Shannon - That's the point. They don't want to.

Posted by Glenn Roberts (Retired) over 6 years ago

The systems in place and the new financial reform act isn't working.  It's only making things worse.

Posted by Doug Bullwinkel, NMLS #281609 (Academy Mortgage Group) over 6 years ago

Hi David, I have to agree with you the banks do feel they are above it all.  If the banks should ever get complete control over the process of buying and selling real estate it will be a dark day.

Posted by Phil Hillerman, Crye-Leike Realtors® (Crye-Leike Realtors®) over 6 years ago

Oh you hit some sensitive buttons with me for sure.  The mere fact that most of the paper pushers in these deals are hourly paid employees with NO knowledge of real estate and are certainly NOT licensed.  Makes me crazy.

Posted by Paula McDonald, Magnolia Realty ~ Granbury, TX 936-203-0279 (Magnolia Realty ~ Granbury) over 6 years ago

Shannon- Someone needs to take a close look at hwat's happening here.

Doug - Boy, they aren't

Phil - The sun will set early those days.

Paula - Makes me carzy too.

Posted by Glenn Roberts (Retired) over 6 years ago

Glenn and they say you can't get away with murder.  What the banks are doing is equivalent to just that:  getting away with murder.

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (Keller Williams Realty) over 6 years ago

I love the deals we put together that have no banks. The cash sales, and the specially crafted, hammered out owner financing deals where the buyer and seller serve themselves with a take back mortgage set up with a proper down payment, healthy interest rate that is good for seller. Better than the bank for the buyer and no middle man paperwork application fees, appraisals, etc.

Posted by Andrew Mooers, Northern Maine Real Estate-Aroostook County Broker (MOOERS REALTY) over 6 years ago

Charita - Make one want to call on Uncle Vinnie.

Andrew - A meeting of the minds with out dragging along various anchors.

Posted by Glenn Roberts (Retired) over 6 years ago

Attorney Ron Ballard has dissected the Corelogic report.  It's a JOKE.
Corelogic is being sued for appraisal fraud.  They also have a HUGE bias in their studies.  They get PAID by the lenders.
http://californiashortsalelawyer.com/2011/06/ill-logic-of-corelogic/
http://californiashortsalelawyer.com/2011/06/exposing-corelogic/

 

Posted by Kevin Vitali over 6 years ago

Kevin - I don't doubt that a bit. I was objecting to Harney saying banks and owners are losing millions "to tag teams consisting of real-estate agents and investors."How many real estate agents are there? How many implicated in this fraud. Then why not say one tenth of one percent of agents...or whatever the figure. That's all. And that the banks should stay out of the real estate ownership and marketing of property.

Posted by Glenn Roberts (Retired) over 6 years ago

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