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Real Estate Agents Exploit Short Sales to Trick Banks

By    |   Friday, 18 Jun 2010 08:49 AM

Some unscrupulous real estate agents have found a way to take advantage of banks in short sales.

A short sale occurs when a homeowner sells the home for less than the value of the mortgage. So the bank must accept a loss on its mortgage loan.

Some agents have created a scheme called "flopping," where home buyers hire brokers to assess a home for less than its market value and persuade banks to approve a sale at that price, Bloomberg reports.

The buyer doesn’t let the bank know that he already has lined up another buyer at a higher price and then quickly flips the home for a profit.

Flopping occurs in more than 1 percent of short sales and may cause $50 million in losses for lenders this year, according to CoreLogic. Almost 622,000 short sales took place in the year ended April 30.

“Short sales are an important tool that can help both the bank and the borrower,” Morgan McCarty, executive vice president for mortgage servicing at Regions Bank, told Bloomberg.

“It’s just that criminals are always trying to find ways of profiting.”

And their opportunities may continue, because experts see continued weakness in housing.

“The housing market may be in better shape than this time last year. But when you look at recent trends, there are signs of some renewed weakening in home prices,” David Blitzer of Standard & Poor’s said in a statement.

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Some unscrupulous real estate agents have found a way to take advantage of banks in short sales. A short sale occurs when a homeowner sells the home for less than the value of the mortgage. So the bank must accept a loss on its mortgage loan. Some agents have created a...
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2010-49-18
Friday, 18 Jun 2010 08:49 AM
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