The other major real estate fraud, the "short sale"

We're waiting for some other important information to come in, so today we're going to discuss the real estate phenomenon known as the "short sale".  When the real estate market was booming, we had the real estate fraudsters ripping banks off by over inflating the prices of homes through fraudulent appraisals then cashing out money, now that things have cooled down, we have another scam for the fraudsters to profit off of known as the "short sale".  Let's look at the definition from wikipedia:

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

This is all well and good when there is actually a need for a short sale due to financial hardship, collapsing home prices, etc.  The first step is putting the home on the market and showing the lender that you've actually made an effort to sell the home.  Once it's on the market, you submit the offers to the bank and try to get them to accept a price that could be lower than what the loan balance is on the home.  This makes for a fertile breeding ground for fraudsters.  List up a home, tell the bank there's no offers, drastically reduce the price of the home and convince the bank to take a low ball offer, then remarket the house for a profit.  Yesterday we discussed the sale of Bernardo Barrera's primary residence, let's take a look at the time line of that homes activity on the MLS system...

• 6/22/09 Listed for sale at $262,000
• 7/2/09 price lowered to $175,000
• 7/15/09 price lowered to $155,000
• 8/10/09 price lowered to $140,000
• 10/09/09 pending sale
• 12/30/09 transaction closed at $145,000

Nice huh?  Incredible how the man that is at the center of one of our mortgage fraud stories, the man who claimed his identity was stolen by John Arther Romney and crew for a $400,000+ fraud now turns around and nails the same bank, Citi Mortgage, for close to $150,000?  Superb.  Remember, Mr. Barrera purchased his home back in 11/05 for $289,275 and borrowed $274,800 from Citi Mortgage.  Take into account commissions and other fees associated with this short sale and I guarantee Citi netted less than $140,000.


We did stumble upon something far more alarming in researching today's story though.  Consider that according to the state, Mr. Barrera is a fine upstanding member of society whose identity got stolen for the commission of this mortgage fraud.  Fine, let's buy into that for now.  Remember we mentioned way back when that Mr. Barrera had purchased his home in November 2005 just days after he had lost his job therefore committing mortgage fraud.  Let's take a close look at this fine home Mr. Barrera purchased...

2 bedroom, 2 bath, 1,270 sqft situated on 1,960 sqft of land all for $289,275. 

That's great isn't it?  Now let's take a look at the records for his next door neighbor at 16568 SW 48 terrace, who just happened to buy their house at the exact same time...

2 bedroom, 2 bath, 1,270 sqft situated on 1,960 sqft of land

Oh, what do you know, the exact same unit?  What should have struck our friends at the state attorneys office and the Mortgage fraud task force was the sales price of this identical unit that was purchased at the same time as Mr. Barrera's unit, take a look at the records from the property appraisers office for yourself...

Nice!  Same exact house, sold at the same time for $138,285 less than what Mr. Barrera paid.  Draw your own conclusions.  Some victim the state has, huh?