Click to enlarge
CoreLogic, an industry group that manages a database of closed transactions across the U.S., estimated that 1.9 percent of all short sales are fraudulent and they cost lenders $300 billion per year, according to a new study.
A fraudulent short sale can take several forms, but is usually a variation on this theme: A “distressed” seller approaches the lender about a short sale with a buyer in mind. The short sale goes through, with the lender taking heavy losses on the property and the buyer taking ownership at a well-below-market rate. The new owner is then able to sell the property at a profit very soon thereafter.
In that case, the seller may or may not be distressed. A real estate agent may be involved as a party to the fraud, collecting two commissions on what is essentially a single sale, according to the study.
The study looked at instances where a home sold short sold again very soon thereafter, and at a much higher price than the short sale. Approximately 4 percent of short sales fit that description, half of which the authors believe are fraudulent.
No comments yet.