Banks and distressed home sellers stand to lose more than $375 million this year from a short sale scam that has sellers and banks agreeing to sell homes at very undervalued prices, according to a new study by CoreLogic.
In discovering the short sale fraud scam, CoreLogic analyzed over 400,000 nationwide short-sale transactions in the last two years.
Here’s how the scam often works: Borrowers who are underwater or in financial distress are contacted, often by investors and sales people, then persuaded to sell the property in a short sale and at a low price. Then the banks accept the lowball offer, and the investors resell the house to legitimate buyers at a higher price and for a hefty profit.
65% of short sales resold within 6 months that net profits of 40% or higher were flagged “suspicious,” which means there is a high likelihood that the lender accepted a low ball offer, according to the CoreLogic study. These transactions often go undetected by banks.
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