Florida is number one in the nation on mortgage fraud. And we are seeing it in front of our faces day in and day out. It is bad. And it is negatively affecting our business and our communities. I guess that I have been lucky that I never had any smelly proposals made directly to me. However I see the signs of mortgage fraud all around me most of the time.


For example, as I was preparing a CMA I noticed there was something weird in the Miami Lakes neighborhood I was researching. There was a home that had been listed for sale on the MLS for about a year and a half and then it was shown as expired. The original asking price was about $800,000. There were various reductions along the way, and the listing price eventually went down to $ 600,000. The house still didn’t sell. Then the listing expired. I was going to use this listing as one of the properties that “didn’t sell”, when surprise, surprise, I find it in the public records listed as “sold” only a couple of months after it was shown as expired on the MLS.  The sale price?  $ 900,000!!!


That price in this market??? I don’t think so. I believe there is something smelly about this deal. I told my buyers why I was not going to use this property to value theirs, even if it was the latest sale in the area. I showed them all the information, including the whole MLS history for this property. The sellers also concluded that something was wrong with that sale, and agreed to list their home at a realistic price. I guess the price was right because the home sold in just five days! I was happy and so were the sellers...

all the way to the bank.

But those inflated prices can mislead real estate agents and owners into placing a much higher price tag on a property than its true market value. Believing there are real buyers out there who are paying these prices, many sellers overprice their homes, and as a result, their homes don't sell. The sad reality is that many of these deals with inflated prices involve shady cash backs at the closing table that the lender is unaware of, so they are  illegal.

These kinds of deals are distorting the real estate market by pushing listing prices up when in reality we are in a depreciating market. It’s economics 101. Each month the ratio between active listings and pending sales is a higher number than the month before. That combination brings prices down because there is simply much more offer than there’s demand. And then when the property doesn’t sell at the overpriced listed price, the sellers blame the realtor for not doing enough. The inflated prices that result of these fraudulent sales feed sellers fantasies of selling at unreal prices and also distort CMA’s and appraisals. In the end, true buyers don't even bother to look at these overpriced properties!

Many times I have also seen the signs of fraud on the MLS itself. Recently I found three properties that had been listed for some time. Then they were listed by this broker (the same one in the three transactions) who miraculously sold each one of them for a price that was much higher than the previous listed price. I am talking about a difference in price that ranged from  $80,000 to $ 150,000 higher than the previous listing price!!! By the way, each one of these three properties also showed that they had been sold for the exact same price as the listing price. Coincidence?

Is this a case of a realtor with superpowers?  I suspect otherwise.  I smell a rat!            


So even for those of us who have not been confronted with mortgage fraud directly, the fight against mortgage fraud is played out almost every day. I can’t directly accuse anybody without real proof (I guess being there at the table and seeing the money exchange hands?). But I attempt to show sellers all the evidence I gather and let them draw their own conclusions. Also, just in case they get tempted with another realtor’s proposal, I point out to them that even if they don’t get a single extra penny out of the deal, participating in a transaction that gives the buyer any amount of cash back that the lender is unaware of is always illegal and can have dire consequences to all involved. 


In one of the various seminars I’ve taken lately on the subject of mortgage fraud (now it seems that everyone is finally aware of it!), the presenter was very optimistic about stopping fraudulent mortgages for good, and she told us the FBI was here in Miami in full force. She said: “the FBI is going to get the bad guys!”  Just a few days later I read an article in the Miami Herald about (guess what?) mortgage fraud. The article mentioned the FBI “ is not investigating the complaint because it has only two agents in its Miami field office working on mortgage fraud.” Only two agents to deal with all the cases here in Miami?! This article left a bad taste in my mouth. Is the government serious about stopping mortgage fraud?  I am really fed-up with what this type of crime is doing to our communities and our business, and it doesn’t seem to me that the government is doing enough to stop it. Tell me, what do you think?