FLOPPING . . . IS IT BPO FRAUD? . . . OR IS IT A UNIQUE TRANSACTION WITH UNIQUE SERVICES TO DIVERSE CLIENTS?

Ken Cook posts about "BPO Fraud" as defined by the Sarasota Herald Tribune. 

O.K.  COLOR ME JADED.  Frankly, I'm more concerned about the article in the Herald Tribune than I am about the prospect of "FLOPPING" by a conspiracy between a real estate agent and a relative who buys the property at a below market price.  Frankly, I don't buy it.  How many real estate agents have relatives or friends "at the ready" to buy a specific property from a bank based on a fraudulent BPO?? 

"The March 7 letter references an article in the Sarasota Herald Tribune titled The new flipping: short sales which reports "Questionable short sales accounted for 1.4 percent of all property sales in Sarasota and Manatee counties this year.""

So a newspaper article is "questioning the standards" of real estate broker price opinions????  That's a laugh.  On what authority do they "question" short sale valuations??

My opinion??  I'm perfectly fine with appraisers protecting their turf and property appraisals are their turf.  However, neither the BPO nor an appraisal sets the list price of a property for a buyer or a seller.

IMO, this newspaper article is the epitomy of making a mountain out of a mole-hill.  Does BPO fraud exist??  Of course, it does.  Fraud exists in just about every facet of real estate transactions, sooner or later.  However, the actual numbers are probably so small that it's like a gnat gnawing on an elephant's hide. 

The Devil is in the details.  The article cites numbers of properties purchased and resold quickly.  However, the article fails to state the type of purchase and financing involved in each transaction.  It is not unusual for an investor to purchase a foreclosure for cash and then offer it for resale to a home owner occupant with financing.  In fact, I've seen cases where the original investor and the eventual end buyer bid on the same property at first listing by the bank/owner.  The investor took the property in a cash transaction/no inspections, etc.  However, when the consumer purchased, they needed financing, warranty, inspections, etc.  which the bank wouldn't provide. 

So, the bank sold the property to the investor and the investor sold the property to the consumer.

THE BANK GOT THE "QUICK AND EASY" SALE THEY PREFER.  For the life of me I can't see where the bank lost.  If they had been willing to provide inspection repairs, warranty, financing help, they could have sold it to the consumer the first time around.  But, they didn't.  Banks want quick and easy cash sales with no inspections or warranties.  So be it.  They sell for less. 

I believe that, while I'm sure there are instances of "flopping", I don't believe it's as serious as the newspaper article cites. 

The Devil is in the details and news reports seek the sensational.  When one understand how transactions work, we know that, in the big picture, BPO Fraud is a manufactured problem.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

Home buyers

"Honey, did our agent say why we didn't get the house??"

"Yes Dear, she said that the bank sold to an investor with ALL CASH and no inspections.  However, she has already made contact with them and the home will be on the market again.  The price will be higher but it we'll be able to use an FHA loan and have a home inspection." 


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9 Comments on FLOPPING . . . IS IT BPO FRAUD? . . . OR IS IT A UNIQUE TRANSACTION WITH UNIQUE SERVICES TO DIVERSE CLIENTS?

MAR
12
2010
288,781 Points 38 Featured Posts Outside Blog

We all know the news is based on what sells, and that often those reporters looking into the real estate industry (and every other industry for that matter) often get a "dimly shaded" view of reality. ... just like when they report on how low rates are AFTER they have already gone back up.
10:55am • #1
183,371 Points 13 Featured Posts Localism Sponsor Outside Blog

I'm with you Lenn; there seem to be many other relevant topics for reporters to address - like the proposed salt ban in restaurants in New York!  ;-)

tina in virginia
11:09am • #2
971,333 Points 102 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Lenn, It seems behind every tree these days there hides a conspiracy. It happens but is it the norm, I don't think so...
11:17am • #3
1,120,483 Points 102 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Hmmmm, I do BPOs and I list REOs.  On a listed REO there's MY BPO, a second opinion from other broker AND an appraisal.  The bank then has these THREE things in which to consider in setting the price, so if a price were "fixed" it would have to be a conspiracy that also involved an appraiser so HA.

I just don't see it.
11:32am • #4
815,458 Points 165 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Lenn, I am more concerned about the recent trend up here where the short sale negotiator gets his offer approved, the seller continues to market the house (showing as "short sale approved" in the remarks) a buyer comes along, negotiates with the negotiator, the negotiator buys the house and one day later sells it to the new buyer at a higher price.

Now that... IMHO is fraud. And the lender knows as I have been assured it is all transparant. Yeah, I don't think so.

You are right, how many times does the real estate agent have a family member standing by to purchase and flip.
4:45pm • #5
1,952,054 Points 478 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Andrea.  In our MLS, MRIS, the rule is that the Short Sale listing goes "CONTRACT" and won't be exposed to any new buyers once the contract is accepted 

Do the agent all follow the rule???  Certainly not and that is the problem.
4:57pm • #6
815,458 Points 165 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Lenn, how it works prior to the unsuspecting buyer comes along, I don't know as it appears on the MLS as active. The remarks say that it is an "approved short sale". Then when the offer is made to the sellers, it comes back signed by the short sale negotiator, not the current owner. Apparently he is known as the "contract purchaser". I would call it something different, but not here in mixed company.

I had a fit when I saw this, contacted our state association, and they say it is legal, but suggest we stay away. Me? I will steer clear of it. It may cost me a sale or two, but I would rather have a clear conscience. And any day now the powers that be may decide it is in fact illegal. I don't want to participate.

I wrote a post about it, and many here believed that it is just fine. Not me, no way, no how.
5:31pm • #7
325,091 Points 12 Featured Posts Outside Blog

Lenn,

Strong point. How do you determine property value? You take the latest comparable sales with like properties and get an average. That's as close as you can get to the real market value. Whether it's a BPO, ACB, KLM, YRU or another set of letters, it doesn't mean a thing.
8:49pm • #8
MAR
13
2010
1,952,054 Points 478 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Esko.  Property value should not be a challenge for any experienced real estate agent.  Notice I said experienced. 
6:11am • #9

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