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Flopping - Short Sale Fraud

By Laura Dickenson

Real Estate Agent with The Dickenson Group, Keller Williams

June 11, 2010 02:45 PM

SHORT SALES HELP BANKS

In a short sale situation, the bank is taking a loss on a mortgage they sold. They don't do this because they have such big hearts. They do this as a loss mitigation strategy - they lose less money than if they have to foreclose. Banks don't want to own property.

ENTER THE ENTERPRISING AGENT

Floppers are real estate agents who will help you do a short sale so you don't have to deal with the negotiation headaches. They get the bank to approve an offer from their investor group. You, as the agent, continue marketing the home. If you get a higher offer than the bank approved, the flopper gets the profit and the house goes to the buyer at the true market value. You as agent get a 3% commission - much better than a simple 25% referral fee

Let's talk about why it NOT ok to screw the bank. Now the flopper has the money that the bank should have so the bank's profits go down so the stock price goes down and dividends go down SO retirement accounts and other stock owners get "screwed". And our government bails the banks out that are "too big to fail" so the taxpayer gets the joy of the event, too.

Read the whole story about two Connecticut agents

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Ellen Caruso

Daniel Gale Sotheby's International Realty - Glen Head, NY

Can't get away from Short Sales! Before today I didn't know too much about them (as wife of a builder I deal with mostly new construction). I took a class today and now I get the big picture! Lots of opportunities!

Ellen

Jun 11, 2010 02:51 PM

Royce Dean Vanderpool

Devan Realty & Development Corporation - Lake Mary, FL

GKC, RMC, REOS, CIAS, BPOR - Principal Broker

Laura:

Have you had the experience with the Short Sale artist who calls the Owner to offer their assistance in procuring an attorney to help with the short sale. Once the Owner signs on and gives the "artist" the keys to the property, the "artist" goes on to craig's list, markets the property for lease and puts an unsuspecting renter into the property while the bank continues to foreclose. The Owner does not get the lease money, the attorney does not get involved since the artist never brings him on board, the bank continues the foreclosure process and the "artist" pockets the deposit and monthly rent until the bank steps in to evict the unsuspecting tenant.

True story happening here in Florida.

Royce Vanderpool, REOS, Principal Broker : Devan Realty and Development Corporation.

Jun 11, 2010 02:55 PM

Leslie Ebersole

Swanepoel T3 Group - Saint Charles, IL

I help brokers build businesses they love.

Floppers -- now this makes a little sense to me...there are a couple of agent locally who use a "short sale mediator" (not an attorney) and the role that was described seems shaky. I'll now guess that they're floppers. Thanks for clearing up a mystery for me!

Jun 11, 2010 03:28 PM

Dan Edward Phillips

Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA

Humboldt and Del Norte Counties, CA

Very good blog, thank you for the information! I am on my way to look at the link!

Jun 11, 2010 05:39 PM

Laura Dickenson

The Dickenson Group, Keller Williams - Brentwood, TN

Leslie - that's what I hear them called mostly: "short sale mediator". Here's the bottom line: the floppers make a profit by getting a investor contract approved at a lower price. The agent continues to market to the public where another market-value contract is procurred. Flopper gets 3% plus difference in the 2 contracts. Listing agent gets the 3%, too. More than a piddling 25% referral fee.

Royce - I haven't seen that here personally. The TN foreclosure process is probably too short for that to happen. But that is really despicable!

Jun 18, 2010 12:05 PM

Anonymous

Joel

Not only do I think this article invented a new term (floppers) for use in this business, but it's another pain for folks who are actually out there and helping distressed homeowners. To the point of the article, the real estate agents may have breached their fiduciary responsibility, it's unclear if they did - but not all floppers are real estate agents. Some are enterprising real estate entrepreneurs who are well trained and experienced (though like in any industry, the few that are not give everyone else a bad name). Two things I am happy about is the fact that the article points out the lenders do lose less money with a short sale rather than a foreclosure, and that the total "loss" estimated to be cause by "flopping" is around $50mil. Um...$50mil, the government is bailing out these institutions in the tens and hundreds of billions, and we are talking about a hypothetical $50 million dollar loss. Glad to see they are spending their time wisely worrying about the possible loss of a few extra bucks due to a BPO that is probably on the low end of market value, but still market value. Regards, Joel

Jun 22, 2010 01:04 PM

Joel, are you an agent? It sounds like you are someone who helps distressed home owners sell their property. Why is this article another pain for people who help distressed home owners?

I can see a potential problem if the homeowner does not receive written and full relief from the deficieny, A few years from now, the homeowner finds out what they thought was the deficiency is actually higher - because the Distressed Home Sale Helper (agent or not) has actually sold to the bank for a lower amount.

Any "loss" to the bank where they did not receive true information as in the information on the highest offer is still, well, stealing. Why do people think that taking advantage of a corporation or entity is any different than stealing someone's wallet?

And when any institution loses, who else loses? Stock owners. Who are the stock owners? IRA and retirement account owners. People who are saving money and trying to make it work for them in the stock market. It just keeps going.

And as to the bailouts, the bailout money comes from taxes which come from us, right?

Jun 22, 2010 02:05 PM

Flopping - Short Sale Fraud

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