Insider Trading on REO Properties-First Time Homebuyers Losing Out

By
Real Estate Agent with Integrity Real Estate Group

Insider Trading on REO Properties

Following my post last week on Short Sales-Welcome the New Straw Buyer another conversation with an agent again leaves me shaking my head.

One of my clients heard a "rumor" about a terrific property about to come on the market in a neighborhood they were interested in.  It was one of those "friend of a friend" types of rumors so they made a call to the person who said they knew all about the property.   It turns out that the number went to another agent and after they left a message they passed on the information to me.   

When I got in touch with the agent they told me how they were getting their investor clients great deals on properties all over Northern Virginia, before they ever went on the market.  Seems his team works with a number of lenders as REO agents.  When they are assigned a property to list, if it is in good shape and in top location they start making calls to their investors.  Before the property is formally listed in the MLS the investor makes an offer at below market price.  In many cases the bank accepts the offer and the home never makes it to market.

When I questioned the price he was quoting on the property my clients were interested in, far below market value, he said since my clients were already represented he would not share any additional information as he had an investor lined up.   WHAT?????   One of the properties we talked about I knew was coming on the market and had talked to the listing agent to confirm the listing price range.  It was significantly higher than what they first agent quoted.  Now I'm watching to see if it actually makes it to the MLS.

Do lenders know this is going on and turn their heads?  If they turn a blind eye to REO "insider trading" why do they make buyers of short sales jump through so many hoops?  Now obviously not every agent or group of agents are up to this type of "insider trading" or creating "straw buyers" but at the same time for every one we hear about how many more are there?

Just another reason to wonder how long it will take us to straighten out the housing crisis and why banks shouldn't be in the real estate business.

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                                   Real People*Real Lives*Real Estate

If you are interested in learning more about the Northern Virginia Real Estate market including Alexandria, Arlington, Fairfax and Prince William Counties give Cindy Jones and Integrity Real Estate Group a call at 703-346-2213.

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Ambassador
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Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"

Good morning Cindy.,.I do believe I had that happen to a client of mine just this week... a townhome in lakeridge was 0 days on the market, I was trying to call css to show... Css told me the instructions were to contact the agent first...I told them I'd hold....they could not reach the agent..so I told them to call me when they did......well...they did..and the agent told them no more showings, it was already under contract......WHAT????  I won't say who the agent (or agents) lets just say.....this is not the first experience I've had with them in Woodbridge/Lakeridge area.... don't know how they keep getting listings..but they get a ton of them.

Mar 02, 2009 11:30 PM #1
Rainmaker
4,797,927
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Cindy, unfortunately this is happening.  Some banks have a policy of not accepting offers for 30 days after the listing goes active, but I've seen agents that have their own buyers, enter incomplete or wrong areas for these listings, so only his offer is ever presented.

Mar 03, 2009 12:33 AM #2
Rainmaker
606,133
Brian Burke
Kenna Real Estate - Englewood, CO
Broker & Advising Expert-Denver Luxury Real Estate

Cindy, we have heard of and suspected this was/is happening around here too. ~Rita

Mar 03, 2009 03:36 AM #3
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Konnie-I'm suspcious when I see 0 days on the market for an REO and it is under contract.  I try and watch some of them to see if it turns out to be the same agent or someone on the team that gets the offer.  I also am seeing more and more of them with signs in the yards for weeks prior to the listing appearing in the MLS. 

Mar 03, 2009 10:43 AM #4
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Gabe-I'm not sure that the agents are serving their clients well, even if it is a lender, when they don't allow access to other agents and their clients prior to presenting their own offers.

Mar 03, 2009 10:45 AM #5
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Rita-I'm sure it is happening in more than just my area.  Frustrating indeed!

Mar 03, 2009 10:46 AM #6
Rainmaker
316,251
James Downing - Metro DC Houses Team REALTORS®, CRS, GRI, ABR,MRP, MilRes
Real Living | At Home - Washington, DC
When Looking to Buy or Sell - Make the Right Move

This whole industry is amazing to me.  How can this kind of crap be going on?  

Mar 03, 2009 12:58 PM #7
Rainmaker
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Maria Mastrolonardo
RE/MAX of Naperville - Naperville, IL
Realtor, Naperville, IL Real Estate

Cindy - unfortunately it happens a lot more than we realize, I have decided not to deal with a few REO agents because of that.

Mar 03, 2009 02:00 PM #8
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

James-the idea of a quick buck is bringing out some oportunistic agents and investors that may lead us into more trouble five years from now when they decide to sell.

Mar 03, 2009 11:09 PM #9
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Maria-there are a few in this area, I'll call them the REO mills that it is fairly obvious with the signs in the yard weeks before the listing goes in the MLS, that they are getting the buyers lined up before another agent has a chance to show it.

Mar 03, 2009 11:10 PM #10
Rainmaker
5,581,383
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Timely post!  Let's hope that the lenders are alert and identify offers that should not be accepted. Our experience is that most of the asset managers are not quick to accept low offers on new listings. However, when the initial listing price is too low, the listing agent could easily submit early offers before other agents have a chance to show the properties.

Mar 04, 2009 01:47 AM #11
Rainer
17,892
Chris Oliver
Century 21, Preferred Properties - Reynolds Plantation, GA

Freddie & Fannie have a 48 hr mls stop on contracts but it doesn't seem to help much. When the price gets near the magic number they fly off the shelves. My client bid on 2 properties this week - at full price - and got shot down both times. It's a nasty system because there is no way to check and see if an offer has even been submitted and sometimes I don't think they are. At least not accurately. What with the upload platforms of differing lenders there is a lot of wiggle room there. Lenders using 'statewide' agents with no follow-up or supervision other than asking the agent what they've been doing and major players refusing to add additional agents to areas are doing a major disservice to us all.

Mar 04, 2009 02:34 AM #12
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Roy-I know some banks have a hold time on contracts.  But if the home isn't active in the MLS how do they know?  You can easily manipulate a listing report in our system to show a property as active when it isn't.

Mar 05, 2009 10:57 PM #13
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Chris-our area is full of "REO Mill" agents who have hundreds of listings.  One of my clients just lost out twice on the same property.  The first contract on the property didn't go through so weeks later I get an email from the listing agent telling me they are resubmitting our original offer.  What we didn't say resubmit our offer.  When I finally got in touch it turns out they were using our offer as a tool to get a better offer from another agent.  My clients didn't get the house the second round either so now I'm on to this agent's system and will be cautious before I submit another one to them.

Mar 05, 2009 11:01 PM #14
Rainer
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Sue Paige
ERA Today Realty, Windham, ME 04062 - Windham, ME

We too are beginning to see this happen more. I saw a property come on the market, called my buyers,p ut in an offer and that night was told it was under contract. Excuse me???? Keep an eye out. And the listing agent is a big reo lister. I am sure the banks like seeing their inventory go down and won't question the ethics of how it went under contract.

Mar 06, 2009 12:21 AM #15
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