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The Masked Tulip

Real-Estate Scam That’S Devastating (Us) Prices

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The full article is worth a read.

Question: My neighbor in Palm Springs, Calif., who claims to have millions or more in the bank, let his home with a $1 million mortgage go into foreclosure. A real-estate friend of his bought it from the bank and is renting it back to him. After one year, my neighbor plans to buy it back. It affects me as a homeowner because now we have a home in our community that shows a sale price for $600,000, instead of the current market of $725,000. How do I report such activities?

Answer: This type of thing is more prevalent than most people realize. According to CoreLogic, a real-estate and mortgage data firm headquartered in Santa Ana, Calif., lenders will lose more than $375 million this year alone when they sell undervalued houses based on the price opinions funneled to them by unscrupulous real-estate agents.

The scam is called “flopping,” and you are correct, it can have a devastating impact on property values because now, the “sale” becomes a comparable for all future appraisals of matching neighborhood properties.

http://www.marketwatch.com/story/real-estate-scam-thats-devastating-prices-2011-06-10

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The full article is worth a read.

http://www.marketwat...ices-2011-06-10

TMT interesting find.

Of course what is interesting is the use of the word scam, whereas I'd say it was more someone exercising there contractual right to default on a mortgage.

If the bank was daft enough to lend too much in such a non recourse scenario, then what do they expect to happen when prices fall.

In practice there is nothing wrong with non recourse, as long as the bank makes sure the buyer has enough equity to cover most scenarios and the bank itself hold reserves to buttress against a reasonable number of defaults.

Edited by Mikhail Liebenstein

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That's fine if the bank pays for its decisions. But when it's everyone else....

Well exactly.

I'll stick to my original point that its the banks fault and add your point we shouldn't bail them out.

Edited by Mikhail Liebenstein

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Risky strategy, if they are selling at artificially low prices, presumably there is some requirement on the bank over there to publicly announce the selling price, at which point a third party could jump in and make a genuine offer leaving the origonal vendor(scammer) homeless.

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[sounds to me as if the Real-Estate friend who is buying the property is the one that provided the bank with the valuation. I don't know about the US, but in the UK professionally providing a low valuation for self-interestmight be considered fraud.

On the other hand, the realtor could simply be saying 'I value it at $, I'll take it off your hands for that' and the bank is being lazy by not considering the motives of the realtor.

Also, what if the realtor refuses to sell the house back to the original owner. Would you trust a dodgy estate agent? Even one who is a 'friend'?

Perhaps the reason I'm not rich is that I never quite worked out how honour among thieves works.

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Ive often thought of a similar thing. Transfer all my capital to a company, use the company to buy me a house, claim Housing benefit given i now have no savings/capital in my own name, 'company' builds of housing benefit receipts and get paid to rent my own home

Its what all the chief's of the laughably named 'social housing' companies seem to do.

At some point i can transfer the capital back from the company to myself through dividends etc.

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Test. It's been a while. In any case, estate prices here in NY have been descending, but not quickly. It sems to be a slow grind down, despite the headlines.

Oh, and by the way, I've just passed my sixth year anniversary on this board! Wow! Where does the time go? Thanks to everyone here for saving my financial #ss! I still remember "Time to Raise the Rents" (TTRTR). I'm still renting! But things are getting worse, so I don't think it's wise to buy now anyway.

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The banksters thought they didn't need to worry about moral hazard- but it turns out that selling debt is selling obligation- and obligation is essentially a moral concept.

So if you piss all over the moral basis of the society you operate in- can you really be surprised if those on the receiving end decide that they too will play the same game?

Strategic default scares the banksters and I hope they choke on it.

The funny thing is- what happens if you teach people to regard themselves as 'investors' when they buy a house? They will do what any sane investor does when a deal goes sour- get the hell out if they can.

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The banksters thought they didn't need to worry about moral hazard- but it turns out that selling debt is selling obligation- and obligation is essentially a moral concept.

So if you piss all over the moral basis of the society you operate in- can you really be surprised if those on the receiving end decide that they too will play the same game?

Strategic default scares the banksters and I hope they choke on it.

The funny thing is- what happens if you teach people to regard themselves as 'investors' when they buy a house? They will do what any sane investor does when a deal goes sour- get the hell out if they can.

The bankers never bet on everyone developing the same morals as the banker. They really don't have a leg to stand on.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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