Buyers beware with the short-sales.. Make sure that short sale home is the bargain being sold!!!"Who cares if someone is making a spread on flipped properties," said Marc Pelletz, a real estate investor and agent with Hook & Ladder Realty in Sarasota. "Banks are getting money. Someone gets a deal. As long as everything is disclosed to everyone, what's wrong?"
But fraud experts warn that some of the real estate flipping they see today involves the same kind of insider deals and manipulated sale prices that plagued the housing bubble.
The FBI recently added short sale flipping, dubbed "flopping" by some mortgage fraud experts, to its list of recognized real estate fraud.
In a June 2009 report on mortgage fraud, FBI officials described various forms of short sale flipping fraud. Each type involves misrepresenting the value of a house to a lender.
Banking experts point out that those losses trickle down to taxpayers, who have bailed out the banking industry.
"These middle men are making a huge profit at the expense of banks, which means they are often making huge profits at the expense of taxpayers," said Anne Weintraub, a real estate attorney with the Syprett Meshad law firm in Sarasota.
LUCRATIVE BUSINESS
The evidence that short sale flippers are finding ways to benefit from bank losses can be found in deed records filed along Florida's Gulf Coast.
Some individual investors and small groups of flippers have bought dozens of properties at discount prices and resold them within days, each time for thousands of dollars in profit.
Since September 2008, Tampa real estate agent Joe Wright and accountant Kevin Byrne have worked together to buy more than 30 pre-foreclosure houses and condos, with Wright's brokerage as the listing agent and Byrne's company as the buyer.
In each case, the men arranged a short sale and quickly resold the property at a higher price. Of their 33 deals, 22 properties resold within 24 hours of purchase. The median one-day price increase was $25,000.
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