http://www.batonrougerealestateappraisal.com/ - BPOs And Flopping Scams Rise! Does The Baton Rouge Short-Sale Process Encourage Flopping Fraud?

What happens when banks want to save money by assigning real estate agents the task of both “valuing” foreclosures and short sales and then selling those properties for the bank? It easily opens the door for “flopping” to occur. What is “Flopping”? According to Ann O’Rourke’s weekly Appraisal Today email update, here’s an example:

“Sergio Natera and Anna McElaney, two Connecticut real estate agents, are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed –known as a short sale — without disclosing that there were better offers. They then flipped the houses for a profit.”

I remember doing REO appraisals in the late 1990s and getting pressure from real estate agents to low-ball so they could sell the home easier. At least they used appraisers then.”

Why do I bring this up? Because it’s in the Bloomberg News under “Banks Face Short-Sale Fraud As Home Flopping Rises” and because of what appeared in the Appraisal Today email last week from Appraiser, Richard Hagar, SRA – Fight Against BPO’s.

Richard recommends appraisers go to Google and search the term “How to influence a broker price opinion”.

Then Richard recommends, “Now take the results and show it to everybody you know, within the government or a bank, especially the people who think broker price opinions are OK for valuing property for a bank loan, short-sale or foreclosure.”

I remember listening a Real Estate Investing course in the early 2000′s from a Florida short sale expert, Jeff Kaller, who taught us how to meet the agent at the home in the attempt to get a low ball BPO. Mr. Kaller states, “The B.P.O. is the single most important part of the short sale process. In our business we have learned how critical it is that we “influence” the BPO.” Source: http://www.uslandco.com/articles/kallerspeedupshortsale.html

So, don’t be shocked if you read more and more about real estate agent flopping fraud taking place nationwide. Am I saying it’s taking place in Baton Rouge? One can’t be sure until it surfaces. But we have had one recent incident involving a real estate agent and fraud in Wilderness At White Oak (L. Mitchell per The Advocate.com). Again, this involved 1 local agent, which is the exception, not the rule. There are approximately 2,700 other local law-abiding agents operating in our market and the Wilderness was the first reported case in recent memory.

Why This Matters Now? Are their crooked appraisers as well out there? Absolutely! It seems we read about them each month nationally. The difference now is that banks rely much more heavily on BPO’s and have placed real estate agents in this situation – kind of like placing the fox in the hen house and saying you be a good boy or girl while in here. Agents not only “value” the bank’s short-sales and REO’s, but also market and help dispose of them by receiving purchase agreements. Who is out there to insure that all purchase agreements get forwarded on to the banks? And, it doesn’t appear that we learned much of anything from the mortgage meltdown. The less hands-on the valuation (just order that BPO), the more room for error and loss. The lenders have learned that they can operate in whatever manner they choose (ordering BPO’s) and when the situation turns sour, they’ll receive a U.S. Tax Payer funded bailout and be back in business next month.