L.A. Land: latimes.com
May 2, 2008
Peter Viles on the rapidly changing landscape of the Los Angeles real
estate
market and beyond
Wondering about the fraud next door
Burbank
Yesterday's post about the possible loss of $6 trillion in housing wealth
brought me a small flood of e-mail. One of the most provocative notes came
from an old friend in suburban Phoenix who poses the question: How much of
that $6-trillion bubble was created by outright fraud?
He writes, "I haven't seen articles surrounding the common fraudulent
scheme
where mortgage brokers worked with a home appraiser to overvalue homes,
then
direct owner to sell home to a pre-identified buyer at hundreds of
thousands
over market value with large kick-back from seller to buyer at closing.
"This happened with great frequency in my former neighborhood just north
of
Phoenix. In fact, three homes out of six homes on my former street are in
foreclosure due to this scheme. An example: I sold my house in Dec. of 06
for $815K (legitimate sale and value at the time at height of price boom).
Five months later the same house sold for $1.2 million. The people who
bought it from me sold it to an "investor" at the $1.2MM price.
"We bought from builder in '03 for $493K then sold in Dec. '06 for $815K.
My
buyers never moved in but did remove expensive window coverings, outside
landscaping fountain and custom-made iron entrance gate then did the
kick-back sale scheme for $1.2MM. Their buyer never moved in either.
"The house is now in foreclosure but was recently listed (while in
foreclosure) for $534K. It is now set to go to auction. What I wonder is,
do
the banks who hold the mortgages know the last buyer received the
kick-back?
Are they going after the money and prosecuting? This happened all over our
community. The buyers would never even move in to the properties. They've
been sitting empty for a year and a half with no landscaping and other
maintenance being done on these upscale, gated golf community homes. Much
of the sky-high valuations in the Phoenix and Scottsdale areas were an
illusion as this scheme was rampant."
"What angers me most is that innocent buyers in the neighborhood would
have
been shown these phony sales as 'comparables' by their Realtor and may
have
overpaid for a home in a legitimate sale but have now lost a great deal of
value as these 'comps' weren't real. I would imagine it took place in
California and Nevada as well."
Fascinating note -- and frustrating, too. I've seen no evidence that
prosecutors are going after this kind of fraud in any meaningful,
systematic
way.
http://latimesblogs.latimes.com/laland/2008/05/wondering-about.html
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