Property flippers target unsuspecting home buyers
BAKERSFIELD - As the housing market fizzles, the number of foreclosures is on the rise, and scams and real estate frauds that went unnoticed amid a flurry of mortgage applications are now coming to light.
Local attorney Kathryn Fox said her phone has been ringing with local people claiming they were the victims of real estate fraud.
“I have a lot of people that are not in the financial position for this type of home, something really out of their price range,” said Fox.
In several cases, callers said they were duped and unaware their adjustable rate mortgage would adjust with payments sometimes doubling.
But many times, Fox said proving the fraud occurred in an uphill battle, especially if it is not in writing.
“Because you can’t weigh ‘he told me,’ but you can weigh the value of what’s on paper,” said Fox.
But what if the homebuyer is in on the scheme?
The FBI website said that’s called property flipping, and it happens more often than you might think.
Here’s a typical property flipping scenario: The flipper buys a property for a specific price, $300,000, for example, and then artificially inflates it’s value by obtaining a false appraisal.
Now the overvalue of the home is repurchased at the higher price by associates of the flipper.
The flipper pockets a profit, in this case $100,000, and usually offers kickbacks to the appraiser and associate who helped buy the home.
But the associate never pays the mortgage, and the home goes into foreclosure by the lender, who is left holding the bag.
The flipper profits, and usually so does the associate and the appraiser.
“When you qualify people on facts that are not true, or embellish the facts or leave out bad facts, or you assist them in buying and know they are not going to be able to service the debt, or service the loan, you’ve got a problem,” said Fox.
“You can do anything with the property as long as it keeps going up in value,” said Attorney Cal Stead from Borton, Petrini & Conron. “It’s when the increase in value tapers off is when you start having these foreclosures.”
Many other across the community may find their property values going down too.
“In that particular neighborhood, and in that particular strata of home values, it will have an effect for a while, not forever,” said Fox.