Talk about being 'creative' in real estate. I have not heard of this activity, but it does not surprise me. Georgia has had problems with mortgage fraud - some of the worst in the nation. Check out the post by Hank Miller. Have you encountered any fraud schemes like these?
So word is just getting out about “reverse staging”? The idea that this is a developing fraud trick is very old news to those of us in the field. Instead of stripping and destroying the home on the way out, the idea is just to do “light damage”, sell the home and flip for a profit.
The methods by which banks and other lending institutions value property never ceases to amaze me, it seems whatever is cheapest is the route taken. It makes no sense not to complete appraisals on distressed assets. How is soliciting a BPO from a broker that is making virtually nothing for the work productive? If the broker is rendering an opinion shouldn’t they be held to USPAP? And an agent is obviously going to work to secure the listing, is that not a conflict of interest? It’s also great to see the Appraisal Institute doing its usually nothing with regard to issues with BPOs.
From Appraisal Buzz:
Reverse staging is designed to make a house look less valuable than it actually is. The goal is to accentuate the negative features of a home in order to change the perceived value of the property.
It involves a short sale where a Broker Price Opinion (BPO) is all that is required to determine the value of a property. It is often done by real estate agents or investors who are in collusion with a buyer who plans to then flip the house for a much higher price, said Ann Fulmer, Vice President of Industry Relations at Interthinx. Fulmer, an attorney, has represented lenders in mortgage fraud cases and prosecuted mortgage fraud as an assistant district attorney during her career.
It can involve anything from simply not fixing broken windows, or not taking care of the grass, to actually breaking things, or punching holes in the walls. She says there are real estate “gurus” all over the Internet who offer advice on how to do this. The worst case I’ve heard about is someone who went out and bought possum urine and spread it all over the house and turned on the heat and let it marinate for a few days,” Fulmer said. “It looked like a Hazmat situation it was so foul,” she said. “Certainly, if you walk in there and it smells like that, it’s going to have a negative effect on your opinion of value.”
If these same folks put half the energy they commit to trying to scam the word into something productive things would be a lot better.
Short sales occur when lenders allow homeowners to sell their properties for less than what they owe the bank. It is often done to avoid foreclosure which can cost both the lender and the homeowner additional fees. A BPO is ordered by the lender in a short sale to determine how much they should expect to recoup from the sale of the property.
“That’s part of the problem,” Fulmer said. “With BPOs it can literally be a drive by, or even just looking at MLS listings. One of the problems with a BPO is you don’t have USPAP and you’d don’t have appraisers who have been trained in how to develop a market opinion. It’s just their best guess for a fire sale price. The BPOs pay so little. It’s supposed to be a Broker’s opinion, but a lot of times that’s not what is happening because it just doesn’t pay.”
Several states are moving to make BPO’s illegal – and I think North Carolina has already. With as much meddling as Washington has done to “help” the real estate market, how can they not be on this? Oh that’s right, we’re talking about Washington and “too big to fail” banks…enough said.
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