Why would anyone spread possum urine around a house, turn up the heat and close all the windows for a few days? Because they're flopping, of course. Flopping is the latest in mortgage fraud, in which sellers actually want as low a price as possible. The scheme works if they are underwater on their mortgage, and their lender agrees to a short-sale, forgiving the difference between the sale price and the amount owed. The seller unloads the home for the sandbagged price to an accomplice, who can then clean it up and flip it for a quick gain.
We touched on a similar scam previously - "Reverse Staging" where homes are similarly set up to appear in worse shape than they actually are. This is a nifty variant...
Hereâ€™s how it works: The seller is underwater on their mortgage and wants to get the lender to agree to a short sale. The seller, working with an accomplice, seeks to get a super low price to sell their home in the short sale by making bogus damage claims. Once they get the bank to agree to a short sale, the home is sold to an accomplice who then quickly cleans up the home and resells it for a profit. â€œFloppers,â€ as theyâ€™re known, average a $55,000 profit from the quick flips.
Floppers also have been known to remove appliances and cupboard doors and even paint the ceilings so it looks like thereâ€™s been water damage in he home. When no sellers want the home due to the flaws, the sellers will point out to the bank the problems with the home and why the sales price needs to be lowered. Some scammers have even claimed their homes were contaminated as crystal meth labs in order to get a lower price.
As noted by CNNMoney - The sellers point out the flaws to legitimate shoppers, and when no one buys, the sellers have a convincing argument to make to the bank, according to Tim Coyle, director in the Financial Services division of LexisNexis Risk Solutions. They can say: "Look, I've tried to move this property for six months and haven't been able to -- we need to lower the price," said Coyle. "They convince banks that the value of the property has deflated."
It can be hard to refute bogus damage claims without full investigations, according to Rob Hagberg, associate director of fraud investigation for Freddie Mac. One flopping scam that relied on heavy repair estimates was repeated several times in the Ogden, Utah area. A group kept claiming houses had been contaminated with residue from crystal meth labs.
"It was the same cast of characters on multiple properties," said Hagberg. Noticing the pattern, Freddie Mac investigated and broke up the ring.
Freddie Mac is cracking down on floppers, investigating suspicious cases, and has opened up a toll free number for others to report suspicious activity: 1-800-4fraud8. See the article at CNNMoney