Real estate fraud has now firmly emerged on the FBI's radar as the country's fastest-growing white collar crime - all, in essence, polite forms of bank robbery. Industry losses ran to at least $606 million last year, it says. And the Treasury Department's suspicious-activity reports are up 35 percent this year. The Internal Revenue Service's criminal case numbers in mortgage fraud have been doubling every two years through the first half of this decade.
What is not stated is the rip-off of the American consumer as the inflated home appraisals push market values up beyond what is warranted -- and above what middle class Americans can afford. That does not even mention how many American consumers will be forced into bankruptcy because they, in their longing to buy a home, will have their dreams dashed on the rocks of the bankruptcy court because of exorbitant greed.
When homes are sold, the appraisal is based on camparable sales of other homes, or "comps" as they are known in the real estate industry. As inflated appraisals get factored into the market, other homes are expected to sell for similar prices.
Again, from the article:
In over 80 percent of the cases, scammers are helped by an insider, the FBI says. One of them was Jerome Mayne, a former loan officer who spent time in prison before becoming a motivational speaker in Eden Prairie, Minn. "The buyer they sent me was completely full of holes, fake everything, and I knew darn well that these guys were slippery enough to try to pull it off," says Mr. Mayne. A bottle of expensive booze and $500 cash helped grease the wheels, he admits.
Unraveling such gangs takes time and expertise, which has become the focus of law enforcement and industry professionals across the country. Working in their favor, at least, are solid paper trails.
"Usually when we complete an investigation, we end up with a spectrum of actors, from closing attorneys to brokers to appraisers, organizers, recruiters, and straw buyers," says Ms. Nelan. "It's fairly sophisticated, and it takes a lot of people to do it."
One of the toughest things for prosecutors is sorting out who's guilty. One group of recent perpetrators turned out to be clueless senior citizens in Alabama, who OK'd ploys to inflate their income in order to "invest" in real estate, says Linda Finley, a civil attorney who prosecutes such fraud cases in Atlanta. "It's gotten to the point where it's really hard to figure out who the actual victims are."
Another factor is the late-night TV ads and "motivational speakers" that touted how people became "overnight millionaires" buying and selling homes. I read somewhere that many of these motivational speakers were simply teaching people how to commit real estate fraud.
For more education on real estate fraud you can also go to the Flipping Frenzy website.