Hat tip to SM for sending this article from the Arizona Republic – here’s an excerpt:
“Flopping is the opposite of flipping,” said Amy Swaney, regional Arizona sales managers for Citywide Home Loans and a past president of the Arizona Mortgage Lenders Association. “It is the art of profiting off the devaluation of property rather than an increase in value of a property.”
It is impossible to know how many homes have been “flopped” since short sales began to be widely accepted by lenders in the past year.
But a key indicator is how quickly short-sale homes are resold. An owner who buys in a short sale and sells the home again within a few days most likely had the second buyer lined up in advance.
In the past year, nearly 20,000 short sales closed in metro Phoenix. Of those, at least 1,000 were flops, according to an analysis by Tom Ruff of the real-estate research firm Information Market. A few examples: a Tolleson home sold for $90,000 through a short sale and then was flopped within 20 days for $106,000; a northwest Phoenix home was purchased first through a short sale for $28,500 and then resold through a flop within two weeks for $50,000; and a Scottsdale house sold via short sale for $90,000 and then for $122,000 through a subsequent flop less than a month later.
The Arizona Department of Real Estate, mortgage giants Fannie Mae and Freddie Mac and the FBI are all investigating flopping deals.
“Short-sale flopping is one of our real-estate industry’s biggest issues right now,” said Judy Lowe, Arizona Department of Real Estate commissioner. “We are all looking at the legality and ethics of these deals. And it varies by flop because it appears every deal is done a little differently.”
The full article here:
business as usual in short sales.
Thing to look at: 10 year yield up so quick, Mortgage rate too! Let’s keep an eye on it:
http://finance.yahoo.com/echarts?s=^TNX+Interactive#chart2:symbol=^tnx;range=6m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
(that link is too long for the blog, another look below)
http://finance.yahoo.com/q/bc?s=%5ETNX+Basic+Chart
So is this officially the bottom for home interest rates then?
from cnbc:
Bank analysts maintain, however, that the market should stabilize as the Fed continues its purchase program, which has only just begun.
On Monday, the Fed bought $7.9 billion in medium-term Treasurys, part of its intended $105 billion total purchase of government debt through mid-December.
“The Fed’s buying every day, which should help stabilize the market,” said Briggs of RBS Securities. “When these things happen it’s a question of level versus positions.”
Igor Cashyn, Treasury and TIPS analyst at Morgan Stanley in New York, also saw support for the market. “The theme is still that the Fed is still printing money and they are expanding their balance sheet and absorbing the supply,” he said.
Bank of America Merrill Lynch also recommended buying on weakness.
“The market was ‘long and wrong’ going into QE2 and this can take time to unwind,” the bank analysts said in a research note on Monday. “We would look to buy as the sell-off subsides.”
I don’t see the problem with ” flopping” as the bank accepted the offer. Why should they get the benefit of a buyer that they were not able to bring to the table?
Now if the agent played games and cooked the deal, another story but just buying from a distressed seller in a fire sale was called good buying, not a crime. It’s just envy from those that think the cheap deals and a guaranteed exit should just happen for them with little effort.
Price of green ink futures was up big today.
#5 How can a bank bring a buyer to the table in a short sale?
It’s hard to see how an agent could not have been involved in a shady deal if the house sells for 20% more less than a month later.
Is there any legal responsibility for the agent to try to get the best deal in a short sale?
Wouldn’t making it illegal to resell a short sale property within 1-2 years solve most of the “quick hit” flopping scams?
Definition of flop (noun):
a heavy, loose, and ungainly movement, or a sound made by it : they hit the ground with a flop.
1 informal: a cheap place to sleep.
2 informal: a total failure : the play had been a flop
Flop: accurate description of today’s housing market and policies.
“Wouldn’t making it illegal to resell a short sale property within 1-2 years…”
More regulation? Get a rope…
I think the issue here should be who arranged the second buyer. If it was the bank’s real estate agent, then this is in fact fraud. But if it was the buyer or the buyer’s agent, I don’t see the problem.
Geotpf: That’s just what I was thinking.
The banks real estate agent isn’t supposed to screw the bank out of x thousand dollars. You don’t hear about car salesmen screwing their dealerships out of money on deals like this because they go to jail when they try it.
#11 What bank real estate agent? In a short sale the selling agent is representing the owner. This why there is such a huge conflict of interest and so much room for fraud.
I fail to see the problem here. If banks are incapable of managing their real estate portfolio, then they shouldn’t be in that line of business. Sympathy=zero here.
#14 I suppose the problem is that if a large number of sellers are committing short sale fraud then the banks will have to stop allowing short sales.
There is no way for the banks to know the value of a house without soliciting offers themselves (i.e. foreclosure).