A recent article in Wall Street Journal touches on the local damage of foreclosures. We can all look at the bargain foreclosed homes being sold in wonderment, but imagine you were selling the house next door, or down the block.
Say your house is appraised at $220,000 and your hoping to get at least $200k for it in the current market. When a foreclosed home down the road sells for $80,000 you can kiss those hopes good buy — not least because recent local sales are all factored into an appraisal.
It is bad enough that the self-serving banks are flushing their bad loans out into your local market at crazy-low prices, but worse, the situation has provided an opportunity for greedy fraudsters. Not happy that they will get a discount of 50% or more, fraudsters are paying potential bidders off at foreclosed auctions to get properties even cheaper.
The latest case to be announced by the Department of Justice is that of Christopher J. Deans a real estate investor from Raleigh North Carolina, who pleaded guilty to rigging bids on Friday. Deans apparently paid co-conspirators not to bid on certain properties, which he then bought for a massively low price, allowing him to benefit from a quick-sale or high-yield rental income.
I hope it was worth it because Deans now faces up to a $1 million in fines and up to 10 years in prison.
Though there are no figures on how many properties Dean fraudulently nabbed, but the DOJ said that his campaign would have done damage to the local market, by artificially driving down prices.
“The conspiracy resulted in the suppression of competitive bidding on foreclosed properties which caused foreclosing lien holders and certain homeowners to receive a lower price for properties sold through foreclosure actions,” the DOJ said in a statement.
Deans case follows a spate of similar cases uncovered this year, including: the case of 43-year Stockton, Ca investor Anthony B. Ghio, who pleaded guilty in May, and that of Baltimore lawyer Harvey Nusbaum who pleaded guilty to rigging tax lien auctions in Maryland, also in May.
WSJ said it best:
“As the feds decide the future of the government’s involvement in the housing market, whether it’s reforming Fannie and Freddie, another stimulus, or more assistance to banks weighed down by foreclosed houses, the fraudsters may seem like just another nit in their hair to weed out. But for local markets, they’re a pretty pesky bug.”