Jim the Realtor gives advice to buyers about what to look for in order to avoid short sale fraud, something he sees as rampant in North County, San Diego where he works as a realtor. (Hat tip Tom Lindmark.)
San Diego and LA are seeing some pretty prodigious rises in house prices on the back of REO and short sale inventory. I first talked about this in July in Cruising foreclosures, REO and short sales with Jim the Realtor.
See my posts Short Sales in North County: “Feeding Frenzy” as banks pretend and extend from October ’09 and House flipping back in vogue in North County San Diego from Dec ’09 as background for the renewed over-the-top conditions in his housing environment.
The mainstream media has only just caught on to this. See House Flippers in U.S. Crowd Courthouse Steps in Hunt for Deals from Bloomberg and 5 Areas Where ‘House Flipping’ Is Booming Once Again (PHOTOS) from the Huffington Post for two good accounts.
Notice, he mentions that a buyer should be very dubious about buying a short sale property that is mortgaged via a purchased money loan. The simple logic is that California is a non-recourse state for non-refinanced first mortgages, which means that a short seller’s lawyer will likely advise a client that walking away is a more cost-efficient option than a short-sale. A buyer who sells his property to discover that the short sale is not going to transpire will be very perturbed.
Bottom line: Low rates and low prices are attracting buyers. This has induced some serious speculative and unscrupulous behaviour in a self-regulated market. So, it’s buyer beware: you’re on your own on this one, because you can’t expect the feds to bust this up.