Fraudulent Short Sales Hurt East Boston Property Values

One of many things happening in the East Boston real estate market is the “short sale.” A short sale can occur when a seller owes more on a property than a property is worth. If a homeowner can show financial hardship, a bank will sometimes allow a seller to sell that property at “market value,” which might be less than the amount owed on the property. The bank forgives the homeowner the difference in money owed.

Fraud can sadly sometimes come into play in a short sale transaction. In an ideal world, a seller will list a property at a “fair market price” and bring in as many buyers as possible to obtain the highest price on the property before asking a bank to accept a “short sale.” But agents and sellers sometimes discourage buyers from seeing their properties—a property is explicitly described with defects instead of assets. The seller then gets a friend or relative to purchase the property, not at market value, but at an artificially low value, perhaps a price much lower than a “regular buyer” would pay if encouraged to view the property or if given a chance to make an offer.

If a homeowner can convince a bank to allow him to sell his house below market value to a friend or relative, why should anyone care? Well, it hurts all of us. Offers are usually based upon recent sales; mortgages are based upon appraised value. When a “regular” seller sells his home, buyers and bankers look at recent sale prices. “Short sales” can create artificially low comps—comparable sales. Artificially low short sale comps not on the “open market” can hinder legitimate homeowners from selling at true market value. Neighborhoods like East Boston risk losing their true, and primarily stable, property values.

Please check back as we continue to update you on East Boston real estate happenings. To see all our listings, or to search MLS properties, head to the Tony’s Realty Website.

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