This past Sunday evening, I hosted a webinar that served as a bulletin for real estate investors about a major new announcement from Freddie Mac concerning the practice of A-B-C (aka AB-BC, aka back-to-back) short sale flipping.  Essentially, a page on Freddie Mac’s website has declared that practice to be fraudulent.

I realized this wouldn’t be welcomed news, but I had no idea how much of a firestorm my webinar would set off.  If you’d like to see it, go here:  Short Sale Flip Fraud webinar.

In response, several of the short sale experts have scheduled “emergency webinars” that will give you their perspective on this new situation.  That’s a good thing.

The text of the Fannie Mae update can be found here:  Freddie Mac Short Sale Fraud Notice.  What we know about this notice is as follows:

  • It perfectly describes a typical A-B-C short sale flip
  • It does not have the force of law and may not be official Freddie Mac policy
  • A-B-C short sale flips are clearly in the consciousness of Freddie Mac’s fraud investigations unit
  • The publication is in part contradictory to some of the other policies Freddie (and Fannie and FHA) have adopted in recent months

The truth is this:  Nobody, including the attorneys that will be hosted on these emergency webinars, knows what the ramifications of this publication really will be.  I happen to know that there is a lot more going on behind the scenes to combat this threat, and you probably will not hear the details about those efforts for at least another few weeks.  I’m not at liberty to reveal any of that, but I can say confidently that the issue is being addressed by appropriate legal experts, including at least one that you’ll hear from on some of these “emergency webinars”.

The point of this article is to give you proper perspective.  It is undeniably true that the publication from Freddie Mac is somewhat odd.  All of that is in my training video about short sale fraud and will doubtlessly be mentioned in these emergency webinars.

The truth is that I sincerely hope that the legal experts being publicized about this matter have come to a resolution.  I really, really hope so.  But remember – the best thing you can do for yourself is to consult with your own attorney about this matter, because I have a very bad feeling that this publication not only is here to stay, but will spread to the other lenders quite rapidly.  Hopefully I’m wrong.

But if I’m right, and this spells the end of the short sale flipping business, I suspect that the short sale real estate experts out there will abound with creativity and provide some really innovative solutions.  No matter what happens with the new Freddie Mac policy, you and I as real estate investors will be ok.  After all, the A-B-C short sale flip is itself a relatively new phenomenon, and a reaction to changes in the market.  The market appears to be changing again, and this could mean opportunity, just like it has in the past.

Thank you for reading the Bryan Ellis Real Estate Letter, and please leave your comments below.  Particularly if you think that the Freddie Mac publication is no real threat to real estate investors, please enlighten us on your opinion.  Thanks!

UPDATE:  I’m hosting a webinar on Thursday night that focuses on a strategy that will go a long way to resolving the short sale fraud fiasco.  It’s not directly about short sales, but definitely enables real estate investors to acquire foreclosure properties at short sale-like prices and includes built-in long-term financing without regard to the credit of the investor.  Check it out here:  Show Sale Flipping Alternative