Although she did not falsify documents or engage in fraudulent appraisals, Anna McElaney, a Norwalk real estate agents, will spend eight months in a federal prison and the following three years under supervised release due to her involvement in a fraudulent short sale transaction[1]. McElaney and another real estate agent, Sergio Natera, placed “low-ball” offers on bank-owned properties, then failed to inform the lenders when better offers came in. Once they purchased the properties, they “quickly sold [them] for a profit,” according to court documents. McElaney has been accused of – and admitted to – being involved in similar transactions involving other properties in the area. U.S. attorney David Fein stated that he hopes that the sentence “should serve as a warning to real estate agents and others who seek to take advantage of the current financial crisis by defrauding lenders.” McElaney’s attorney, however, is pleased that she received roughly a third of the minimum 21 months in prison considered appropriate for her offense and routinely sought by government prosecutors. He stated that he believes that her abbreviated sentence is due to “the kind of person [McElaney] is, how well she is regarded by family, friends and people she works with.”
Do you think that the sentence McElaney was given is appropriate? Given that she did not actually falsify documents, should it have been less or more?
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[1] http://articles.courant.com/2011-07-26/business/hc-short-sale-fraud-sentence-0727-20110726_1_short-sale-short-sale-fraud-mcelaney-and-natera
Without having all the details of the case spelled out in your article, I really can not make judgement. But, if the Agent followed correct proceedure, she should not have been found guilty of anything.
There is nothing wrong with back to back transactions as long as there is full disclosure to the home owner and Lender. The article is misleading and making people think back to back transactions are illeagal. Seasoning requirements being placed on transactions to stop back to back transactions should not be allowed. It is just stalling the housing recovery.
Proper disclosure usually comes via a clause included with the purchase and sales agreement offer. To make the offer, the price is first agreed to and signed off by the homeowner. Usually a clause in the offer clearly states the intent by the buyer/investor to immediately resell the property for a profit. The signed agreement now gives the investor “equitable interest” in the property and the right to immediately market the property for resale. The short sale offer price is usually based on comparatives to other recent distressed short sales plus the BPO (Broker Price Opinion) minus repairs and it is low. Once a low offer is made and accepted by the home owner, the Listing Agent should submit the offer to the Lender and not accept or submit additional offers until the accepted offer is rejected. The “Active” property listing should also have a status change to “On Deposit.”
If the listing states the sale is an open bid process (basically an Auction) and it has a drop dead date then all of this is moot. I don’t know if an MLS Aution is leagal. Usually autions are posted in the newspaper.
By the way, it is none of the Lender’s business what the property is resold for and what profit is made. There is no fraud if the Investors offer discloses the property will be immediately resold for a profit. Suppose you found a great deal on a iPhone and you purchased it… then decided to sell it on… let’s say EBay for a profit. Would you go back to the guy you bought if from and tell him how much profit you made and who you sold it to? None of their business right? Same goes for the Lender.
THIS IS MY OWN PERSONAL OPINION!! SCREWED UP AS THE COUNTRY IS & THE BANKS ARE SCREWED UP MORE SO SHE SHOULD BE GIVEN AN AWARD FOR
HELPING SOME BANK GET RID OF THEIR INVENTORY OF FORECLOSERS
what it sounds like is that the article is mixing up two different things – “short sales” (where a homeowner sells to a third party at a loss greater than their equity, and the lender agrees to participate in the loss), and “REO sales” (where the lender has already foreclosed, now owns the property, and wishes to sell it). From reading between the lines, it looks like these real estate agents took listings from the bank, made offers on them, and held back information from the banks that other, higher, offers existed on the properties. If so, this is clearly a breach of the agents duty to their principal.
I totally agree, usually the better deals are distressed homes, if they paint, put new carpet etc they should be able to sell for a profit, none of the lenders business what it sells for. All the facts aren’t here, sounds like she did nothing wrong and shouldn’t have been prosecuted.
This is a funny situation! On the one hand the agents were wrong for what hey did but on the other hand the LENDERS have been ripping people off for so long it’s hard to be angry. Can you say BANK CORRUPTION!!
Without all the details, it looks like she and her cohort were price fixing the properties that were listed with them. Having purchased foreclosures for some time, I have often wondered if certain agents would do this; not necessarily for themselves, but maybe for their ‘better’ clients. In my market, the banks don’t play nice and I presented fair offers, but always got beat out by lesser offers, usually within a month after mine was submitted. Send them to jail, I say. I have no problem with competition, but the insiders have a responsibility to their position in the deal.
BTW, I do not deal in foreclosures anymore in my market. The banks want as close to retail as possible and seem to not want to deal with investors.