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Fraud Report: Reported Home Prices Potentially Overvalued By 40%

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posted on Sep, 1 2010 @ 11:54 PM
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Zero Hedge reports on yet another potential fraud of the century:


A reader writes in with some troubling observations on what could potentially be a pretty substantial scheme to artificially “boost” existing home prices by up to 40%, putting all the NAR data, and all other relevant public housing data materially into question. Since trick is painfully simplistic, and all too easy to spot, we wish to open it up to our readers for verification, as this could be a huge hit to the credibility of all existing home price metrics, and put into question all transitory upticks in home prices, such as the backward looking Case-Shiller index indicated yesterday.

From the email:


Realtor are not reporting the true sold prices on homes. Here are 2 examples. If a home is listed on the MLS and then sells at a auction like Hudson & Marshal or RealtyBid, you can see the sold price online or if you attend the live auctions, see the house sell at open outcry auction. The next day the houses are reported sold on the MLS but always at full price.

The example below sold for $115,000 at Realtybid but is listed as sold for $159,500 on the MLS.

Also, homes are listed on the MLS and sold on the HUD site. You can see the sold area on HUD and the Bid Stats. The house listed below sold on the Hud site for $90,061 but again was listed as sold for full price on the MLS $113,400.

These are only 2 examples, I have seen over 100 and assume it is occurring everywhere. I understand that foreclosures are not included in the sales stats from the Realtor Assoc. but the stats they use are taken from the sold prices listed on the MLS. They are all false.


Simply said, this means that any pricing data coming off Multiple Listing Services is fatally flawed, and if this observation is verified, could potentially be a simplistic means to misrepresent the true home price by up to 40% higher.

As for the examples, here is property 1 as represented by the MLS: note the price of $159,500


See link for screenshots of the fraud.




posted on Sep, 2 2010 @ 12:40 AM
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Good info but unfortunately, not surprising. It seems like all big-dollar businesses, like banking, real estate, investments, etc. have an underlying corruption. The blatant greed is obscene.



posted on Sep, 2 2010 @ 12:47 AM
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Helluva find pal...things are just going from bad to worse arent they?
I always thought there was some kind of phoney pricing going on there in the realty market, but this is definatly proof that the skullduggery is real.
I wonder what else besides fuel food and housing is overpriced?
Insurance?Interest rates?goverment salaries?



posted on Sep, 2 2010 @ 12:51 AM
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reply to post by General.Lee
 


I always cringe when I see "greed" used to describe private industry.

That's what they are supposed to do.

It is vitally important that we keep in mind the system that allows this fraud to be perpetrated.

The federal reserve system is ultimately at the root of this corruption.

People will always act in their own self-interest. Thus, the system must be constructed in such a way as to automatically punish those who commit fraud. This means a free market. The SEC and all the rest can't protect us. Only a free market that is allowed to punish fraudsters can protect us.



posted on Sep, 2 2010 @ 01:06 AM
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This does not ONLY apply to the private end of it.

Where do the tax assessors get their information for pricing houses for property tax purposes? I would think they get them from the same locations, right?

Oh well, when you know you are screwed, at least you can see it coming.

Now, if I could only get selective Alzheimers. I would be just another one of the sheeple.

Or maybe madcow.



posted on Sep, 2 2010 @ 01:53 AM
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Originally posted by mnemeth1
reply to post by General.Lee
 


I always cringe when I see "greed" used to describe private industry.

That's what they are supposed to do.

It is vitally important that we keep in mind the system that allows this fraud to be perpetrated.

The federal reserve system is ultimately at the root of this corruption.

People will always act in their own self-interest. Thus, the system must be constructed in such a way as to automatically punish those who commit fraud. This means a free market. The SEC and all the rest can't protect us. Only a free market that is allowed to punish fraudsters can protect us.




Better get use to it, because many of them are no different than the Fed. when it comes to making profits. Greed is greed, be it the Fed or private industry. Because the system allows this, does not mean they have to do it. If you owned one of these private industries, would you partake in this fraud? I don`t believe you would if you have any morals or scruples. So why shouldn`t they be just as guilty of being greedy?

[edit on 2-9-2010 by FiatLux]



posted on Sep, 2 2010 @ 07:09 AM
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Wow. Now my property taxes make sense. I was putting off an appraisal but it might be worth the $300 to get the real value and stop being raped...

[edit on 2-9-2010 by AzoriaCorp]



posted on Sep, 2 2010 @ 07:25 AM
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so let me get this straight.

I bought my house for $206k and others on the street/neighborhood were going for up to $250k. If my next door neighbor puts his up for sale at $210, wind's up foreclosing and HUD dumps it for $170, then our entire street is now overvalued?

I think this comparison has less to do with over-inflating and more to do with protecting property values. Please correct me if I'm making the wrong assumption (I'm no financial expert or real estate guru)



posted on Sep, 2 2010 @ 07:53 AM
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Originally posted by TXRabbit
so let me get this straight.

I bought my house for $206k and others on the street/neighborhood were going for up to $250k. If my next door neighbor puts his up for sale at $210, wind's up foreclosing and HUD dumps it for $170, then our entire street is now overvalued?


No... in that case somebody just gets a deal on a 250k house for 170k.

...but you can bet you're not going to be able to market your home for 250 when TEN homes in your suburban neighborhood are foreclosed and on the market for 170, especially when ten other homes are falling into disrepair and the banks are more than willing to short-sale their foreclosures because their loss has already been subsidized.

When every home in a neighborhood is occupied, well kept, lawn mowed, and only a few are on the market the prices stay high. When the opposite is true, you can count on home values being low. It seems to me we are trending towards foreclosed, roof leaking, no money to fix it.

Sri Oracle



posted on Sep, 2 2010 @ 08:11 AM
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Well we are now heading into the great downward spiral of property prices. In the fear stage of the collapse. Finally, we are going to see properties set at a realistic benchmark for their true price, rather than a greed absorbed, over inflated false price. It's about time those on lower incomes who work hard can actually afford a decent home at a reasonable price. All else is, and has been, cloud cuckoo land.



posted on Sep, 2 2010 @ 08:20 PM
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The MLS is basing the home prices on appraisals or valuations that would be normally valid in a normal economy.

Most appraisers use the sales approach when valuing homes. They find several similar sales in the area, make adjustments based on amenities, condition, date of sale, blah blah blah. Usually the comparisons are similar but the price fluctuates with time. During the housing boom, people would bid up on homes and jacking up the appraisal sales approach.

The key to the price difference now is the fact appraisers try to shoot for a value based on a normal sale. A home that was overbid is usually considered a normal sale but a foreclosed and auctioned home is considered a distressed "non-arms length" sale. The appraiser will adjust upward on a subject house if the comparison homes were sold at auction. The reasoning behind this is that IF a home sold in the area was an actual non-distressed sale, it would sell at a higher price.

The MLS is just going by a real estate appraiser's reasoning when it lists a home at a higher price than the sold price. In a normal economy, a foreclosed and auctioned home would be more valuable than the actual sale price. Just because one guy defaults doesn't mean everyone else will and why should everyone's homes be devalued for one guy's failures. Auctions are much less frequent than regular sales and have a very small effect on general area prices.

But in this present time with this present economy, everything I said above is absolutely insane.

With so many people losing their homes and with so many bank auctions, the sold price IS the value. A normal sale is almost impossible in an environment where potentially cheaper houses are flooding the economy. A normal seller would have to slash prices just to compete. Why would I buy a home at a set price when there is a high chance that a home down the street would auction much cheaper.

What is going on with the MLS is not really a fraud. But it is careless, stupid, and lazy. The appraisers and the MLS guys aren't thinking, kind of like the non-thinking that helped churn the market in the housing bubble. These guys are using the same valuation methodology in an extreme and rare down market as they would in a normal market.

What the article points out without telling is that the real estate appraisers are the guardians of the real estate market. They were supposed to prevent the churning of home prices during the housing bubble but failed due to the non-spoken fact that brokers and bankers wouldn't give them business if they were seen as deal breakers.

Now they are failing again.

In fact the real fraud is that appraisers hardly consider the cost approach method and they totally skip the income approach method. With the income approach method, the value of a home would be based on what that home can earn as rental income. Without getting into too many details and justifications, the income method would basically say that homes at present are way overvalued in comparison to wages being earned.



posted on Sep, 2 2010 @ 08:50 PM
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I don't care what anybody says, not the government, not the people on ATS, and sure as hell not the banks or realtors say, their word is equivalent to a flying turd as far as I am concerned, any how my point the housing market is WAY overpriced, and by way far much more than 40%. Unless you think you can put a price on someone's life, well then to you pond scum, I say I hope that one day you will come down off your high horse!!!!
The only reason people pay these assinine prices is because of fluff in the market, a bunch of really ridiculous prices, numbers that mean basically "this is what you will pay, or you will die in a gutter and we don't give a damn!"

[edit on 2-9-2010 by ldyserenity]



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