The Herald Tribune in Sarasota just completed and reported on an investigation they made into property flipping in Sarasota and Manatee counties on Florida's Gulf Coast.
It's the second installment of this series, the second, third and fourth paragraphs prepare you for the level of the insanity caused by many well connected flippers on the West Coast of Florida, many of them industry insiders from the FIRE Economy.
This paragraph reads:
More than 100 properties from Palmetto to North Port doubled in price in a single day during the recent real estate boom. Proposed condos -- no more than ideas on paper -- flipped two or three times before anyone moved in.
Some investors bought up dozens of houses within a few blocks. Within weeks or months, they flipped them at a profit.
A yearlong Herald-Tribune investigation has found that many of these sales cannot be explained by shrewd deal-making or as an innocent consequence of the real estate boom. Instead, they were manufactured by property flippers who found ways to drive up housing prices so they could make money at the community's expense.
Now I had heard stories of people camping out in front of offices for new housing developments and condos up that way, but I never heard the stories where properties doubled in price in a single day!
That right there smells of fraud. It reminds me of the dotcom days when insiders whose firms were dealt new shares of an about to launch IPO, would see those shares rocket 100 to 200% on the first day of trading, all inspired by investment banksters pump and dump schemes. And that's what much of the Housing Bubble Ponzi Scheme was: a pump and dump of properties which overvalued by insiders who knew the "pump" prices were unsustainable.
The article continues,
The Herald-Tribune examined more than 3,000 property flips that occurred since 2000 in Sarasota and Manatee counties. Based on interviews with more than 100 investors and real estate professionals and a review of thousands of pages of deeds, mortgages, foreclosure filings and other public records, the Herald-Tribune found:
At least 37 groups of property flippers operated in Sarasota and Manatee counties. The groups bought hundreds of properties worth more than $350 million and sold them to associates for inflated prices.
The flippers identified by the Herald-Tribune -- and the people who ultimately bought their properties -- have so far defaulted on more than $450 million in mortgage loans. Their defaults account for $1 in every $13 lost to foreclosure in Sarasota and Manatee counties from 2005 through 2008.
I am going to venture that the same types of groups of "flippers" existed in Key West because I have noticed time and again in records from the Court House and on the MLS that certain townhomes in certain neighborhoods and certain condos all seemed to have been bought up by Realtors and other of their ilk during the same time frame.
But getting back to the story, one must marvel that 37 "groups" of property flippers operated in two West Coast counties during the Bubble and so far, the properties they once controlled are now 1/13th of all defaults in those two counties, meaning the defaults relating to the 37 flipping groups are now worth $450 million in belly up mortgage loans. That's some serious coinage vaporized by crazymaking money chasers.
So how did you organize a flipping group back then? What kind of upstanding citizen did you want to lead your group which would try to manipulate prices in certain neighborhoods?
Nearly 40 percent of the people involved in questionable flips in Sarasota and Manatee counties were industry insiders -- real estate agents, developers, lawyers and mortgage brokers. Of the 37 groups discovered by the newspaper, 21 were organized by real estate agents or mortgage brokers.
Most flipping circles were organized by a leader who either recruited investors on the promise of easy money or conspired with friends and associates to sell properties at inflated prices. Some of these investors did not realize they were buying properties at inflated prices; others willingly lied about sales prices to obtain mortgages that more than covered the actual purchase.
Some of the people who organized or participated in flips were considered leaders of their profession. One was recognized as one of the top 50 Re/Max real estate agents in the world. Another won multiple awards from the Mortgage Bankers Association of Florida. Some flippers identified by the Herald-Tribune were seen as key clients by local banks and were allowed to pick their own appraisers or had loan approvals expedited to quickly close deals.
Pillars of the community became leaders or participated in these manipulative flipping rings such as:
- One of the top 50 Re/Max Real Estate Agents in the World
Let's call this what it really is: Crony Capitalism used to commit fraud so as to enrich the Oligarch of FIRE Economy greedheads who have no conscience.
Not all the flippers were FIRE Economy sharks feeding on clueless buyers. As the article points out, there were many a flipper wannabes:
The Herald-Tribune found that some of those involved in flips were nothing more than naive investors. They paid far more than they could afford believing they could sell the houses before the bills overwhelmed them.
Others were irresponsible speculators who bought house after house with little or no money down and no clear way to pay their mortgages if the houses could not be resold.
Flipping schemes uncovered by the Herald-Tribune were so common that some investors who participated believed they did nothing wrong.
They viewed flipping as a legitimate financing tool, an easy way to demonstrate that property had increased in value so that banks would lend money against the equity. Banks fed that belief by approving deal after deal.
Ain't that the truth. All those taxi drivers, strippers, hotel workers and the deadbeat husbands and boyfriends of hard-working waitresses, bartenders and strippers were all dabbling in Real Estate after the dotcom crash ripped their faces right off their skulls. You'd think they would have learned in 2000 a hard earned lesson . . . but 99% of them who lost money in the stock market fell for the "Real Estate always goes up" mantra that became an established and supposedly incontrovertible fact by the local and national NAR.
The wealth destruction fallout from the dotcom bubble was nothing compared to what the Housing Bubble crash has wrought and is still bringing us daily. Just think of the trillions of dollars in side bets, i.e. derivatives, still hidden off banks's books and which could absolutely bring the whole world into a giant Depression should the FASB not have given banksters a reprieve last Spring by changing accounting rules. Were the banks still marking to market, well, every other bank in this country would be bankrupt or insolvent, and there would be none of this magical accounting where banks are now showing profits.
This article from the Herald Tribune should be enough to make you want to read the entire series of pieces in their investigation. I'll continue to spotlight them here.
Here is the link to read the latest installment. This piece was orinally titled, "Flipper's toll: On Gulf Coast, half a billion in defaults"
Caveat Emptor,
Rock Trueblood
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