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Property flips targeted in HUD real estate sales

Audit shows investors abuse preforeclosure program
Published on Sep 26, 2005

The U.S. Department of Housing and Urban Development needs to crack down on investors who are abusing a federal preforeclosure program to buy houses at below-market value then quickly resell or "flip" them for profit, according to an audit released in mid-September. "Investors abused the (HUD) preforeclosure sale program and obtained properties below fair market value...then resold (the properties) almost immediately at an increased sales price," the report, performed by Joan Hobbs, a HUD regional inspector general for audit, said. Investors are violating HUD rules to obtain properties at a lower price, the report said. They do so by relying on undervalued appraisals based on inaccurate or inappropriate comparable sales data, by neglecting to market properties to get a fair price and by not telling borrowers how to get a fair market price, the audit said. The HUD Homes Program resells tens of thousands of foreclosed homes each year. Because of a lack of adequate controls by HUD, the d...

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