The Mortgage Fraud Blog is a great way to glimpse the endless creativity of our real estate criminal class.
One of yesterday’s posts focused on Guerard Wallace Howard, a short sale flipper in Florida who pleaded guilty to wire fraud and is headed for federal prison. One of Howard’s techniques was “reverse staging.”
Reverse staging is a process wherein someone manipulates the short sale price by intentionally downgrading a property’s appearance and falsely representing the condition of a property in advance of bank appraisals.
Reverse staging is done in an effort to acquire the property at below market price. In this case, it included Howard removing receptacle plates and pulling wires from the walls to falsely represent to an appraiser that the house required rewiring; falsely representing that the house needed electrical service upgrades, and repair work. In some instances it also involved spraying the house with a foul-smelling prank product, and falsely representing to an appraiser that the odor was due to mold or other potential biohazard issues that required expensive remediation costs. The reverse staging effectively caused the lender to agree to the below market offer made by Howard… The property was then immediately resold at a profit.