Media Report Shines Light On Central Florida Short Sale Flipping Duo

A recent story on the apparent emergence of short sale flipping fraud reported by the Sarasota Herald Tribune contained this excerpt on a Central Florida duo who are engaged in practices some may consider suspect:

• The evidence that short sale flippers are finding ways to benefit from bank losses can be found in deed records filed along Florida's Gulf Coast. Some individual investors and small groups of flippers have bought dozens of properties at discount prices and resold them within days, each time for thousands of dollars in profit.

• Since September 2008, Tampa real estate agent Joe Wright and accountant Kevin Byrne have worked together to buy more than 30 pre-foreclosure houses and condos, with Wright's brokerage as the listing agent and Byrne's company as the buyer. In each case, the men arranged a short sale and quickly resold the property at a higher price. Of their 33 deals, 22 properties resold within 24 hours of purchase. The median one-day price increase was $25,000. Byrne and Wright did not return repeated calls seeking comment.

• Their purchases, including nine in Sarasota and Manatee counties, involved properties that ranged in value from $50,000 to $800,000. They also included four properties owned by Wright. Court filings show that all four were on the brink of foreclosure when Byrne bought them from Wright at reduced prices and resold them for a profit.

• In one deal last year, BB&T filed a foreclosure action against Wright and moved to seize a three-bedroom house he had built on Fielder Street in Tampa. Mortgage documents show Wright had a $545,000 mortgage, but BB&T agreed to sell the house to Byrne's company for $287,000 so that it could avoid the foreclosure process. Deeds show that the same day Byrne bought Wright's house, he resold it for $425,000, $138,000 more than the bank had been paid.

• "If a bank knows that an end buyer is going to pay $425,000, why would it agree to take $287,000?" said Sean Martin, the owner of Martin Funding in Sarasota, which provided a loan on one of Byrne's deals. "Banks don't want others to profit at their expense." Such rapid price increases are "a huge red flag," said Mark Johnson, Florida vice president and underwriting counsel for Stewart Title, which provided Byrne with title insurance.

• While Byrne benefited from the bump in price, Wright profited in different ways. He was able to erase nearly $1.2 million in debt from his name, and his company earned commissions as the listing agent for the sales, according to Multiple Listing Service records from the Mid-Florida Region. Wright's brokerage, with its 15 agents, is now Byrne's go-to real estate agency, according to MLS records, which track the sale of properties and record the listing agent on sales. It has been the listing company on every property Byrne's companies have bought in Hillsborough, Sarasota and Manatee counties since October 2008, MLS records show.

• In addition, Byrne has used the same title agent, Chris Rodriguez, to close all of his short sale deals, at least since November 2007. Court documents show that Rodriguez moved into the same office building as Wright at 3309 Bay to Bay Boulevard in Tampa after Wright and Byrne began working on property sales together.

For the story, see The new flipping: short sales.