When you cheat a little, you sometimes get a way with it. When you cheat BIG, you almost always get caught. Kids learn this at an early age, and adults would be wise to remember life’s lessons. But apparently a local Twin Cities builder chose to ignore the age old rule that “What Goes Around Comes Around”.
- They built spec homes, then brought in fake buyers. The fake buyers borrowed more than $25 Million to buy these homes. The “solution” of having the builder buy its own houses flooded their business with money to keep it a float, which in turn let them build even more houses. Fortunately the declining real estate market caught up with them and unveiled the scheme.
- The fake buyers were friends and family who bought the homes to obtain the loans. One buyer bought 46 homes at the tune of $20 Million between 2004-2007.
- A bank officer was enlisted to falsify verifications of bank deposits
- An appraiser was enlisted to inflate and over-value the property appraisals.
- A closing agent was enlisted to forge signatures on purchase documents
The real losers are the people in these neighborhoods that bought homes at inflated values and now are seeing surrounding homes being auctioned off at sheriff sales. In New Prague, many homes have already been auctioned off. Other buyers have entered into leases with the option to buy, and are facing eviction from new owners.
It will be interested to see how this all unfolds in the next couple of months. The Parishes have all plead guilty and are currently awaiting sentencing. They could get 5-15 years for their offenses and will have to pay back millions to the bank and affected home owners. People always get their comeuppance. It is nice to see justice served.
Just remember not to group this company in with all the great builders out in the market place, or to have a bad impression on appraisers, closing agents, bank officers, or real estate agents. There are more good people out there than bad…it is just that the media likes to report on the bad more than the good.
It amazes me they didn’t think there were going to eventually get caught. Also, how did the one person buy 46 properties? Didn’t the mortgage company (which was probably not involved) see how many units this person owned?
Great post.
Scott, I just can’t imagine the thought process of buying your own homes, just so you can go build some more. You would think if you can’t sell the first ones, then you wouldn’t sell the next ones either. Yeah, and eventually the scheme is going to get so big that you just can no longer control it.
I don’t know how they sleep at night. I agree that the people that are the real victems are the people that instantly saw their house value drop by 30-50%.
I don’t know how they did sleep at night…I guess I am just too honest of a person because there is no way I could sleep at night. A crook is a crook and unfortunately, the booming market brought out the crooks, cheaters, etc. Now the market is cleaning up the joint, which will be a benefit to us all.