While average housing prices continue to fall around the US, foreclosure rates are going up. Investors know that they can purchase distressed property at foreclosure and sheriff sales at some of the lowest prices that they will see in this lifetime, but they also face steep competition. In California, a group of eight investors conspired to rig bids in order to lower their costs. Because they worked in counties where foreclosed properties were abundant, but competing bidders were scarce, the investors involved in this scheme were able to walk away with properties at a bargain.
Over the course of nearly three years, investors in Contra Costa and Alameda county, California, bought foreclosed homes at exceptionally low prices and then re-auctioned them privately. A series of pay-off, bribes and other underhanded financial transactions followed. Finally, the assistant attorney general caught wind. Eight men from surrounding counties in California were indicted and arraigned on charges varying from conspiracy to commit mail fraud to bid rigging. All parties involved face lengthy prison terms and million dollar fines.
As a result of the federal investigation, investors in California will now be able to bid on foreclosed properties without worry. Several banks have suffered from the actions of these eight investors, but with more foreclosed properties on the market now than in recent years, they will likely be able to regain their lost profits. One investor, Yama Marifat, has been identified as the ringleader in this housing scheme, and he faces as much as 30 years behind bars.
