Using a “neutral” middleman, investors make a lowball offer on a house where the debt on the property is larger than its total value.
Then they require the transaction to be completed right away. The estimates of home appraisers and price brokers are also fake, in order to convince desperate homeowners into signing the short sale.
As soon as the sale goes through, usually just hours later, the investor resells the property to another person, who has made a higher bid, unbeknown to the original homeowner.
The scammers make an average profit of $40-50,000, which is obviously what the desperate homeowner lost, not knowing the real estimate.
How to avoid: ask for many opinions, and look for the most reputable real estate parties in your city.