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High Foreclosure Rate in Colorado is Linked to ID Theft

Posted on Nov 8, 2006 by Michelle Pastor

Here in Colorado, we're not proud of it, but we have the worst foreclosure rate in the nation. It's been a real concern so officials investigated, and their findings surprised me!

According to an October 29 article in the Denver Post many of the Colorado homes that face foreclosure are the result of an "inflated home price" scheme. With this scheme, a home buyer, a mortgage broker and a real estate appraiser join forces to inflate a home's value well above the seller's asking price. The buyer and the other involved parties will sometimes use a stolen identity to purchase the property after convincing the seller to split the excess cash from the sale with them - everyone walks away with a piece of the inflated value. The home then goes into foreclosure because the buyer has no intention of making the payments or living in the house. They can buy house after house in this way to make a lot of money.

To investigate this scheme, a broker and an attorney worked together and found that 48% of the newly foreclosed homes in Colorado sold for more than the asking price (something that is rare in Colorado's housing market which currently is a buyers' market). They determined that in the past, home sales were inflated by an average of only 3 - 6%, but recently, the inflated prices have been 30% or more above the home's value - this can mean a $100,000 profit for one house and a major headache for the identity theft victim!