Timothy William Barnes, 37, formerly of San Luis Obispo, California, a real estate broker pleaded guilty to orchestrating a property flipping scheme in which he purchased houses in short sales at artificially low prices and immediately resold the properties at their true market value.
The defendant, who now resides in San Francisco, California, pleaded guilty to one count of bank fraud, a federal offense that carries a statutory maximum penalty of 30 years in federal prison.
Barnes owned and operated Apex Properties Real Estate Brokerage, Inc., San Luis Obispo. Between January 2010 and September 2012, Barnes purchased properties after banks gave approval for short sales. In short sales, banks agree to accept less money than the outstanding balance on a mortgage, usually because the property is under water, meaning that the value of the property has fallen below the amount remaining on the mortgage.
The lenders authorized the short sales after Barnes minimized the value of the houses and concealed higher offers he had already received. To carry out his scheme, Barnes made false statements about the fair market value of the properties in the documents he submitted to the banks.
Barnes admitted that, in many cases, he had already negotiated the resale at the higher price while he was simultaneously negotiating the short sale of the property at the lower price.
Barnes used this scheme to flip properties in San Luis Obispo, Paso Robles, Pismo Beach and other cities on the Central Coast, California, earning profits of more than $500,000.
Barnes is scheduled to be sentenced by United States District Judge Stephen V. Wilson on June 16.
This case was investigated by the Federal Bureau of Investigation and the Federal Housing Finance Agency, Office of Inspector General.