It's a short sale fraud or it's legal?

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Agent was doing short sale for almost two years, finally she got approve from the bank. Then she found what property title was transfer by owner to other person by quick claim deed. The new guy start remodeling the property. Previous owner became tenant in the property with two years lease agreement.
Question:
What kind of strategy new owner is using and why he is doing remodeling if bank will take property anyway or I am missing something?
The property will go to trustee auction next week.

Thank you

Marius