Discussion on Loan Mods and the Recession

Buyer Beware, Miscellaneous, Seller Beware No Responses »
Apr 242010

In light of the “current” economic recession (although the media claims recovery) I will put a post up here that is a brief summary of some of the items to be aware of as possible scams. Keep in mind that “scam” here is a broad term, and of all things, simply translates to “buyer beware”.

Today more than ever, people are turning against the banks. Not for one common reason, but simply because people are now more “tuned in” to what, when, and where the banks had ripped them off previously. This is good. Change begins with awareness. At the end of the day one can easily point the finger at the banks for being the “cause” of most major issues today in real estate. The greed they have and the power [they] have is amazing. Whether you wish to go on to the Fed is up to you… here we will “Stop” at the banks. So.. that having been said, let us move on to the first point…

Many people today have tried for loan modification: the promise and dream is that the banks will magically lower your monthly payments to something you can now afford, and “hold off” potential foreclosure. PLEASE don’t fall for this scam as many people have. This is pie-in-the-sky dreamland fairy tale stuff here people… the banks ONLY make money from charging you fees and penalties for this process. The is no “loan modification”. Not only do they charge you processing fees, but you also LOSE TIME. Most homeowners lose their houses unexpectedly during this process. These programs were scams set up by the banks, for the banks. FOR PROFIT! Banks do not make money by lowering payments of people that have proven that they cannot pay over the long term. They only make money upfront on these things, and in some cases, they “roll” penalties and fees on to the “back end” of your loan… only to re-package them and sell them to another corporation. If you are thinking about loan modification, do your research and you will see… it has a massive “failure” rate. Do the right thing and “weigh” the options… do you walk away now when you have some resources… or wait and be forced away with your pockets turned inside out? Your choice. In the mean time take a look at some of the proof by visiting THIS WEBSITE. Now defunct IndyMac bank sure took some of their customers for a “ride”.

The next point is renting versus buying. People… the US Government no longer does much to benefit the common people, you may be shocked to learn most actions are done for profit. lol. The $8,000 credit for buying a new house now? PLEASE don’t buy in to this. The best thing you can do is not get caught up in more debt by buying in to another dream. Learn from the past. In todays economy only buy what you can truly afford. (don’t “justify” in your mind why incurring more bad debt may be the right thing to do… its not). If you spend some time researching (try Robert Kiyosaki and the Conspiracy of The Rich) you may actually come to the realization that now is a good time to rent! Again, run the numbers. Call around and find rental rates for properties you are interested in. You will be benefiting from landlords who need to keep units occupied. You may even consider a rent to own (read our posts on that please). Here you’ll benefit from low rental rates without the “obligation” to a bank as well as the ability to lock in a decent purchase price for when the economy DOES turn around in a few+ years. This is a win-win. Walking away from your mortgage payments may actually MAKE SENSE. Your credit? Forget about it. The credit system is heading for a major overhaul anyways. Too many people with bad or marginal credit. I would not be suprised if shortly we see that it is now “okay” to have foreclosures on your credit, otherwise no loans will be made period. There simply won’t be any qualified buyers. So suck it up, forget about your credit in this instance, and take a look at your current financial picture. What makes sense from an economical standpoint. What is the bottom line FOR YOU? This is how the banks look at it, now it is time for you to do the same.

Be weary of “deep discounts” during the recession. Find your comparable properties, and make sure that is accurate. My old rule of thumb? I used to value a property (attention investors!!) by the following formula: purchase price equals 70% of actual market value (not appraisal) minus all the repairs needed to get it in to tip-top shape. That’s what I’ll buy it for. In todays market investors should not be the only ones using simple formulas to get a deal… homeowners should pay attention here as well. Today you should drop that 70% to 50%. That may sound ludicrous, but the market is going to sink, and sink very bad in the latter part of 2010 and beyond. Don’t get caught overpaying yet again. There are so many homes available on the market (bank owned now) that this “liquidation buy” may be the best bet if you must own. I would not support people going around “beating up” homeowners on their prices, but banks? Remember.. look out for YOUR bottom line now.

More on this coming soon…

Posted by The Masked Investor at 2:46 pm Tagged with: , , , , , ,

Appraisals

Buyer Beware, Evil Agents!, Landlord Beware, Miscellaneous, Seller Beware 2 Responses »
Aug 182009

For the many years that I have been in real estate, I have fought consistent battles against “Real” value vs implied value, or assessed value. Here is what an appraisal is without definitional lingo.. It is a snapshot of the value of your house derived from comparable sales within the last year in your immediate area. Got That? Comparable means similar in size, beds, baths, etc, similar amenities, similar in age or “effective age” and close to your neighborhood. If you live in a middle class average neighborhood, compare to the millionaires row next door or the crack head heaven down the street won’t cut it. Foreclosures and “fire sale” or distressed sales? Not a comparable. Appraisers that disagree with me.. you are a disgrace to the business and I warn all homeowners of you… you cause major damage to the economy! The comparable must be what are referred to as “arms length transactions”. Are licensed real estate agents appraisers? No they are not. They can however be an excellent guage as to the potential marketability of your house and where you should price it to be competitive.

Here’s where it gets interesting. There are many online companies that promise a value of your home. Bogus. They are a decent guesstimate, but other than that.. bogus. Here’s the funny part though….  A lot of investors go to homeowners, whether it be in a buy or sell situation, armed with proof of the value of the home. This proof comes from the county or city tax records! First of all the tax records is ZERO indication of your properties’ worth. It simply is a reflection of “assessed” values by section or segment of the community that your house happens to fall within. It’s solely a number created for a tax basis. Everyday people argue their values to raise them, or lower them. Look at some of the ultra-rich multi million dollar homes. They will always be assessed as low as possible, as they know the true value of their home, but just don’t wish to pay the absurd taxes attached to that. When an investor tells you THEY know the value of your house… laugh in their face! When documented value becomes important in the transaction, you must get a reputable third party appraiser to do the valuation.

Posted by The Masked Investor at 11:12 pm Tagged with: , , , , ,

Mortgage Elimination

Buyer Beware, Landlord Beware, Miscellaneous, Seller Beware No Responses »
Aug 182009

Have you ever heard the “conspiracy theories” out there about the federal reserve and banking systems coercing you into a non-enforcable contract called a “mortgage”? The reason it is non-enforceable is because the money lent to you for the purchase of the house is created “out of thin air” and therefore doesn’t really exist? Read The Creature From Jeckyll Island or The Fed if you wish to go deeply into this concept. I believe it as fact, but I don’t believe there is anything at all we as citizens can do about it.

In recent years, companies all across the country have sprung up claiming the unbelievable: they can completely eliminate your mortgage and you will own your house free and clear all based on the fact that the mortgage funding process is fraud and you can beat the banks at their own game. HAHHHAAAHHA right. Ok, once you learn the intricicies of WHY these companies propose this, it does make sense, and I do believe it is all factual information…. except the part about you being able to do anything about it. Here’s how it works:

  • You have a house with a mortgage
  • You want to get rid of the mortgage altogether and own the house free and clear
  • You and your new best buddy and the mortgage elimination company file a “fraudulent”  document at your county or city stated that existing mortgage is paid off (a lie)
  • You quickly refinance your house for cash and split the proceeds (no biggie, you’ll eliminate that new mortgage also)
  • You stop making your payments, the mortgage elimination company waves its magic wand and you’re FREE!

Not only does it not work, you’ll lose your house to foreclosure, you’ll damage your credit severely, and you’ll piss off the bank. Let me tell you again, this stuff is based on fact and it does make sense when you hear there arguments. Whether or not they are correct is not the point. The point is this is NOT the way to fight the system, the system WILL SCREW YOU. I have not tried this myself, nor do I plan on it, so again this is all opinion here. Please be careful of these scams, if you have any experience or involvement with these I would LOVE TO HEAR SOME STORIES!

Posted by The Masked Investor at 11:10 pm

Rent To Own & Lease Option Scams

Buyer Beware 2 Responses »
Aug 162009

Let me first address a growing concern I have involving what will be a growing arena real estate due to our economy, that deals directly with the vile behavior of some investors. It’s called the “lease option” or “rent to own” programs. I will start by telling you that INVESTORS MAKE A FORTUNE OFF THIS! In absolutely no way do the majority of investors look at this program and say to themselve..”hmmm.. how can I help someone today?” The facts are the facts, so there can be no defense. Here’s how it works:

Let’s say that you have some blemishes on your credit, so buying a house is nixed, and renting a house is a possibility, but you really want the chance to own. You will probably notice the ads in the paper or signs on the street claiming “Rent-to-own… $5,000 down, $800 per month, 3 bed 2 bath, blah blah blah..” You may think to yourself “ah.. ok I have bad credit, but that okay.. because I just put more money down, my payments are great, that’ll be paid towards principle, and the house is a “great deal” so they say… cool.. how could I go wrong?”

Let me show you the brief summary of these transactions from an investors eyes:

First of all, the investor will be checking up on your credit and your ability to pay back. This is reasonable, of course, as they would like to minimize the potential of you defaulting on payments. But it’s what lurks beneath that question that you should be worried about… It is highly likely that something will appear ANYWHERE about you somewhere that the investor will grab a hold of simply to justify the raise in payments or “down-payment”, so be careful there. “Down Payment” is another biggie. Whatever you do, you must never sign a lease option agreement or a rent to own agreement without the FULL understanding of what you are doing. As its name states, you are renting until you own. You will never own by renting, as you must exercise your “option to buy”, which 9 times out of 10 is what your upfront money is covering… your option to buy. That is non-refundable. Can you imagine the devastation many  investors have caused with this slight of hand? You think you are putting a down payment down on your new house, that will either come off the purchase price, or secure you an ownership position. It probably won’t. Think your monthly rent is amortized against the principle? Hah.. most investors would not even know how to compute this! Last but not least, the last rabbit in the hat for the investors is the dual-doc strategy… having you as the buyer enter into a rental or lease agreement SEPARATE from your option agreement. This means if you are as little as 30 days late on your payment you get evicted! You’re renting! Oh, and you’ve also breached your option agreement.. so thats gone too. This is what the investor wants… to “turn” the tenants in the house creating massive amounts of “down payments” or “option consideration” to put in their pockets, all the while increasing the equity or value of their home… not yours. The best part? You keep the house nice and neat for them because you care for it as if it is your own!

Here’s a summary of what not to do:

Don’t respond to street advertising. It’s cheesy, and it’s most likely a scammer.

Don’t sign an agreement without an attorney. Ask the investor to pay this cost, or deduct it from your down payment.

Be sure your payments are fully amortized against the balanced owed to purchase. You’re buying the house now, not later.

Dual agreements mean more protection for the investor and less for you… usually. Be careful what you sign.

Get receipts for everything… your monthly payments should say mortgage payment, and your deposit should say “down payment”. Nothing else.

If you have the ability to go to your city or county to file your agreements so they are legally binding, you should do so.

If you cannot satisfy the majority of these concerns, move on to another property… you’re getting scammed.

Posted by The Masked Investor at 11:52 pm Tagged with: , ,
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