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: , , , , , ,

The "Multiple Offer" Scam

Seller Beware 2 Responses »
Aug 192009

In response and thanks to a recent comment, I feel this post needs to go out immediately. As a homeowner selling your home, it’s your job to identify what you feel is the strongest offer on your home. What do I do? I take the strongest and weakest offers and set them aside. Not for good, just for further analysis. Why do I not jump on the strongest offer? Here’s why:

It is heavily taught (while mingling in the REIA’s you can’t help but overhear this on a constant basis) that you can increase your odds of landing the “deal of the century” by creating multiple “lowball” offers to as many sellers as you can. This simply means that investors have put together “machines” or “systems” that either automatically or manually submit many CASH offers to as many homeowners that fit their pre-determined list of criteria for that group of offers. Could be something as simple as out-of-State owners (this was always amusing to me… I live in a different State so I must be desperate to sell my house?) The offers will contain very strong wording indicating that they will be closing QUICKLY and for CASH and they have earnest money being held in escrow already… WOW… whata buyer! Now Let’s look at the Truth (uh oh.. I feel the investors cursing me now)…

The offer is derived from a formula. Here is a typical formula that’s widely used across the country – Offer $ = ARV(70%)-Repairs. What in the world does this mean? It means that the Offer price shall equal 70% of the After Repaired Value (appraised value of home after possible remodel or improvement) LESS, or MINUS the cost of doing those improvements. They’ll probably go ahead and subtract closing costs out of that as well.

They will NOT be closing quickly the majority of the time, they will be backing out of the contract via a well inserted weasel clause as we talked about in other posts. What about the earnest money? Simply put, a friendly attorney or broker is holding this earnest money. Not only does it represent the earnest money for YOUR house, but it represents the earnest money for all the other houses as well!!! The funniest part? That’s perfectly legal if done properly!

So now you can see from a homeowner or sellers point of view, why you MUST keep an eye out for this scam! If you are not getting offers on your home and you really do need to sell quickly for whatever you can get, than this is your game. Just cross your t’s and dot your i’s in this transaction. Know who you are dealing with, alright!

Posted by The Masked Investor at 7:16 pm Tagged with: , , ,

Agents With "Buyers" Scam

Evil Agents!, Seller Beware 2 Responses »
Aug 192009

When trying to sell your house, have you ever been approached by a real estate agent who has a “buyer” for your house? It’s different stories each time, but still the same outcome. “Oh, I know someone who has been dying for a house just like this.. this would be perfect for them!” Or my favorite…”Oh I represent a lot of cash buyers/investors, and this house would be perfect for them, we could close very fast!” When I was beginning this “game” I fell victim to the real estate agents many times. In my case it was a variation of the “Cash Buyer” or “Investor” story. I would list my house with the agent expecting a fast closing, and lo and behold, their “buyer” would back out for any myriad of reasons, but no matter, the agent had a strong listing to build their “listing” portfolio and enhance their pathetic image! Simply put, this is all “taught” to agents in their training classes. It is a technique to gain listings. Be careful and use common sense when dealing with this. I didn’t and suffer from the “hind sight is 20/20″ syndrome on this one. Whether you are a buyer or a seller, it may be worthwhile to peruse through a “Learn to be a Real Estate Agent” book at your local bookstore. You’ll see their tricks and techniques plainly spelled out… the same tricks and techniques they will use against you!

Posted by The Masked Investor at 5:09 am Tagged with:

Open Houses

Evil Agents!, Seller Beware 1 Response »
Aug 192009

Have you ever bought a house via an “open house”? Have you ever sold a house via an agent’s “open house”? Didn’t think so. That’s because open houses put on by agents are not designed to sell your house. Your house is being used strictly as a marketing tool to build listings! You know the drill… the sign in the front yard prominently displaying the agents sparkling smile and two-thumbs up, the balloons blowing in the wind, and the welcome sign right below the open house logo. Agents shine when they have many listings… remember, selling houses is a numbers game, i.e. the more listings (exclusive listings if they are scrupulous enough to pull that scam off) the higher the likelihood a sale will occur, lining the agents’ greed infested pockets. Any agents want to argue this by saying “But, but, but, I sold a house through an open house…”? Give it up guys.. the gig is over, stop wasting the homeowner’s valuable time and resources to grow your self-image and your business. Want proof? Sneak a peak in your local Multiple Listing Service (find an agent friend or ask your agent for a printout of this) and see how many houses have sold via an open house (yes this is a selection for this on most MLS services). If you’re seeking an agent to represent the sale of your home, make sure that when you interview them you listen VERY closely to their “sales pitches”. You want to know what type of houses they SELL, how close they come to selling for their asking price, the houses proximity to your house and the agents experience in that local market, how long the agent takes to sell a house, and through what methods. I’ll be putting together a DETAILED list of how to choose the right agent soon. Check back for that post.

Posted by The Masked Investor at 5:06 am 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

The "Weasel Clause" Scam

Seller Beware 3 Responses »
Aug 172009

I’d like to address what is know as the “weasel clause”, or “cover your ass” clause. When you talk to an investor and it gets to the point of signing contracts, rest assured in knowing that 95% of the time, the contract will be to protect the investor, not you. This one “clause” in the contract is the biggest thing you need to be concerned with. It can read something as simple as this:

This contract/agreement is subject to suitable inspection of premises by partner.

Any variation of this is also considered the same “weasel clause”. The investor is trying to accomplish two things. The first, is tie your house up with no liability. (you’ll notice the weasel clause goes hand-in-hand with a low, refundable earnest money, or hardly any at all). The second is to allow the investor to “market” the house to his own group of people with his added “finders fee” on top of what your contracted price is for. Please don’t fall for this unless you just don’t care how much you get for your house. Don’t get me wrong, I am not telling you these investors are not legitimate buyers, I am just telling you to not allow someone to tie you up in a contract that protects only themselves if something were to go awry. Here’s some steps to take to protect your end of the transaction:

You should be collecting earnest money (do not let it be held by their attorney or representative unless you wish to never see that money) to the tune of 1-2% of the contracted price. This earnest money should become non-refundable in 5 business days, or when all of the “contingencies” (inspection, termite, radon, your State required documents to close) are in line, whichever comes first.

Knock out all clauses that protect only the investor, the “weasel clauses”. Per the contract, the investors “partner” can be anyone. If they cannot know in a week if they want to buy your house, they are flipping it and tying you up!

Don’t be afraid the investor will walk away if you demand something. Think of it this way, If you demand legitimate protection and the investor walks away.. who do you think was going to get screwed in this transaction?


Posted by The Masked Investor at 7:39 pm Tagged with: , , , ,

"Stop Foreclosure, Save Your Credit" Scam

Seller Beware 3 Responses »
Aug 172009

The economy is bad and is getting worse. What we’ll see is more and more foreclosures. Investors target people in foreclosure as people that are in financial chaos and need any type of assistance they can get. What you’ll need to look out for are the people attempting what are called “short sales”. Simply put, this is where an investor comes in as a third party and tries to negotiate with your bank to take less money on the sale of the house than is owed. There are many “nuts and bolts” to doing this, none of which are groundbreaking or revelutionary. They are simply negotiating techniques. I won’t go in to the details of short sales here. Typically for a short sale to be considered, the house must be at least 90 days past due, although I have seen it started as early as 60 days past due. Now here’s the clincher… the investor will lure you in by stating “don’t let foreclosure ruin your credit…. we can save you!!!” Well, I am sorry to say, once you have a 30 days past due on your credit report, its a heavy blow to your score and your future borrowing ability. 60 days late and your going to be hard-pressed to put your credit to any good use for another 5 – ish years, 90 days past due and you’re as bad as a foreclosure. Basically, don’t let investors tell you otherwise. It’s simply not true. What they CAN help you with is what is called a waiver of deficiency judgement. This is a form that is signed stating the bank will not pursue you personally for the difference of what you owe vs. what they are able to re-sell the house for. Don’t fear on this one too much however, as judgements drop off your credit report between 7-10 years anyhow. If you see the investor as offering you real, viable offers like the waiver of deficiency, then you may have something..here’s an investor willing to actually work for his money! With banks scrambling nowadays to gain any extra capital they can, deficiency waivers are few and far between.

Here’s A Summary of how to deal with the “Stop Foreclosure” clowns:

  • They cannot and will not be helping your credit
  • Again, have an attorney.
  • Do not in any way enter into a contract that will let them tie your house up for ANY amount of time. First come first served for the sale of this house…time is money.
  • There is no such thing as a “short sale” expert. Banks change what they wish to do, and many banks have short sale departments you can talk to yourself.
  • Be careful the investor does not bring in a fake buyer that cannot perform on closing the house per the banks expectations. You’ll have wasted an awful amount of time.
  • You do not have to be licensed for this.
Posted by The Masked Investor at 7:23 pm Tagged with: , , , , , ,

"Fast Cash For Your House" Scam

Seller Beware 1 Response »
Aug 172009

I’m sure you’ve all seen the “fast cash for your house” signs and ads by now. This is solely a lead generation technique. The “investor” behind the ad is collecting calls, sorting them by a pre-qualifying them by who has the most “financial benefit” in their house, as well as who may be in the more desperate situation financially. When the investor finds the right combination of disparity and money, they will “swoop in” and save the day with a “Fast cash offer”. Ninety percent of the time this offer does not consist of “cash”, nor is it “fast”. They will “tie up” your house by entering into a contract with you, the seller. The “investor” will seek as much time in this contract as they are able to convince you to give. Cash closings should close in days.. so don’t fall for drawn out timelines. The investor will normally hem and haw about putting down “earnest money”, or any financial consideration. This is a huge red flag. The Investor is trying to do one of 3 things; get your house under contract to “flip” or re-sell to another buyer to make a fast dollar, find a private money lender to give them a “short term” cash loan based on the value of the home, or honestly buy your house for cash (not all investors are evil).

Here’s A Summary of how to deal with these investors:

  • Don’t sign an agreement or contract without your attorney (don’t use the investor’s attorney…who do you think they will protect??).
  • Always take non-refundable earnest money in the form of a cashiers check. Must be traceable.
  • Don’t let them tie your house up for more than 2 weeks, even in a down market. If they MUST do this, then tell the investor you wish to add a “first right of refusal” clause into this agreement. If you find another buyer before the investor can close, you will give that investor 48 hours to perform or you will sell to the other buyer.
  • Be sure you are well aware of the actual value of your home. Do this buy asking real estate agents for the selling price of homes on your street or neighborhood that have SOLD within the past year. The houses should be similar in size and amenities to your house. This is very easy to do. Don’t let the investor tell you YOUR value. They will try to beat you down and make you think the best thing you could do is to let them “take it off your hands”.
Posted by The Masked Investor at 9:13 am Tagged with: , ,
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