dave@cylixd.UUCP (Dave Kirby) (12/17/85)
> I have a question concerning the various television and newspaper >ads ( i.e. "Special Report" at midnight on Ch 7 Albuquerque would be >a good example ) about investment methods that manipulate mortgages and >other real-estate vehicles by buying with "other people's money". >... >I and probably many other would like to see this "nothing down" craze laid >to rest one way or the other. If I am allowed to use it, fine, but otherwise >I want to know how much of a scam it really is. In the original posting Mr. Fine asked some questions regarding the legality of such shenanigans; I cannot comment on those questions. But I can comment on how advisable it is to enter into one of these schemes. The Wall Street Journal a few months back had an expose' on such scams. I will summarise their findings here. The whole pitch of "Make Money Without Money," "Create Wealth in 6 Easy Steps," "Buy Real Estate at Below Market with NO MONEY DOWN!" and the like, sounds irresistible to most people. And it used to work sometimes in the 70's, when hyperinflation in the real estate market was rampant. But now the rise in real estate prices has slowed significantly, and there just aren't the desperate sellers there used to be. These schemes are by no means a sure thing, and never were. Not only are they not a sure thing, they are also downright dangerous. First, you spend megabucks on seminars and tapes and books. Then, if you have the daring to actually go out and try it, you might luck into a property you can buy this way. But slowing inflation and poor market conditions can trap you into a negative cash flow very easily. As one disgruntled would-be investor said, "The hard part has not been buying houses for no money down. The toughest thing is keeping them after you buy." One economist observes, "A few years ago you could count on inflation to bail you out of your mistakes. But there isn't any margin for error any more." Even though such deals are called "No Money Down," this name is very misleading, because even if you can swing such a deal, the closing costs frequently eat you alive. Also, finding a buyer desperate enough to give up all his equity is much more difficult than the seminarists let on. If he is that desperate, there is probably something terribly wrong with the property. In a typical No-Money-Down deal, the buyer must obtain a 75% mortgage, then convince the seller to finance the remainder and accept a note in lieu of a down payment. This is not always so easy to do. First, it is difficult to find a bank to lend you the money unless you are already rich, especially if they know you are financing the down payment. But there are other deals and schemes, too, that can get around some of these difficulties. Typical of these is the "Documented Paper Acquisition." Here's how it works. It's simple. You negotiate an option to purchase an $80,000 mortgage by offering the cash-hungry seller $48,000. In a separate transaction, you then purchase a $100,000 property free and clear by offering its owner $20,000 cash and the $80,000 mortgage. Of course, the closing on both the purchase of the mortgage and the purchase of the house must occur simultaneously - you also have to arrange that. Now, using the property as collateral, you then obtain an $80,000 loan (and we all know how quick and simple that can be at a bank). Finally, you pay the seller of the mortgage $48,000, and pay the seller of the property $20,000. You end up with a property and $12,000. Now isn't that easy? Most real-estate brokers dread the thought of these seminars coming to town. "We get a flurry of these no-money-down offers every time one of those guys comes through town. We don't even bother with them. It's a waste of our time and theirs," is a typical response. Most realtors have their standard form that says "initial deposit" on one line and "down payment" on another. If you can't fill in those lines with something reasonable, they don't want anything to do with you. In Houston a while back, hundreds of desperate homeowners were swindled out of their money by some folks who took these seminars. Seems they bought the house and mortgage from them, and rented the house back to the sellers. But they refused to make the mortgage payments, so the lender foreclosed and the seminar people absconded with the rent. One such crook who got his start in a No-Money-Down scam said he couldn't find a way to make it work for him legally, so he settled on an illegal way. If you want to learn more easy, simple steps like the "discounted paper acquisition" method above, go ahead and plunk down your money for one of these seminars. But count me out, please. I feel I will stand a better chance at Harrah's in Las Vegas. ----------------------------------------------------------------- Dave Kirby ( ...!ihnp4!akgub!cylixd!dave)
spp@ucbvax.BERKELEY.EDU (Stephen P Pope) (12/24/85)
> Most real-estate brokers dread the thought of these seminars coming > to town. "We get a flurry of these no-money-down offers every time > one of those guys comes through town. We don't even bother with them. > It's a waste of our time and theirs," is a typical response. Most > realtors have their standard form that says "initial deposit" on one > line and "down payment" on another. If you can't fill in those lines > with something reasonable, they don't want anything to do with you. > > Dave Kirby ( ...!ihnp4!akgub!cylixd!dave) Actually, realty agents are required to present to the seller all offers, however absurd. They are also responsible to advise the seller if an offer (such as a 100 or more percent financing deal) is risky (they almost always are). What's more the agent can be held liable if he doesn't follow the rules, and the seller loses from the fraudulent sale. But some no-money-down offers are legit -- for example, if there is security besides the property being sold being offered for the second mortgage. So agents who categorically reject no money down offers aren't doing their job either. It's pretty silly that seminar-giving types are still plugging techniques that only worked when it was completely a buyer's market. But don't blame the seminarists (?), however sleazy they may be, if the allegedly professional realty agents let their clients get swindled. steve pope (...ucbvax!spp)
dave@cylixd.UUCP (Dave Kirby) (12/27/85)
In article <11288@ucbvax.BERKELEY.EDU> spp@ucbvax.BERKELEY.EDU (Stephen P Pope) writes: >Actually, realty agents are required to present to the seller >all offers, however absurd... So agents who categorically reject >no money down offers aren't doing their job... Yes, if the OPM buyer goes directly to the seller's agent. But a detail I omitted from the article is that many of these seminar graduates will go to a broker wanting him to be their buying agent, so they can get a look at the multiple listing and write a ridiculous offer on everything listed there. This is what the agents are turning down. ----------------------------------------------------------------- Dave Kirby ( ...!ihnp4!akgub!cylixd!dave)
mykes@3comvax.UUCP (Mike Schwartz) (12/31/85)
I heard an interesting one on TV the other night. It goes like this: Step 1. Acquire a large number of VISA cards. The "scam" lecturer says you can get well over 200 of them from banks all over the country. Step 2. Find a house to buy, and offer the seller CASH TOMORROW for his place, (which clearly is the most upright way to get a discount on a house), for 70-80% of the appraised market value (or your best estimate of it). Step 3. Go to your bank and get a cash advance on all those VISA cards (the lecturer says he likes to do it at 10 minutes before the bank closes, for kicks). 200 cards at $1000 per cash advance is $200,000 (enough to buy some pretty nice houses). Step 4. Pay for the house using the cash. Step 5. Refinance the house for 80% of the value and pay off the VISA cards within 30 days (to avoid the interest payments). Step 6. Pocket whatever money is left. Step 7. Give the house away (all the buyer needs to do is take over the payments). His example: Offer $150,000 for a $200,000 house, take it or leave it (show him some cash maybe). When you find a seller, go to the bank and get $150,000 in advances on VISA cards and buy the house. Go to the bank and get one of those (easy to get???) 90% LTV mortgages for $180,000. Pay off the $150,000 on the VISA cards and pocket the $30,000 that is left over. The last step, says the lecturer, is to go to one of those real estate conventions and offer to give away the property, if someone will simple assume your loan. Seems he finds a sucker or two at every one. /mike schwartz @ 3Com Corp.
mark@cbosgd.UUCP (Mark Horton) (01/02/86)
I saw this too. It was hilarious. My wife's reaction: "Don't these mortgage companies ever run credit checks?" If I were a mortgage company and somebody came to me wanting to borrow $180K, and the credit check I ran on him showed he owed $200K on Visa cards, there isn't much chance that I'd approve the loan. (Don't tell them about the Visa cards? Well, then, that means you have to perjure yourself on a loan application. I wonder how many years at the big house that's worth?) Also, these credit checks take time - 2 months or so. Where does he go - Vito's Mortgage and Pest Elimination Service? Some other inconsistencies: what about the cash advance charge? When you get a cash advance, don't you have to pay 1.5% of the advance as an advance charge? That adds up to $3000 in fees. Then there are closing costs and loan origination fees, that's another several thousand dollars. And he has to sell the house - that takes time, after all, it wasn't selling in the first place. Let's see now, the real estate commission at 7% is $12,600, unless he can sell it himself. Oh yes, he figures on financing the house at 90% of the appraised value of $200,000. But he just bought the house for $150,000, and the house is going to have to be appraised for the loan, and if it just sold for $150,000, the appraisal isn't likely to be for $200,000. Finally, there's the matter of the annual $20 or so fee on each Visa card. For 200 cards that's $4000/year. He said "just get the card from somebody in Texas or Conn, they can't charge a fee." I understand that Texas just started allowing annual fees, and that every bank in Texas just started charging the fee to all their existing accounts, without bothering to tell anybody. Mark
ron@brl-sem.ARPA (Ron Natalie <ron>) (01/03/86)
> Step 5. > Refinance the house for 80% of the value and pay off the VISA > cards within 30 days (to avoid the interest payments). > Wrongo! Every bankcard I've ever seen starts charging interest on CASH ADVANCES from the date of the advance. You really are taking out a 18-21% loan in that case, as opposed to regular charges which are interest free provided you maintain a zero balance from month to month. -Ron
rudy@wang.UUCP (Rudy Bazelmans x72609 ms 1989) (01/03/86)
> Some other inconsistencies: what about the cash advance charge? When > you get a cash advance, don't you have to pay 1.5% of the advance as > an advance charge? That adds up to $3000 in fees. The credit cards mentioned did not have an advance charge nor did they have an annual fee. > Oh yes, he figures on financing the house at 90% of the appraised value > of $200,000. But he just bought the house for $150,000, and the house > is going to have to be appraised for the loan, and if it just sold for > $150,000, the appraisal isn't likely to be for $200,000. Not true, $150K was the discounted cash price. It could still be be appraised for $200K.
jj@nrcvax.UUCP (Utah) (01/03/86)
In article <1725@cbosgd.UUCP> mark@cbosgd.UUCP (Mark Horton) writes: >that's worth?) Also, these credit checks take time - 2 months or so. I have never had a credit check take more than a month. > >Some other inconsistencies: what about the cash advance charge? When >you get a cash advance, don't you have to pay 1.5% of the advance as >an advance charge? That adds up to $3000 in fees. Then there are This varies from bank to bank. Some banks do not charge extra for a cash advance. Lest anyone think that I believe in this scam, let me say what I think of it. It may have worked for the promoter, and may even have worked for a few others, but if too many people start trying it, the banks are going to change their ways and a lot of people are going to get burned. In the end only the promoter makes money from the sales of all the courses. My philosophy on deals such as this is that if everybody else knows about it, it probably is not a good deal any more. ------------------------------------------------------------------------- Jeff Jennings Network Research Corp. ihnp4!nrcvax!nrcutah!jj 923 Executive Park Drive Suite C ucbvax!calma!nrcvax!nrcutah!jj Salt Lake City, Utah 84117, U.S.A. {sdcsvax,hplabs}!sdcrdcf!psivax!nrcvax!nrcutah!jj (801) 266-9194
mr@homxb.UUCP (M.RINDSBERG) (01/03/86)
> I heard an interesting one on TV the other night. It goes like this: > Step 1. > Acquire a large number of VISA cards. The "scam" lecturer says > you can get well over 200 of them from banks all over the country. This is not as easy as it sounds. When each bank checks your credit rating they may notice (:-)) that you have many cards and as the number goes up they will start refusing you (based on lack of credit) > Step 2. > Find a house to buy, and offer the seller CASH TOMORROW for his > place, (which clearly is the most upright way to get a discount > on a house), for 70-80% of the appraised market value (or your > best estimate of it). > Step 3. > Go to your bank and get a cash advance on all those VISA cards > (the lecturer says he likes to do it at 10 minutes before the > bank closes, for kicks). 200 cards at $1000 per cash advance > is $200,000 (enough to buy some pretty nice houses). > Step 4. > Pay for the house using the cash. > Step 5. > Refinance the house for 80% of the value and pay off the VISA > cards within 30 days (to avoid the interest payments). Most Visa cards start the interest on the day of the cash advance at rates of 16.0% - 22.8%. (Sorry) > Step 6. > Pocket whatever money is left. If any. > Step 7. > Give the house away (all the buyer needs to do is take over > the payments). > > His example: > Offer $150,000 for a $200,000 house, take it or leave it (show him > some cash maybe). When you find a seller, go to the bank and get > $150,000 in advances on VISA cards and buy the house. Go to the > bank and get one of those (easy to get???) 90% LTV mortgages for > $180,000. Pay off the $150,000 on the VISA cards and pocket the > $30,000 that is left over. The last step, says the lecturer, is to > go to one of those real estate conventions and offer to give away > the property, if someone will simple assume your loan. Seems he finds > a sucker or two at every one. Odds are that it will never work. > /mike schwartz @ 3Com Corp. Mark
df@ptsfa.UUCP (Dave Fox) (01/05/86)
>> Refinance the house for 80% of the value and pay off the VISA >> cards within 30 days (to avoid the interest payments). >Wrongo! Every bankcard I've ever seen starts charging interest on >CASH ADVANCES from the date of the advance. You really are taking >out a 18-21% loan in that case, as opposed to regular charges which >are interest free provided you maintain a zero balance from month to >month. He claims to have located banks that don't charge interest on cash advances. Somehow I doubt this. I've seen an earlier version of his course - not the fancy package advertised on TV. During his hype talk, he claimed that the course included the names of banks. It did - but there was no indication as to what the bank offered as far the terms of the cards were concerned. The package advertised on TV has a separate book of 'over 6000 banks!'. Has anyone seen this? Does it give real information, or are you still left to write the letter he suggests? Dave Fox ..!ptsfa!df
ramey@ti-csl (01/06/86)
> I understand that Texas just started allowing annual fees, and that > every bank in Texas just started charging the fee to all their existing > accounts, without bothering to tell anybody. I don't think this is true. However, many Texas banks which offer credit cards have moved (or are moving) their credit card operations out of the state so that they can charge yearly fees (seems like they like to move to Delaware?). Also, they generally begin charging interest from the time they receive the charge, so even if you pay the bill as soon as you receive it, you end up paying some fee. Joe Ramey {smu, rice, texsun, im4u} ! ti-csl ! tilde ! ramey
tas@dcc1.UUCP (N. Tasova) (01/06/86)
> > Step 5. > > Refinance the house for 80% of the value and pay off the VISA > > cards within 30 days (to avoid the interest payments). > > > Wrongo! Every bankcard I've ever seen starts charging interest on > CASH ADVANCES from the date of the advance. You really are taking > out a 18-21% loan in that case, as opposed to regular charges which > are interest free provided you maintain a zero balance from month to > month. > > -Ron What about the annual membership fee that the banks charge which ranges from $10 to $35 a year. It can be a hefty amount. Tas.
muth@amdahl.UUCP (John A. Muth) (01/07/86)
In article <748@wang.UUCP>, rudy@wang.UUCP (Rudy Bazelmans x72609 ms 1989) writes: > > Oh yes, he figures on financing the house at 90% of the appraised value > > But he just bought the house for $150,000, and the house > > is going to have to be appraised for the loan, and if it just sold for > > $150,000, the appraisal isn't likely to be for $200,000. > > Not true, $150K was the discounted cash price. It could still be be appraised > for $200K. Only if you can find an incompetent or dishonest appraiser. My wife is an appraiser. I asked her. Given this situation, the house would be appraised for $150,000. She has on several occasions been hired by people in just this situation. When she found out that this is what they have in mind, she promptly refunded their money and told them to find another appraiser. The key to this scam seems to be finding an incompetent or dishonest appraiser to lie to the bank about the value of the property. If you can find one (who hasn't already ruined their reputation), it is very easy to make lots of money. The problem is finding somebody willing to flush their career down the drain (and possibly find themselves sued) so you can get rich. Of course, the standard disclaimer applies. -- John A. Muth ...!{ihnp4,hplabs,sun,nsc}!amdahl!muth
gj@bubba.UUCP (01/08/86)
> In article <748@wang.UUCP>, rudy@wang.UUCP (Rudy Bazelmans x72609 ms 1989) writes: > > > Oh yes, he figures on financing the house at 90% of the appraised value > > > But he just bought the house for $150,000, and the house > > > is going to have to be appraised for the loan, and if it just sold for > > > $150,000, the appraisal isn't likely to be for $200,000. > > > > Not true, $150K was the discounted cash price. It could still be be appraised > > for $200K. > > Only if you can find an incompetent or dishonest appraiser. . . . . . > > The key to this scam seems to be finding an incompetent or dishonest > appraiser to lie to the bank about the value of the property. If you > can find one (who hasn't already ruined their reputation), it is very > easy to make lots of money. The problem is finding somebody willing > to flush their career down the drain (and possibly find themselves > sued) so you can get rich. I would like to offer a different opinion on the above comments. The scenario mentioned above could very well occur and in fact be completely ethical from an appraisers standpoint. One would not have to find a "dishonest or incompetent appraiser" to get an appraisal of $200,000 for the above mentioned property. The quote made below is from "Texas Real Estate" by Charles Jacobus and Bruce Harwood. "The Market value ... is the highest price in terms of money that a property will bring if (1) payment is made in cash or its equivalent, (2) the property is exposed on the open market for a reasonable length of time, (3) the buyer and seller are fully informed as to the market conditions and the uses to which the property may be put, (4) neither is under abnormal pressure to conclude a transaction, and (5) the seller is capable of conveying marketable title." An appraisers job is to determine the market value of a property. Just because the seller was talked into selling for below market value does not necessarily affect the market value. It very well could remain the same. The methods of appraisal take up about 30 pages in the book so I won't go into them. The point I am trying to make is that there is a huge difference between market value and sales price and folks getting involved in real estate should be aware of this. I feel that deals of this sort are extremely abusive and that there are hundreds of better ways to make a buck in real estate. However, they are legal and the seller in this instance would have no recourse unless s/he was misrepresented to in some manner. Disclaimer: I don't hold a real estate license, am not an attorney, nor an expert in real estate. These opinions are my own and in no way reflect the opinions or policies of my employer. -- George Jenkins, COSI Texas, Inc., 4412 Spicewood Springs #801, Austin TX 78759 USA uucp: {ihnp4,seismo,ctvax}!ut-sally!cositex!bubba!gj at&t: (512) 345-2780
mark@cbosgd.UUCP (Mark Horton) (01/08/86)
In article <2491@amdahl.UUCP> muth@amdahl.UUCP (John A. Muth) writes: >> > Oh yes, he figures on financing the house at 90% of the appraised value >> > But he just bought the house for $150,000, and the house >> > is going to have to be appraised for the loan, and if it just sold for >> > $150,000, the appraisal isn't likely to be for $200,000. >> >> Not true, $150K was the discounted cash price. It could still be be >> appraised for $200K. > >Only if you can find an incompetent or dishonest appraiser. I talked this over with my wife, who saw the whole show and remembers more details than I. Apparently the advocate of this plan is making the assumption that the house has ALREADY been appraised for $200,000. (This limits your choices - how many people get their house officially appraised before they go to sell it?) Once you have an appraisal in hand, I think it's good for some period of time. For example, we went to refinance our house about a year ago. We started the paperwork in January, figuring it would take a month or two and that interest rates would go down. We paid our $130 and the house was appraised. Rates didn't go down, and the deal fell through. Then, last June, we decided to go again (rates finally dropped) but, due to a quirk of the system, the FHA appraisal was good for 6 months, and we HAD NO CHOICE but to reuse the appraisal. (We had to get it officially assigned to the new mortgage company, which was different from the first try.) We had actually made some improvements to the house since then, so it might have appraised for more, but this limited the amount we could refinance. I'm not sure if these rules still apply for non-FHA financing, or if the person applying for the loan isn't the same owner who had the original appraisal done. Or maybe the advocate has the appraisal done before he makes the offer for 75% of the appraised value? Mark
muth@amdahl.UUCP (John A. Muth) (01/08/86)
In article <2491@amdahl.UUCP>, I wrote: > > Not true, $150K was the discounted cash price. It could still be be appraised > > for $200K. > > My wife is an appraiser. I asked her. Given this situation, the house > would be appraised for $150,000. This is not true. Indeed the house would appraise for $200,000. My wife is ready to kill me for misrepresenting her. I'm afraid I misunderstood what she told me and I passed this misinformation on to you. I appologise to the net for this error. I especially appologise to my wife for attributing this error to her. -- John A. Muth ...!{ihnp4,hplabs,sun,nsc}!amdahl!muth
scott@hou2g.UUCP (The Brennan Monster) (01/09/86)
Granted I haven't thought about this too much (lazy,
I guess), but could someone please enlighten me as
to WHY someone with a $200,000 house would accept
$150,000 for it? Even if paid in cash?
"Uncle Dick, are any of the kids in your books named Mitch?"
"Uh, actually, most of my characters tend to be hand tools."
Scott J. Berry
ihnp4!hou2g!scottrjb@akgua.UUCP (rjb) (01/10/86)
Well...uh perhaps some yuppie owes a bunch of money for some
nasty habit s/he has developed and needs $150K...NOW to avoid
losing the use of both arms or something more personal. Then
the seller would take $150K for a house worth $200K. It is called
a distress sale I believe.
Bob Brown {...ihnp4!akgua!rjb}martinl@molihp.UUCP (Martin M Lacey) (01/10/86)
In article <757@hou2g.UUCP> scott@hou2g.UUCP (The Brennan Monster) writes: >Granted I haven't thought about this too much (lazy, >I guess), but could someone please enlighten me as >to WHY someone with a $200,000 house would accept >$150,000 for it? Even if paid in cash? > > "Uncle Dick, are any of the kids in your books named Mitch?" > > "Uh, actually, most of my characters tend to be hand tools." > > Scott J. Berry > ihnp4!hou2g!scott And allong those same lines, Doesn't everyone who own's a house and sells it recieve the equivelent of cash anyway ? I mean, If I want to buy a house, I get a loan from the bank to buy the house and buy it completely. The bank now really own's the house until I can come up with enough money to give the bank for the house (interest + cost). So the original owner gets completely paid, and is no longer in the picture; or at least after paying off his debts. IE. There doesn't seem to be any advantage in selling the house to the person who *states* he will pay cash, when that is the condition of the sale anyway - unless he was trying to sell it through a broker of some sort, and needs money NOW. I would apreciate flaws in this thinking to be pointed out, if any. -- Martin the Magician.
lji@python.UUCP (L. Iacona) (01/10/86)
> Granted I haven't thought about this too much (lazy, > I guess), but could someone please enlighten me as > to WHY someone with a $200,000 house would accept > $150,000 for it? Even if paid in cash? > > "Uncle Dick, are any of the kids in your books named Mitch?" > > "Uh, actually, most of my characters tend to be hand tools." > > Scott J. Berry > ihnp4!hou2g!scott The idea is to find people so desperate (and in a great hurry), that they will jump on an offer that is only a portion of the property's value. 150K for a 200K property may be an extreme, but this could happen ..... DON'T waste $295.00 on audio tapes from Ed Beckley, Dave DelGatto or any of those other CLOWNS for an education. A well written and FREE book at your local library called --- CASHLESS INVESTING IN REAL ESTATE by Cummings will answer any questions you may have on real estate transactions of this type. You can decide whether it's BULL and whether it's for you or not for FREE! Louie
leb@alliant.UUCP (Larry Bakst) (01/11/86)
In article <312@3comvax.UUCP> mykes@3comvax.UUCP (Mike Schwartz) writes: > > >Step 5. > Refinance the house for 80% of the value and pay off the VISA > cards within 30 days (to avoid the interest payments). > > /mike schwartz @ 3Com Corp. on every visa/mc card that i have ever seen interest on cash advances starts to accrue from the day of the cash advance. it' only on purchases that you have 30 days interest free. -- larry uucp: {decvax!linus, harpo!seismo!harvard!mit-eddie}!alliant!leb arpa: leb@mit-vax || g.leb@mit-oz at&t: (617) 263-6673 [home], 263-9110 [work]
ark@alice.UucP (Andrew Koenig) (01/11/86)
> IE. There doesn't seem to be any advantage in selling the house to > the person who *states* he will pay cash, when that is the condition > of the sale anyway - unless he was trying to sell it through a > broker of some sort, and needs money NOW. > > > I would apreciate flaws in this thinking > to be pointed out, if any. There is a consierable advantage to selling a house to a buyer who offers cash, and that is that you know the deal is really going to go through. Consider: you want to sell a house to someone who proposes to borrow money to buy it. How do you know the buyer is really going to get the loan? It takes a month to find out. During that time, you can't sell the house to anyone else, so that if the deal falls through you may lose your chance. Or the buyer may get the loan, but not for as much as originally requested. Now you have the choice to settle for a lower price or start all over again. And so on.
rick@ut-ngp.UUCP (Rick Watson) (01/12/86)
Selling a house for cash has the following advantages: 1. With a bank loan, often the seller and buyer must pay both must pay the bank points or other fees to get the loan. When I bought my current house 18 months ago, the seller paid 4 points on $65000, or about $2600. 2. Avoiding the bank can save 30+ days waiting for credit checks, etc. Rick Watson University of Texas Computation Center arpa: rick@ngp.UTEXAS.EDU rick@ngp.ARPA uucp: ...seismo!ut-sally!ut-ngp!rick rick@ut-ngp.UUCP bitnet: ccaw001@utadnx phone: 512/471-3241
mark@cbosgd.UUCP (Mark Horton) (01/12/86)
In article <131@molihp.UUCP> martinl@HP-UX.UUCP (Martin M Lacey) writes: >And along those same lines, Doesn't everyone who own's a house and >sells it recieve the equivelent of cash anyway ? Yes, the seller is paid off in cash at closing. However, there are still at least two advantages to the seller if the buyer pays cash: (1) There is no 2 month delay for the buyer to get a loan approved. (2) There is no chance that the buyer will back out because s/he was unable to get a loan approved. As to why a seller would take $150K on a house worth $200K, if you've ever sold a house, you'll start to appreciate why they might be interested. Just getting any offer at all can be very difficult, especially for "by owner" sellers that don't use a broker, or in problem areas. (My in-laws had a house listed with Century 21 for over a year, and not only didn't get any offers, but didn't even get any showings! They lived in Youngstown, Ohio. They were asking $32K for a 30 year old house originally bought for $13.5K, and wound up selling it to a broker for $13K, as I recall, just to get it over with.) Real estate scam people describe a class of sellers called "don't wanters." These people are very anxious to sell quickly, and are having a hard time doing so. Perhaps they are paying some huge anount of interest each month until the house is sold, and that interest is eating them alive. Perhaps they've already bought another house and are making double payments. Perhaps they just got divorced and are anxious to sell the house, split the profits, and get it over with. Perhaps the house has been up for sale for 6 months or a year with no offers, and the sellers are getting desperate. Perhaps they can't buy their new house in their new location until the old one sells, and they are paying rent plus house payments in the meantime. Perhaps the 90 minute one-way commute to work in Steubenville each day is getting old. I believe the scam people say that if you go down the MLS listings and offer each one 80% of the asking price, some significant percentage of the sellers will accept. (I can't remember the percentage, but the figure 10% sticks in my mind.) If you go down a "by owner" list, the percentage may get higher. There is one big limit to this reasoning, however. It assumes the seller has at least $50K equity in the house. If they bought the house recently, chances are they are fighting just to get the real estate broker's commission paid from their equity, and they can't afford to go down in price much, if at all - otherwise they'll owe money to get out of the deal. So we're just talking about people who have lots of equity, generally who have owned the house for a long time. Mark
olaf@ihwpt.UUCP (olaf henjum) (01/12/86)
I've been following this debate with some interest simply because I know of
at least one case where it was actually done, but the person involved
encountered practically all of the problems that have come up in this
discussion -- except one:
It really is possible to get 200+ VISA cards at once. The key phrase is
"at once"; the person I'm thinking of had practically no credit record to
speak of but did live in the L.A. area (where there are a lot of banks).
He had some store charge cards before his "blitz" but that was it.
What he did was collect applications from every bank he could find in the
L.A. area, fill them out, and mail them in AT THE SAME TIME! Out of 1047
applications, 207 were approved; after that point, the time delay had grown
to a couple of weeks and the remaining banks had started to notice this
person's massive and sudden acquisition of VISA cards.
Yes, it takes a long time to fill out that many applications; the only reason
the person had time to do it (and it took a few months to prepare all of this)
was because he was a high school student. In any event, that's how he got his
start in real estate, at the age of 16. I hope you'll forgive me for not
disclosing his name; he's in enough trouble already. (The plan fell through
when the interest charges started to pile up and I suspect this young man will
have to declare bankruptcy -- if the banks involved ever catch up to the fact
that he's using the cards to pay off each other.) Fortunately for the
electronic banking community, this young man apparently has no interest in
becoming a "password hacker."
-- Olaf Henjum (ihnp4!ihesa!olaf)
"... the students then were sour grapes, today you're cream and peaches.
Conditioned by the status quo, you shun the iconoclastic;
just like the minds we help to mold -- the world is made of plastic."
-- from the Stanford Daily comic strip "Gradepoint,"
run as a "Poetry of the Absurd" featuremykes@3comvax.UUCP (Mike Schwartz) (01/14/86)
In article <757@hou2g.UUCP> scott@hou2g.UUCP (The Brennan Monster) writes: >Granted I haven't thought about this too much (lazy, >I guess), but could someone please enlighten me as >to WHY someone with a $200,000 house would accept >$150,000 for it? Even if paid in cash? I am as skeptical as anybody about these scams, and I do not like many of them. A person might have his house on the market for many months and might take $150,000 for his $200,000 house. Also someone interested in a quick sale, or someone who still stands to make $100K + on the deal, or many other valid reasons. The thing that I do not like about the nothing down schemes is that those who are successfull really make their profits from those who deserve it (the seller). This is true for MOST of the schemes. The seminar lecturers we all see on TV do have a lot to teach us, though, and I am not being derogatory. I bought one $300 course and in less than 90 days, I did buy (with a 50% investor partner) a house that I am living in. I also own property in two other states, and IT IS PROFITABLE when it is done right. I have spent a grand total of $2800 for my ownership in two of the properties (I inherited the third), and have made at least $2800 in write-offs. The lecturers seem to come from two camps: the Ed Beckley camp and the Hal Morris group. The Beckley guys come across to me as good speakers, but their methods aren't what I would like for my own ethical conscience. Hal Morris and his group seem to be a little more "honest" in the way they deal with the sellers, banks, etc. All of the lecturers will tell you that you wont get rich quick and that it takes hard work. My gut feeling is that the '80s are not the best time to use the methods they are teaching, although some do apply. The Nixon/Carter years were much better, because everyone had a hard time selling (and would take $150,000 for a $200,000 house). Since Reagan has been president, the sellers have been at a distinct advantage (turn down the $150,000 - someone will pay the $200,000 real soon). The lecturers all say "learn from my mistakes", which I bet they already made - and is the reason they must sell $300 kits for a living. I know several people who own several pieces of real estate, and I bet they did not use very much of their own money (leverage is nice!!). A few of these people claim to use "nothing down" schemes, but the story they tell is of "a few good cash flows" along with "a few aligators" (why is an aligator green? it eats money, of course). How about this twist on the credit card scam: Take your $200,000 in advances and wager on "RED" at Cesar's Palace. If you lose, declare bankrupcy, and if you win, pay all the fees, etc. with the $100,000 you win. (RED is almost 50-50 in Roulette). This idea at first sounded like fraud, but it does say in the papers I got with my Visa Cards that I can get an advance for any reason, including investments. If an attorney were to tell me that this was fraud, I wonder if some other real risky (quick high profit potential) investment wouldn't work. Real interested in other views. Mine are my own, totally. /mykes
jhh@ihtnt.UUCP (John Haller) (01/14/86)
One problem that hasn't been mentioned as a problem with paying cash for a house to buy quickly is the lack of Title Insurance. One reason that someone may be willing to accept $150,000 for a $200,000 house is that they have second mortgages up the wazoo on the house that they haven't told you about. One of the big delays in getting a home loan is the wait for getting a commitment from the Title Insurance company. When you pay off the seller's mortgage on the $200,000 house, and give the seller the remaining cash, you may be stuck with recorded or unrecorded liens that you don't know about. John Haller
davidsen@steinmetz.UUCP (01/14/86)
People who want to sell their houses will often take less than the market
value to get rid of it. If you are moving (for instance) and have bought a new
house, are living somewhere else, and are trying to make payments on two
houses, all while the house sits empty and you worry about vandalism, you will
probably come down (maybe not 25% at first, but down).
If you have a house on the market for a few *years* and it doesn't sell, or if
you really need the money and have ever waited for someone else to get a
mortgage approved, you will come down for cash.
NOTE: I had a sale of my last house hang fire for seven months while the
mortgage went through. Luckily I was not desparate for the money. I had moved
into a house which had been on the market for two years, which I got for
exactly 48% of the asking price by paying cash. Admitedly the asking price was
too high, but after awhile people get desparate.
Another factor is the actual cost of a delayed sale. The house I was selling
was an income property, with a mortgage (how do you think I paid cash for the
new one?) and the actual cost was seven times (the taxes, the mortgage, the
lost rent to keep the house free). I would have taken a good bit less for
cash.
--
-bill davidsen
seismo!rochester!steinmetz!--\
/ \
ihnp4! unirot ------------->---> crdos1!davidsen
\ /
chinet! ---------------------/ (davidsen@ge-crd.ARPA)
"It seemed like a good idea at the time..."mej@hlwpc.UUCP (Michael Jacobs) (01/15/86)
> > WHY someone with a $200,000 house would accept > > $150,000 for it? Even if paid in cash? > > > > > The idea is to find people so desperate (and in a great hurry), > that they will jump on an offer that is only > a portion of the property's value. > *I, too, am confused. Doesn't the seller of a house get the full selling price immediately, even if you finance it through a bank? ** REPLACE THIS LINE WITH YOUR MESSAGE ***
andrew@hammer.UUCP (Andrew Klossner) (01/15/86)
> IE. There doesn't seem to be any advantage in selling the house to > the person who *states* he will pay cash, when that is the condition > of the sale anyway - unless he was trying to sell it through a > broker of some sort, and needs money NOW. > > > I would apreciate flaws in this thinking > to be pointed out, if any. The discussion of cash vs bank loan and points paid by the seller is correct, but, at least in these parts, "pay cash" is the alternative to "enter into a land contract." In many real estate transactions, the seller takes a mortgage rather than cashing out because the buyer cannot or will not get a conventional loan. During the interest rate peak of the early 1980's, more than half of residential house sales were by land contract. For example, my first house was bought when bank interest rates were at 18%, and I got an 11% land contract with 12% down payment from the seller, who was anxious to sell. -=- Andrew Klossner (decvax!tektronix!tekecs!andrew) [UUCP] (tekecs!andrew.tektronix@csnet-relay) [ARPA]
mykes@3comvax.UUCP (Mike Schwartz) (01/15/86)
As a seller, I would rather sell to someone who wanted to pay cash instead of someone who had to get a loan - far less hassles, and no possibility the buyer won't get the money. Also, a buyer with a large down payment is more likely to get a loan than one with nothing down. Bull walks, money talks. mike schwartz @ 3Com Corp.
suze@terak.UUCP (Suzanne Barnett) (01/16/86)
> In article <757@hou2g.UUCP> scott@hou2g.UUCP (The Brennan Monster) writes: > >I guess), but could someone please enlighten me as > >to WHY someone with a $200,000 house would accept > >$150,000 for it? Even if paid in cash? > > > > Scott J. Berry > > ihnp4!hou2g!scott > > And allong those same lines, Doesn't everyone who own's a house and > sells it recieve the equivelent of cash anyway ? I mean, If I want > to buy a house, I get a loan from the bank to buy the house and buy > it completely. The bank now really own's the house until I can come > up with enough money to give the bank for the house (interest + cost). > So the original owner gets completely paid, and is no longer in the > picture; or at least after paying off his debts. > > IE. There doesn't seem to be any advantage in selling the house to > the person who *states* he will pay cash, when that is the condition > of the sale anyway - unless he was trying to sell it through a > broker of some sort, and needs money NOW. > > > I would apreciate flaws in this thinking > to be pointed out, if any. > > -- Martin the Magician. Well, if the house is being bought without a loan, the seller won't have any points to pay. Depending on the current conditions, this could be a very large or very small savings. However, points are not always required on loans (usually those with large percentages down), and unless the loan is VA, it's a negotiable item as to who pays whatever points are required by the lender. If the house is NOT sold through a real estate agent, a commission is saved. The commission is usually a percentage of the sales price. There are various and sundry fees required in selling a home, such as title insurance, prepaids, filing/recording fees etc. The deal could have been that the buyer paid all of this, which is not listed as a paart of the sales price. But even in the best view of the buyer, I can't see that this could possibly amount to $50,000 saved. Unless the home was overpriced, or the seller was afraid of losing it through foreclosure it doesn't make sense to me either. -- Suzanne Barnett-Scott uucp: ...{decvax,ihnp4,noao,savax,seismo}!terak!suze CalComp/Sanders Display Products Division 14151 N 76th Street, Scottsdale, AZ 85260 (602) 998-4800
mykes@3comvax.UUCP (Mike Schwartz) (01/16/86)
How long does a title search take? We closed on our house in December, and we had to wait about 30 days for the Bank to make the loan, but the title search was done a lot faster (or so I seem to recall).
john@hp-pcd.UUCP (john) (01/18/86)
<<<< < Subject: Re: Re: Re: "No Money Down" (Other People's Money) Scam > WHY someone with a $200,000 house would accept > $150,000 for it? Even if paid in cash? > > > Because they only paid $50,000 for it when they bought it five years ago. John Eaton !hplabs!hp-pcd!john