Consumers-Are you Flipping Homes or just Flipping out

Consumers-Are you Flipping Homes or just Flipping out?
I wrote the story Consumers...are you flipping houses or are you flipping hamburgers? on 8/22/07. The story was my opinion regarding the type of impact there was for people that were flipping properties. It when onto say that it can be a highly profitable venture or a very dangerous way to lose your shirt.

I remember back in the day between 2002-2006 when I would hear about consumers that were buying almost anything that had 4 walls. First we had all these condo conversions going up. I developer would come in and usually take an existing building and spend a few million in renovations. most of the buildings I saw were usually built in the 70's and some of them went from rental buildings to putting the units up for sale.

I had bought quite a few properties with my partners and we would either rent them out or renovate and sell them if need be. For example.... I bought a unit in a building that was originally going to be built from the ground up and was to be used as a rental building but then they made the announcement that they were selling the units so my interest grew. I was able to get in on the ground floor for this particular deal because I had sold a unit in one of the devolpers other buildings so when I showed up on a Sunday I walked into a makeshift office and bought a unit right off of a floor plan. We handed them 20% down at contract and waited about a year for it to be ready to close. We paid cash for it and after we closed....we carried it for about 3 months and sold it. We walked away with 80K. Not a bad deal huh?

We had an idea where the market was going because we were constantly studying it. We weren't pigs and sold it at a reasonable price instead of holding out for more. I knew that the day we became the owners that there were 55 others that just came on the market looking to do the same thing we were going to do and also knew that there would be plenty more so we decided to get out as quick as we could.

One of the biggest reasons that there are many properties in foreclosure is because the person who bought with the intention of never owning it longer than 30 days were blinded by certain issues that could arise if you don't know what you are doing. Here is an example of what I call flipping a property correctly. By low and try to put as much cash down as you can so at least you'll have some equity in the property.

Don't assume that if you sign a purchase agreement to buy Real Estate $500K ...that in a year from now when the construction or renovations are complete that the market will make the property be worth $250K more after you close. Try not to buy it with little or no money down.
Don't assume that if you sell it for a little less than you were wishing for.... that you aren't going to make a profit. "But Neal ...if I bought it for 180K and sell it for 270K instead of 280K ...I'm losing money!"

You didn't make the money yet so how would you know if you lost 10K? You didn't lose anything...you just won't make as much.

Don't try to predict or be fooled into thinking about how much you will make a year in advance. Borrowing hard money with a fluctuation interest rate could kill you if you don't have enough cash reserves to cover your carrying costs. Seasoning issues come into play as well..generally banks want 3-6 months for the loan to be seasoned. They have to justify why they are paying a premium in such a short time. We did manage to get on to close in 70 days which was pretty good. If you are lucky to get one at a foreclosure price or way under market value.... then you might have an easier time.

The approach we would take would be to add the possible costs in before we even make the decision to purchase. Now of course it's impossible to predict how much in cash reserves you will need to carry the property.....but at least if you have a good plan....you can try to figure out a rough figure or forecast of how much you will need to cover the nut until you can turnover the property to the next person. Borrowing hard money can be a good way to have leverage...but you better know what you are doing. It can be a fun game if you play it conservatively. In a market like this I would say at least 2 years of reserves put aside might be a good figure to work with. "But Neal....I don't have that kind of money to play with." Then I would tell you not to buy until you have prepared properly or you could be risking your financial future.

I can't tell you how many people I knew who jumped on that bandwagon and I would tell them to be careful. Some listened and some would just give me this stare and say "Neal...don't worry about me...I know what I'm doing." Now...some of those people have lost their properties and also lost the homes they lived in and have called me for help....well most of those people cannot be helped. They are upside down and can't sell their properties because they owe more than it's worth. Banks don't seem to want to help investors if their only way out is to sell short. Most banks will only let you negotiate a short sale if it's your primary residence or owner occupied.
There are still many good deals out there if you know where to look.

Don't rush into anything...there is plenty to go around. Don't make the mistake that so many people made...buy property...but buy it with a plan. And most importantly "Don't be flipping out!"
For more information please contact Neal The Real Deal Bloom-CRS-Realtor® /Remax Hometown


2500 Weston Road ,Suite 103
Weston FL 33331
(954)608-5556

The Real Deal tells it Like it is in Real Estatecopyright © 2008-All rights reserved

Consumers should know that Realtors® are consumers just like them

Consumers should know that Realtors® are consumers just like them.

Selling Real Estate over the last 12 years has been a full time job. Most of the time it seems that I do a lot more for what I deserve to get paid but hey....that's just me. I always seem to have to go the "extra mile"when it comes to giving my clients the best service they can get. I wrote a blog a while ago called I am the slimiest Realtor®. This post is a prime example of going the extra mile.

When there are issues and I have to explain them to my clients the first thing I tell them is not to panic. Let's figure out exactly how to tackle the problem and cut out the disease before it spreads.

Sometimes I don't always get full cooperation from the other parties involved in the transaction. You see...most of my business is from the listing side. I technically represent the sellers but also do my best to be helpful and fair to the buyers side as well. Let's face it....no matter how you look at it....my job is to get us all to the closing table and make sure the transaction closes as smoothly as possible.

I have been working more and more with buyers and we are now seeing issues on the sellers end more and more with all the foreclosures...short sales.... clear title issues and probates. Those deals take a bit more time and patience to complete...but as long as we disclose all of this to both parties then it makes them understand what is going to be happening during the process.

But sometimes when there are issues the consumer doesn't always understand why it is happening and what is happening. This is where I may have to step into a situation that has a lot of egos involved as well as a lot of testosterone that can make it emotional as well.

I try to explain to the clients that although I am a Realtor® and I still have my own problems just like them. They always say "Neal I'm sure you will do what you have to to make sure we can get this done by using all of your powers as a Realtor® to expedite it."
Wow!...I'm glad and happy to be complimented that way....but let's face it....when I am involved in my own personal Real Estate transactions things can still go wrong and I might make mistakes and have similar issues. Thank god i haven't... but you never know and just because I am more experienced then them still doesn't mean I can solve every issue.

I'm not sure if they just think that because I am a Realtor® that I have some super powers of persuasion but that's the way it seems sometimes and I've been lucky enough to be able to have pulled off a few that I thought were in question in getting done.
As your Realtor® I need to let my clients know that I have more than just a financial interest in working with them and that I will do everything humanly possible to take the stress off of them and make it to a successful transaction.

Even though it is the end of this transaction it doesn't mean it is the end of my relationship with consumers because I might meet up with them again through referrals. My clients appreciate how I am able to understand whats happening around them and the issues they might face and thats why I will receive further business in the future because they know that I am just like them.

It makes sense to find a good Realtor® ....it makes sense to call me so I can fully service you for all your Real Estate needs.

Please contact Neal The Real Deal Bloom-Realtor® /Remax Hometown


2500 Weston Road ,Suite 103
Weston FL 33331
(954)608-5556
The Real Deal tells it Like it is in Real Estate-copyright © 2008-All rights reserved

Mortgage Fraud- thoughts from Ed Rybcznski-Mortgage Fraud Speaker & Expert

Did you ever think that you could have possibly have seen a situation that you thought could be mortgage fraud but you weren't sure?....I did.

I wrote a post a few days ago entitled Consumers....Watch Out- Would Your Realtor® Jeopardize Their Real Estate License with this deal?
I also included this link Consumers...are you flipping houses or are you flipping hamburgers? ...as it somewhat ties into part of this subject but I did not ask him for his views on this one..you'll have to read it over on localism.


If you haven't had the chance to catch the whole article then you can read it-> here
It generated quite a few comments...it also seemed to have caught many peoples emotions. Most of the comments came from Realtors ,mortgage professionals and appraisers. I really appreciated the responses and I am glad that almost all who did comment felt the same as I did. But after thinking about it....I decided to reach out to someone who experienced it first hand.

I wanted to hear from someone who truly can give you his views on this subject. He has had the experience of being a part of this situation...but not on the receiving end. He was one who got caught up in a tough situation and after a few years I guess he learned a lot from it because he speaks to many groups about what happened and how he has dealt with it. I reached out to him by asking him if it would be at all possible to get him to read the post and give his point of view.

Well he responded to me and said he would be happy to. I was surprised that he took a lot of time to go over what I said and he was kind enough to surprise me with this long response and suggested that he sends it to me in an email. He told me to use it any way I wanted. We agreed that I would just turn it into a short interview on the subject. Some of you will probably know who I am referring to...his name is ......

Ed Rybczynski - Mortgage Fraud Speaker & Expert


I wanted to tell you a little about this gentleman...I took an excerpt from Ed's profile in case you missed out on who he really is.....

Ed Rybczynski is often described as a masterful and provocative speaker with an important message for the real estate industry. Prior to pleading guilty to charges stemming from a flipping and mortgage fraud scheme, Ed was the owner of a successful title company and a respected member of Baltimore's business community. Audiences, coast to coast, laugh and cry as Ed brings the reality of a federal conviction to life, particularly the human aspect of life-altering consequences. Ed explains the mindset of federal prosecutors as they take aim at the practices of an industry that is generally misunderstood and mistrusted. A portion of the presentation is dedicated to a discussion of recent indictments, convictions, RESPA actions, and class action litigation.

There will be no question and answer here...Ed gave me his ok to publish his response so I will now past it into this as an interview...thanks again Ed!
Good Morning Ed...thanks you for lending me your views on this subject. I feel your input is very important for both members of our industries and the public to understand that this could happen to anyone.
You might want to direct readers to his blog, Mortgage Fraud Forum. It's relatively young, but already contains good information and is expanding rapidly.

Neal:I appreciate the opportunity to take a close look at your near brush with mortgage fraud as the fact pattern is particularly disturbing. When confronted with a questionable situation, it's always a good idea to step back and compare the circumstances at hand to the flow of an ordinary transaction. While most transactions tend to present challenges, there are definite similarities in transactions that aren't influenced by the misguided motives of fraudsters.I find it interesting that the real estate agent that submitted the original offer wasn't the person named in the document. It's equally significant that the contract purchaser hadn't seen the house and the offer was faxed from a mortgage company. Isn't it customary for a purchaser to examine a property before writing a contract?

Why would a real estate agent fax a contract from a lender's office? A pattern seems to emerge. Could it be that someone was playing a numbers game by making similar offers on numerous listings? Is it possible that the broker you spoke with and the mortgage company were two members of a larger team that included a title company and appraiser as well? Is it possible that the contract purchaser was a straw party whose identity would be falsified to obtain a mortgage?It's impossible to justify the vast difference between asking price and offer as anything but fraud.

Equally disturbing is the amount of the proposed gift of equity. Both items fail to pass any test of reasonableness or conformity with customary practices. I suspect you would have been asked to tamper with MLS records had the offer been accepted. Your decision to present the offer was prudent as the obviously fraudulent scheme wasn't shared with you. There was probably no need to attach a letter of explanation for the seller's benefit as an asset manager should know enough to see through the moving parts in this scenario. In the case of other sellers, I would have prepared a disclosure detailing the issues inherent in the offer. You need to be exceedingly thorough when dealing with situations like this.There's one more thing. As part of the offer package to the seller, I would have attached a letter from a trusted mortgage broker stating that a gift of equity of 25% doesn't conform with established loan guidelines. This simple step adds credibility to your claim that the offer is other than legitimate and possibly points to foul play.

I recommend that you obtain the letter for reasons we'll discuss below.Normally, a great deal of cash is migrated back to the buyer in transactions subjected to fraudulent acts. Regardless of the terms recited in the offer, a higher loan amount would have been needed for the fraudsters to work the deal. I'm thinking that the loan might have been secretly structured as a refinance behind the scenes. You and the seller wouldn't have known about it. Only a subsequent examination of the land records would reveal this fact.

In my opinion, this nefarious investor was attempting to cash out on the property, in a criminal sense, and add it to a real estate portfolio. I've seen strikingly similar situations where properties were used as rentals for awhile and eventually abandoned to foreclosure proceedings. The attempted fraud in your scenario is properly characterized as equity skimming since the properly was marketed a little below value and the offer price wasn't necessarily excessive for comparable properties in the area.It's probably unnecessary to burden the authorities with the facts of this case since you've effectively prevented the fraud from occurring. I would feel differently had the deal made it to the table and purchase funds were wired across state lines. The FBI is the appropriate agency when reporting any incidence of mortgage fraud. At this time, mortgage fraud is prosecuted mostly in federal courts using postal and wire fraud statutes.

The prosecution of real estate crimes at the state level leads to erratic results as well intended legislation remains largely untested and subject to a broad spectrum of judicial interpretation. It's very unlikely that federal prosecutors would convene a grand jury to investigate a single claim of mortgage fraud that didn't reach it's fruition or result in actual losses. Still, you need to protect yourself by preparing thoroughly at this point.I recommend that you act as though the fraudsters encountered by you will be targeted by the feds in the future and that you'll be questioned by authorities in a confrontational setting. Create a separate file containing the hard-copy of the offer and every piece of paper that exists pertaining to this unfortunate scenario. I mean every piece of paper including memos, messages, notes, etc. Include the letter from the mortgage broker suggested earlier as it adds legitimacy to your position. Sit quietly and write every detail that comes to mind including places, times, dates, etc.

If the woman that you spoke to had a New York accent, in your opinion, make a note. If by coincidence, you saw the car driven by one of the players, make notations concerning condition, make, color, the existence of bumper stickers that you recall, etc. By preparing now, you'll avoid later problems should these players happen to be the type of "egregious and notorious" offenders the feds typically investigate. It's also important that you place the file in a safe place that you'll remember years from now. In cases involving white collar crimes, it's not uncommon for investigators to expect detailed information about events that occurred years earlier.

I sometimes suggest to clients to keep such files in the trunks of their cars. It's an unlikely, almost ridiculous, place for a file that you're likely to recall if questioned.Hopefully, you've found this information helpful. Please urge your readers to contact me with any specific questions or concerns.

I was given permission to post this material contribution by Ed himself.... Thanks Ed!

If you are interested in Real Estate for sale in Florida or similar information on other related subjects ......then we strongly urge you to look at the opportunities available here-> The Real Deal tells it like it is in Real Estate

For more information please contact Neal The Real Deal Bloom -REMAX Hometown


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