September 11, 2010

Real Estate Flippers

There was an article in the Sunday Telegram a couple Sundays ago.  I can not link in since I have yet figured out how to access the on-line edition myself.   The story detailed a mortgage scheme which I have explained many times on this blog.  It works like this:
  • You find a property and buy it
  • You sell it right away at an inflated price
  • Lets take an example where you buy for $125K and turn and sell for 200K
  • You really need an appraiser in your back pocket, who will say that your spent alot of money rehabbing the place etc to come up with a 200K appraisal but, in the day,--you could find one
  • You then find a buyer who will get a mortgage for 200K (many times from Long Beach Mortgage) and you make 75K, of which you give the buyer 10K since his credit is about to be ruined since no one payment will be made
The guy in the Sunday paper did this, but with a little twist.  He would buy a three decker, condo it and sell the units to straw buyers.   Bottom line it was fraud and was one of the many causes of the real estate crash.  As a result many changes have been made in the mortgage market to curtail this fraud especially the appraisal process.  They don't even let you know who it will be and you can not even talk to them. 

What killed me was they interviewed Ron Charette from the South Worcester Neighborhood Center, who went on to explain how real estate flippers like this killed the neighborhood?   This guy was not a real estate investor/flipper, he was an outright thief!!!!!!!!  

My point is the Executive Director of the South Worcester Neighborhood Center should be holding meetings inviting real estate investors/flippers and to come down and see the opportunities that are available in this area not calling real estate investors bad people?  Meanwhile, he has turned around and is working on a 7 million dollar project that will have all low-income rental units that nobody in the neighborhood wants?  

We need to roll the red carpet out to investors to come to Worcester and buy property.  Instead we roll the red carpet out to no low income developers and wonder why tax collections attack private developers as "flippers"and we wonder why revenues are down in the City of Worcester?


Sprout said...

Konnie Lukes' research into 116 June Street makes him sound just like one of these guys.


Jahn said...

The CEO's of these non profit real estate organizations should have a question posed to them something like this:

So Ok
1. Mr Main SOuth CDC,
2. Mr Common Grd,
3. Mr. South Worcester,
4. Mr Oak Hill CDC
5. Mr Habitat Humanity
6. Etc

If you personally purchased a piece of real estate (or even particular stock) and you paid $100,000 for it in October of 2009, you invested another $30,000 to fix it up, and now it is worth $175,000 how much are you going to sell it for?

a. $175,000
b $100,000
c. $130,000
d. $ 50,000

Too many of these folks are the epitomy of hypocrisy. Imagine if any of them had to compete in the true real estate market place or worse in the real job market place.

Even more hypocritical, the tax on the profits that flippers pay go to support the non profit real estate organizations.

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