Seller financing?

[Cat Man Du]

Couldn't this situation have been avoided altogether by closing at a title company / attorney's office, rather than doing a kitchen table closing?

Les responds: Since you are getting incorrect advice from another I will respond. The answer is NO. A title company suppose to be neutral. They do not give advice. If fraud occured, the title officer would not know. His original post I believe did not say it was a kitchen table closing but it should not matter.


Cat responds: This is fun...we will now correct the corrector:

I addressed the “ attorney’s office†part of the question shown above - had she had representation there would have been NO case.

Even if the closing had been at a title company...who are impartial ...THEY verify that the parties ...UNDERSTAND what the paperwork is that they are signing....which would prolly have compromised the case where it would have been thrown out. So my answer STANDS! and YES - reread the story...it was a kitchen table closing and NO they are not illegal.



I mean, if he HAD gone to title company / attorney to close and the lady's attorney accused him of "taking advantage" of her, the investor's attorney could reply: "Did you or did you not go to a title company / attorney's office to SELL your house to the investor? If you didn't INTEND to sell your house to the investor at the price and terms you mutually agreed upon, what did you THINK you were doing at the title company / attorney's office that day?"

Les responds: No it does not matter. If you buy for $400k less say then sell it for $400k more in 1 month, the judge can still overrule for unconsciousable advantage.

YEP..WE AGREE.

Les, I guess the reason that I’m on your case is your statement: “ what she doesn’t know won’t hurt herâ€.

I have been the chair on our board’s ethics committee and if we had a member make that statement to us it would be a tip-off that he would bear watching because with that mind-set ..We would know that he will PUSH the envelope and CROSS the line...it would only be a matter of time before he would violate the ethics and be dropped from membership.

Which brings me to this point and where I’ve heard this expressed before.

There was another Icon from the old forum:

He gathered a following........................like you.
He was quite popular.............................like you
You may have been friends with him .... at least you knew him.
His name was “ Utah investor†......... his mantra was: “what they don’t know won’t hurt themâ€

Do you know where he is NOW??

Yep!..........................JAIL

So now I’m going to give you a chance to retract that statement, Les.

Maybe you didn’t give it enough thought?

If we can settle this ...we could sit down and have a beer together and find out what we have in common.

by Jim Rohm:
First, life is worthwhile if you LEARN. What you don’t know will hurt you. You have to have learning to exist, let alone succeed. Life is worthwhile if you learn from your own experiences—negative or positive.

 

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[LesG]

Les, I guess the reason that I’m on your case is your statement: “ what she doesn’t know won’t hurt herâ€.

Les replies: Again, Cat you take my comments out of context. What she doesn't know wont hurt her provide the buyer treats her right. I.e. service the note.


I have been the chair on our board’s ethics committee
Les replies: OMG.


There was another Icon from the old forum:

He gathered a following........................like you.
He was quite popular.............................like you
You may have been friends with him .... at least you knew him.
His name was “ Utah investor†......... his mantra was: “what they don’t know won’t hurt themâ€

Do you know where he is NOW??

Yep!..........................JAIL
So now I’m going to give you a chance to retract that statement, Les.

Les comments: I don't believe he is in jail. I thought he got out awhile back.
But I'm not sure. I thought it was a 6 month thing. Haven't followed it closely.
So are you saying if you have a following, are popular, may have friends with him, that readers, should watch out for me? Oh, let me warn readers then that his ex-wife is on my facebook friends. Nice lady. Utahinvestor and Les Gee had alot of post in richdad.com at one time. So we know alot of the same people. I respect his knowledge. At one time I was a friend. Not close. Don't believe Utah mantra was that. Guess the ethic committee better look into me. I was friends at one time with him.


Maybe you didn’t give it enough thought?

Les comments: R U?


If we can settle this ...we could sit down and have a beer together and find out what we have in common.

Les replies: Sure, I just have to make sure you don't have a tape recorder. Hey, thought you weren't going to comment anymore.

 

[bflbob]

Ugh...time to call a truce on this topic before blood is shed.:greenchainsaw:

If I read Les' comment correctly, he is saying that a table closing is legal, and that a title company would have made no difference in what was (I believe) the fraud portion of this.

A title company employee might have confirmed that the buyer and seller understood the terms of the contract, but they wouldn't have said, "Gee...I think you should have charged him more for this place."

If predatory pricing is what the judge is calling the guy a fraud for, a title company wouldn't (and shouldn't) have any reason to know about it or comment on it. Of course, that doesn't make it right.

If the seller had an attorney, the attorney "might" have commented on the price. He also "might" have insisted on a DOS clause. That said, there is no requirement for the seller to have an attorney.

Of course, all of this might be for nothing. We have no idea what the judge was referring to when he was threatening fraud. In fact, I'm not even sure that a judge COULD charge him with fraud. It seems like that would be up to a District Attorney, or the attorney of the lady, not the judge.

Now we come to the morality issue. "What you don't know can (or can't) hurt you." I have a real struggle with this one. Here's how I see it.

If your buddy told the lady the house was only worth $35k when he knew it was worth $50k, then what she didn't know DID hurt her. But if he told her he could only afford to pay $35k if he hoped to make a profit on the place, then what she didn't know DIDN'T hurt her. After all...he could have had to insure, heat, and pay mortgage and taxes on the place for 6 months before he sold it.

If I understand Les correctly, he is saying that an AITD (mortgage wrap) would have kept the lady happy. She wanted $X per month from the buyer, and she would have continued to get $X per month from the buyer. What she didn't know would not have hurt her.

On the other hand, if he had done the AITD, she never would have found out that your buddy was trying to screw her over on the price (if that is what the judge was claiming), so what she didn't know DID hurt her.

Either way, I think the seller financing is fine. The problem occurred either because your buddy tried to disguise the value of the house, or because he did a lousy job of communicating his part in the transaction to her.

Cat...I take it you are an RE Broker or Agent. I have no doubt that you know your stuff. But I don't know many RE professionals who go much more moral than what the law requires.

For example, when representing the seller...

• Do you tell them how little the seller bought the place for?
• Do you prepare a list of comps that are the cheapest in the area, or do you go with medium to high comps?
• Do you tell buyers that, "He is asking $100k, but he only really needs $80k"?
• If you are aware of it, do you tell buyers that the guy next door uses drugs?
• Or that the neighbors like to play the stereo loud late at night?
• Or that the taxes are based on the seller's purchase price of $50k instead of the sales price of $100k?
• Or that insurance rates on the purchase will be way higher than they are now?
• Or that the biggest employer in town is going to lay off 2,000 employees so property values are likely to fall?

If you do, I commend you. But my experience is that most of these bits of knowledge are things that RE agents feel "the buyer doesn't need to know -- even though they may hurt him". I've even heard agents say "Don't tell me those sorts of things or I'll have to disclose them."

Finally...there is the matter of Mark Kemp a/k/a UtahInvestor. If you read the filings at http://www.securities.state.ut.us/dockets/cr0040601.pdf you'll see there is a big difference between table closings and what he did -- felony securities fraud. I did some digging on him, and it appears he is out of jail and doing internet marketing now.

 

[LesG]

Truce means their is a war or battle going on.
Guess some may read it as such, but from a personal level... there is no battle.

If I read Les' comment correctly, he is saying that a table closing is legal, and that a title company would have made no difference in what was (I believe) the fraud portion of this. Correct.

A title company employee might have confirmed that the buyer and seller understood the terms of the contract, but they wouldn't have said, "Gee...I think you should have charged him more for this place."
Correct.

If predatory pricing is what the judge is calling the guy a fraud for, a title company wouldn't (and shouldn't) have any reason to know about it or comment on it. Of course, that doesn't make it right.

If you remember Cat's comments that started all this is that in firmly disagreed about not using an attorney and gave his friends obsure story with not enough details


If the seller had an attorney, the attorney "might" have commented on the price. He also "might" have insisted on a DOS clause. That said, there is no requirement for the seller to have an attorney. Correct. That was never the issue. If his friend (the buyer at the time) hired an attorney
and the attorney recommended a DOS, I would think his attorney should lose his license. Of course, I'm kidding, but that would not be how his attorney would act. Geeze, lets put protection clauses in for the elderly lady.

Of course, all of this might be for nothing. We have no idea what the judge was referring to when he was threatening fraud. Correct as Cat never eloborated on his story.


Now we come to the morality issue. "What you don't know can (or can't) hurt you." I have a real struggle with this one. Here's how I see it.

Each situation is different. Sometimes it is correct to do and sometimes not. We are big boys and each should be able to figure out for himself.

You have to remember, his friend the buyer has every legal right to sell the property after buying. I'm almost sure his friend did not tell the lady if I sell, your note can be assumed by a total stanger. Is he required to do that, NO! However, common sense might dictate the lady might be upset that another has bought the home so fast. So if the friend serviced it or told her ahead of time that it might be sold or better yet, right in his contract that he is a real estate investor and plans to sell the property for a profit he would have been fine. BTW I do that on almost all my contracts with no agents involved and I say that in my conversation.

If your buddy told the lady the house was only worth $35k when he knew it was worth $50k, then what she didn't know DID hurt her.

This is where the judge and others get it wrong. How does the buddy know the house is worth 50K? I remember talking to a seller and he said the house was just appraised for 190k by a licensed appraiser. We ended up getting it into contract for 90k. We had another appraisal done and sure enough it another licensed appraiser valued it at 90k. Hmm.. 2 appraisals by two professional giving OPINION of value. Elderly lady has an advantage in the public eyes and judges so you want to be extra careful.


If I understand Les correctly, he is saying that an AITD (mortgage wrap) would have kept the lady happy. She wanted $X per month from the buyer, and she would have continued to get $X per month from the buyer. What she didn't know would not have hurt her.

Also the seller would still be involved and making sure the new buyer was paying. If not he could have paid her since the note still his responsibility.

Either way, I think the seller financing is fine. The problem occurred either because your buddy tried to disguise the value of the house, or because he did a lousy job of communicating his part in the transaction to her.

And also doing things without Attornies are fine FOR SOME. Not all real estate investors.

 

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[Runum]

I agree guys. Both sides have had their say. No sense in making this a bigger pissing contest.

Thanks to all sides for expressing their viewpoints. That's how we learn and become better educated investors.:cheers: