BiggerPockets

Scammer or Victim? What do you think?

Monday, August 15

I received 3 emails and a voice mail from a woman on the West Coast - I can't decide if she needed help or was trying to scam me for money -   

The emails came from my website and two other networking sites, and she left me a voice mail on my 800 number.  I should tell you she was emailing at 1:30AM Eastern, which was 10:30PM Pacific.

Her last name was "Buys" - which to me screams "Scam".  Below is the edited text of one of her emails:

"Hello!
You are at the same address as "hardmoney lenders". I am worried that I have been scammed by them and I'm hoping I'm wrong. I was working with <name of person she spoke to> and I STUPIDLY wired over $1200 to an <name of another person> in Ontario, Canada. That also cost me $132. The loan money is nowhere to be found and <name of first person> seems to have vanished as well.

I'm at the point of sending multiple angry voicemails - I have been freaking out because that's the last of my money. I also have filed a complaint with the atty general of MA and CA and have an attorney of my own waiting to help me.

I hate to get litigious and angry. But they've stopped calling back and some man who called after <name of first person> disappeared was evasive and talked in circles.

Are you with that company? Can you fix this and either get me my deposit back or somehow get a good faith showing of the loan, i.e. $1200 in my account TOMORROW and not some "yes he's on the way to the bank" run around?

Please help. I'm really worried. "

She then included her phone number and contact info.  I just knew it was a scam.  Then I listened to her voice mail, and thought maybe she wasn't scamming me, she was just frantic.  I returned her call at 8:30AM Eastern, woke her up (she had said it was ok to call anytime of the night when she left her phone number) and listened:

She wanted me to get her money back for her.  She thought I sounded legit and hoped I would contact the company who was at the same address as I was.  REALLY?

It's all over my website that I lend in New Hampshire and Massachusetts only.  I do first position mortgages only, never personal loans.  And there is no other hard money company or even another mortgage company at my business address. 

I explained to her that there was no way to help her.  If the Attorney General's office or her attorney contacted me, I'd be happy to tell them as much as I know, which is pretty much nothing.  Anyone can scrape an address off a website.  I refrained from asking why she hadn't done all this research BEFORE she sent the $1200.  She then asked me if I was concerned that someone else was using my address.  Concerned, yes.  Can I do anything?  I don't think so.

So what do you think?  Was she scamming me, or just frantic?

PS:  Please don't post your personal address on your website.  This is a good example of why not!!

I just got an A++ from an investor

Monday, June 06

I just received the greatest testimonial from an investor that I work with in my private lending business in Massachusetts and New Hampshire. When's the last time someone said you were outstanding? Or that they would recommend you without reservation? I have to brag a little, because it made my day. Here is the text of what he said.

The little guy to the left is outstanding in his field, too, but he's so cute that I just put the image in for fun.

Financing a rehab project with no skin in the game

Friday, May 13

For investors in Eastern Massachusetts, there is a new program for rehab financing that allows you, in the right circumstances, to finance 100% of purchase and 100% of the rehab budget.

The total loan is subject to 70% of ARV, and this is an equity sharing deal, so the costs are higher than most hard money.

But for the right deal, it can make sense -

• If you have multiple projects and find a good deal and don't have tons of cash for the down payment
• If you're a new rehabber but found a great deal, and don't have tons of cash

Here is a link to the program, so you can view the terms and see if it makes sense for you

Falling through the ceiling - just how dumb am I?

Tuesday, March 29

I bought an old 1850's post and beam in terrible shape, and was working with my electrician one day in the attic.  The house was constantly in some phase of construction and today was no different.  There was no floor in most of the attic, except some boards that had been put down in a few places so you could walk through the attic from one end to the other.  The attic was full of the old rock wool insulation.  The electrician went downstairs to get some supplies out of his truck, and as he passed underneath the area where we were working, I slipped off the boards and fell through the ceiling.  I probably looked something like this photo.Obviously I wasn't paying enough attention to what I was doing.  

As luck would have it, my foot caught the refrigerator, knocking the door open, and filling it with rock wool.  It turned out that I was straddling the ceiling joist, so I didn't fall all the way through, but hung there, sort of in shock at what had happened.  I just missed kicking the electrician, and he rushed upstairs to help.  Adrenaline kicked in, and he plucked me out of the floor as if I weighed nothing.  (Well he was strong anyway, and I was thin, but still).  I was laughing, but he thought I was crying.  Within a few minutes, when he realized I was not hurt, we were both laughing, until I went down to the kitchen.  

Rock wool was everywhere!  And I mean everywhere.  My kitchen was 14 X 25' and the rock wool didn't stay contained in one area.  It permeated every cabinet and covered every shelf  I spent the rest of the day cleaning the kitchen, and he spent the rest of the day not falling through the hole I had created.  He was smarter than I was.

The next time I went to the attic you can be sure I was very careful where I put my feet.  Determined not to let that happen again, I crept around the danger zone and made sure I walked only on the boards.  I pulled out the box I needed and carrying it through the attic, I...

DID IT AGAIN!  I fell through in exactly the same place.  The only good news this time was that I missed the refrigerator.  And I had to get myself out of the mess, because there was no one else home.  And once again, I spent the whole day cleaning the kitchen.  

Would you think I would learn and put some plywood down on the attic floor?  Oh, no, I wasn't that smart.  For some reason that seemed to make sense at the time, I decided the rock wool was the culprit, and I replaced it with fiberglas batts.  Another bad decision.  Darn that rock wool that just jumps up and makes me fall through the ceiling.  

I'd like to think I'm smarter now, but who knows?  What I don't have anymore is an 1850's post and beam money pit that needs constant work.  Enough was enough, even for me.

Why do agents leave the low priced houses out of the CMA?

Saturday, March 26

When a real estate investor buys a distressed property with the intention of rehabbing and reselling to an end buyer, those investors are frequently not agents, but they often work with agents to purchase the property.  They also get CMA's from those agents to evaluate the end value of the property after rehab.  The end value is the beginning point of evaluating the rehab budget and how much they can afford to pay for the property. 

Their offers are not usually based on the list price, they are, and should be, based on the end price, working backwards toward the offer price.  Starting from the end price, they will work backwards taking into account the cost of

• Rehab budget w permits
• Contingency for unknowns
• Finance costs
• Two sets of closing costs
• Carrying costs including taxes, insurance, utilities, HOA dues, grass cutting, snow plowing, trash removal, etc
• Let's not forget entrepreneur's profit

If they call me for funding, the first thing I look at is end value, called the ARV, or after repaired value.  Often the investor supplies me with the CMA provided by their real estate agent.  This CMA is done for the purpose of estimating ARV.  I look at sold comps in the immediate area of the property in question, in the same size range and hopefully the same style/age.  In New England, there is frequently a huge variety of properties in the same area, so exact comps are admittedly difficult.

But time after time, I find that the agent totally ignored properties close to the subject property that are viable comps.    Included in the CMA are properties that support the end price they want to convey, but may be in a completely different part of town.  They may be larger, have more bedrooms, have more bathrooms, have more garages.  That's ok if the agent adjusts for those additional features.  But skipping over the houses that sold for much less than the target price is not presenting an accurate picture of the neighborhood.  Perhaps they are in dated condition, perhaps they are bank owned or short sales.  But they can't be ignored if they are truly comparable in location, size and relative condition.   

What's really distressing is when a very close comp in size, amenities, condition and location is not included in a CMA because it doesn't support the after-repaired price the agent wants to present.   The agent considers it to be an anomaly, and so leaves it out.  The investor-buyer relies on that CMA to work backwards toward the offer. 

What happens as a result? 

• The agent gets their commission on the original purchase.  The borrower then tries to get funding for the deal, and the hard money lender looking at the deal values the ARV much lower than the borrower does.  He won't lend on the property, and the borrower loses his deposit. 
• Or, alternatively, the borrower closes with his own or private money, rehabs the property, and then it doesn't sell because his selling price is too high. 
• Or let's say he does a beautiful job on the rehab, gets it under contract to an end buyer, but the end buyer can't get financing because it won't appraise for the selling price.  I guarantee the appraiser saw those lower comps, and appraisers are very conservative these days.

In any case, the investor/buyer is in trouble.  This seems pretty short sighted to me, because that investor won't be back to buy another one. 

I lend to real estate investors exclusively, we don't lend to homeowners, so the focus of my business is pretty narrow.  But those investors resell to homeowners, so the end after repaired value is a critical component.  I always pull my own comps when I evaluate a property.  And I encourage my borrowers to ask their agent to pull ALL sold properties in a small radius in the same square footage range within the past 3-4 months.  The borrower can then go through and see all sold properties and get a good perspective on the neighborhood.

A real estate investor is reponsible for creating a finished product with the end value that will sell.  It's his money on the line.  The agent doesn't have their own capital at risk, so the final value he/she comes up should always be subject to the investor's analysis and judgement.

You want to close with a title defect? Are you kidding me?

Thursday, March 24