Investors dealt tax blow over depreciation deduction
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Judge questions time spent on showings, fielding phone calls
Wednesday, December 27, 2006
Ulysses Lee was a full-time IRS tax examiner. His brother, Kai, worked as a full-time professor of radiology. Together, they are partners in Lee Brothers Investments, which owns a rental house, a five-unit apartment building and another small apartment building. Each investor also owns several rental properties individually.
On their income tax returns, the brothers claimed passive activity tax loss deductions, mostly from depreciation of their properties, against their substantial ordinary income from their full-time jobs.
Upon audit by the IRS, using Internal Revenue Code 469(c)(7)(B), they claimed each brother performed more than 750 hours of real estate professional services annually (about 14 hours per week) and more than one-half of their personal services are performed operating their properties.
On their income tax returns, the brothers depreciated their properties on a 10-year depreciation basis, rather than the 27.5 years required by IRS straight-line depreciation rules. When the IRS denied the accelerated depreciation deductions, and denied the unlimited real estate tax losses against the ordinary job incomes, the brothers took their dispute to the U.S. Tax Court.
If you were the U.S. Tax Court judge would you allow the brothers to use accelerated depreciation and to qualify as real estate professionals?
The judge said no!
There is no question Ulysses Lee and Kai Lee spent considerable time involved with their real estate investment properties, the judge began. They qualify as "material participants" in their real estate ventures, he opined.
However, their "ballpark guesstimate" of the time spent on different real estate activities were not contemporaneous logs, the judge continued. "We do not find the logs, or the testimony accompanying them, credible," he added.
The judge found 280 hours to close the books on their investments to complete their tax returns, 24 hours to replace miniblinds, 186 hours to show vacant apartments, and 200 hours answering phone calls from prospective tenants over a two-year period to be excessive.
"The exaggeration of their logs of real estate work was matched by understatements of time spent at their full-time jobs," the judge noted. In addition to the extra tax due, the judge assessed penalties for negligence because neither taxpayer could be considered a real estate professional working at least 750 hours annually.
Based on the 2006 U.S. Tax Court decision in Kai and Ulysses Lee v. Commissioner, 92 Tax Court Memo 2006-193.
Friday, December 29, 2006
Tuesday, December 19, 2006
Denver Metro Mortgage News - Housing still far from hitting bottom
Housing still far from hitting bottom
by Lou Barnes
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Mortgage market commentary
Friday, December 15, 2006
Good economic news all week long had mortgage rates headed for an up-side blowout until rescued by today's word of zero change in November's Consumer Price Index. Do not be misled: for long-term mortgage rates to hold near 6 percent -- let alone decline further -- the economy has to sink, and that is not what it is doing.
The killer this week was retail sales, up a solid 1 percent in November, and October revised up. Then came word of falling applications for unemployment insurance and a surge in applications for new purchase mortgages -- the first real gain in a year, up 15 percent in just three weeks in a usually quiet season.
The basis for belief in a substantial economic downturn, Fed easing, and justification for a 4.5 percent 10-year Treasury and six-flat mortgages has been housing's implosion. Overall, the housing market is still some distance from hitting bottom (house prices may begin to stabilize, but loan defaults and foreclosures will rise for a year or more, and resumed price appreciation is a long way off), but there is no sign that housing weakness is undercutting consumers.
Back in September, the Fed rounded up every money-lending regulator to issue a "guidance" to banks, S&Ls, credit unions, and Fannie Mae and Freddie Mac, ordering them to tighten underwriting and advertising standards for "nontraditional mortgages," defined as any loan with interest-only or negative-amortization provisions of any kind. In the world of banking, a Fed guidance is a bolt of Jovian lightning -- fail to pay attention, and you will fry.
The events involved resemble policy-making in the Green Zone:
1. The guidance is about five years too late.
2. The central demands, a significant tightening of credit, are laudable: Thou shalt underwrite all interest-only loans as if amortized, and all negative-amortizing loans by amortizing the highest potential balance. Thou shalt cease thy deceptive (and stupid) advertising: "ONE percent FIXED for THIRTY years!"
3. The guidance, however, missed the big targets. To a nation in desperate need of reform of subprime lending: Thou shalt pay attention to our edicts of 1999 and 2001. The totally ineffective ones. Yes, those. Thy 100 percent piggybacks may continue, but thou shalt be careful or we shall warn thee again and again and again.
4. The entire mortgage industry ignored the guidance. Totally. Our firm has not received a single e-mail from any wholesaler even considering compliance with the interest-only and negative-am requirements.
5. Yesterday, the Office of Federal Housing Enterprise Oversight, Fannie and Freddie's regulator, apparently noticed the cold shoulder and sent to them a blistering letter demanding immediate compliance.
6. It is incredible to me that the Fed has not discovered that mortgage lending became a Wall Street business 20 years ago. The Fed can shoot all the lightning it wants at banks, but they aren't lenders anymore, just originators and conduits like the broker working in the house next door.
7. Main Street underwriting standards are based on the terms of loans that Wall Street will buy. If an investment bank's wholesale mortgage subsidiary will buy some piece of total mortgage crap because its back-office wise guys can lay off the risk to a sucker in the credit-derivative market, then a nice, upstanding Main Street "lender" will accommodate the desire of a suicidal home buyer or refinancer. Sign here.
8. The Fed will sooner or later figure this out (a rocket to the Street's "primary dealers" will be required), and thereby do the one thing worse than slam the door on an empty barn: slam it on the ankle of the housing market while it's running for cover, while the credit-burned bond market is already swinging shut on its own.
9. It's a great country. Really.
by Lou Barnes
--------------------------------------------------------------------------------
Mortgage market commentary
Friday, December 15, 2006
Good economic news all week long had mortgage rates headed for an up-side blowout until rescued by today's word of zero change in November's Consumer Price Index. Do not be misled: for long-term mortgage rates to hold near 6 percent -- let alone decline further -- the economy has to sink, and that is not what it is doing.
The killer this week was retail sales, up a solid 1 percent in November, and October revised up. Then came word of falling applications for unemployment insurance and a surge in applications for new purchase mortgages -- the first real gain in a year, up 15 percent in just three weeks in a usually quiet season.
The basis for belief in a substantial economic downturn, Fed easing, and justification for a 4.5 percent 10-year Treasury and six-flat mortgages has been housing's implosion. Overall, the housing market is still some distance from hitting bottom (house prices may begin to stabilize, but loan defaults and foreclosures will rise for a year or more, and resumed price appreciation is a long way off), but there is no sign that housing weakness is undercutting consumers.
Back in September, the Fed rounded up every money-lending regulator to issue a "guidance" to banks, S&Ls, credit unions, and Fannie Mae and Freddie Mac, ordering them to tighten underwriting and advertising standards for "nontraditional mortgages," defined as any loan with interest-only or negative-amortization provisions of any kind. In the world of banking, a Fed guidance is a bolt of Jovian lightning -- fail to pay attention, and you will fry.
The events involved resemble policy-making in the Green Zone:
1. The guidance is about five years too late.
2. The central demands, a significant tightening of credit, are laudable: Thou shalt underwrite all interest-only loans as if amortized, and all negative-amortizing loans by amortizing the highest potential balance. Thou shalt cease thy deceptive (and stupid) advertising: "ONE percent FIXED for THIRTY years!"
3. The guidance, however, missed the big targets. To a nation in desperate need of reform of subprime lending: Thou shalt pay attention to our edicts of 1999 and 2001. The totally ineffective ones. Yes, those. Thy 100 percent piggybacks may continue, but thou shalt be careful or we shall warn thee again and again and again.
4. The entire mortgage industry ignored the guidance. Totally. Our firm has not received a single e-mail from any wholesaler even considering compliance with the interest-only and negative-am requirements.
5. Yesterday, the Office of Federal Housing Enterprise Oversight, Fannie and Freddie's regulator, apparently noticed the cold shoulder and sent to them a blistering letter demanding immediate compliance.
6. It is incredible to me that the Fed has not discovered that mortgage lending became a Wall Street business 20 years ago. The Fed can shoot all the lightning it wants at banks, but they aren't lenders anymore, just originators and conduits like the broker working in the house next door.
7. Main Street underwriting standards are based on the terms of loans that Wall Street will buy. If an investment bank's wholesale mortgage subsidiary will buy some piece of total mortgage crap because its back-office wise guys can lay off the risk to a sucker in the credit-derivative market, then a nice, upstanding Main Street "lender" will accommodate the desire of a suicidal home buyer or refinancer. Sign here.
8. The Fed will sooner or later figure this out (a rocket to the Street's "primary dealers" will be required), and thereby do the one thing worse than slam the door on an empty barn: slam it on the ankle of the housing market while it's running for cover, while the credit-burned bond market is already swinging shut on its own.
9. It's a great country. Really.
Monday, December 18, 2006
Should buyers stretch finances to buy in Denver's Real Estate market?
Should buyers stretch finances to buy in today's market?
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Deciding on long-term housing needs
Monday, December 18, 2006
There are pros and cons to stretching financially to buy a home. An advantage of pushing the limit of what you can afford to pay is that you may save in the long run if this means that you move less often in the future. The fees involved with buying and selling homes can add up to tens of thousands of dollars, or more. Also, moving takes time and energy. Less moving means less disruption.
On the other hand, if you make a big leap monetarily, lose your job and can't afford to make the monthly mortgage payments, you could lose the house and jeopardize your good credit. Buyers who stretch to buy a new home and count on a big payout from the home they'll be selling may be vulnerable in the current market if they're depending on a large sum and the property sells for less than what they expected.
Despite the risks, there are compelling reasons for many buyers to move now to a home that better suits their long-term needs: There is less competition from other buyers; competition tends to drive prices higher; and interest rates are still in the mid-6 percent range for 30-year fixed-rate financing -- low by historical standards.
However, buyers who need the equity from their current home should give serious thought to selling before buying a more expensive home, particularly if there's no margin for error. Some buyers who recently bought first have had difficulty selling their old home.
Real estate is a local business. There is a lot of variability from one market to another. In some areas, well-priced homes are selling relatively quickly and in other areas listings are sitting for months. The longer your home sits on the market, the more it ultimately costs to make the move.
Pricing right for the market is the key to success. It's difficult for most sellers to hear that they won't be able to sell their home for as much as they'd hoped. And, unfortunately, there are some real estate agents who are willing to tell sellers what they want to hear to obtain a listing.
HOUSE HUNTING TIP: Don't get carried away by an agent's enthusiasm for your home. Ask for solid information about the probable selling price for your home. The most reliable comparable sales will be the ones that sold most recently, not those that sold six months ago when the market was different.
Tapping equity before you sell is easy enough. There are plenty of lenders who will give you an equity line of credit secured against the home you're selling, often based simply on your estimate of the property's value and a drive-by appraisal. Even so, it's best to be conservative about the value of your home. In this market, you won't know for sure how much cash you'll net from the sale until the property is sold.
Most buyers stretch to buy, banking on the fact that their financial situation will improve within a few years. There are mortgage products designed to help you buy over your immediate affordability. One such product is the interest-only mortgage, which enables you to make lower, interest-only payments for up to 10 or so years.
These mortgages serve a purpose. But, they can become problematic if your financial future doesn't turn out as planned and you don't have the resources to pay the much higher mortgage payments that could follow when the initial interest-only payment period expires.
THE CLOSING: Buying a home you can grow in to over time is a great idea as long as you fully understand the risks and rewards involved before you make the commitment.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Deciding on long-term housing needs
Monday, December 18, 2006
There are pros and cons to stretching financially to buy a home. An advantage of pushing the limit of what you can afford to pay is that you may save in the long run if this means that you move less often in the future. The fees involved with buying and selling homes can add up to tens of thousands of dollars, or more. Also, moving takes time and energy. Less moving means less disruption.
On the other hand, if you make a big leap monetarily, lose your job and can't afford to make the monthly mortgage payments, you could lose the house and jeopardize your good credit. Buyers who stretch to buy a new home and count on a big payout from the home they'll be selling may be vulnerable in the current market if they're depending on a large sum and the property sells for less than what they expected.
Despite the risks, there are compelling reasons for many buyers to move now to a home that better suits their long-term needs: There is less competition from other buyers; competition tends to drive prices higher; and interest rates are still in the mid-6 percent range for 30-year fixed-rate financing -- low by historical standards.
However, buyers who need the equity from their current home should give serious thought to selling before buying a more expensive home, particularly if there's no margin for error. Some buyers who recently bought first have had difficulty selling their old home.
Real estate is a local business. There is a lot of variability from one market to another. In some areas, well-priced homes are selling relatively quickly and in other areas listings are sitting for months. The longer your home sits on the market, the more it ultimately costs to make the move.
Pricing right for the market is the key to success. It's difficult for most sellers to hear that they won't be able to sell their home for as much as they'd hoped. And, unfortunately, there are some real estate agents who are willing to tell sellers what they want to hear to obtain a listing.
HOUSE HUNTING TIP: Don't get carried away by an agent's enthusiasm for your home. Ask for solid information about the probable selling price for your home. The most reliable comparable sales will be the ones that sold most recently, not those that sold six months ago when the market was different.
Tapping equity before you sell is easy enough. There are plenty of lenders who will give you an equity line of credit secured against the home you're selling, often based simply on your estimate of the property's value and a drive-by appraisal. Even so, it's best to be conservative about the value of your home. In this market, you won't know for sure how much cash you'll net from the sale until the property is sold.
Most buyers stretch to buy, banking on the fact that their financial situation will improve within a few years. There are mortgage products designed to help you buy over your immediate affordability. One such product is the interest-only mortgage, which enables you to make lower, interest-only payments for up to 10 or so years.
These mortgages serve a purpose. But, they can become problematic if your financial future doesn't turn out as planned and you don't have the resources to pay the much higher mortgage payments that could follow when the initial interest-only payment period expires.
THE CLOSING: Buying a home you can grow in to over time is a great idea as long as you fully understand the risks and rewards involved before you make the commitment.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Tuesday, December 12, 2006
Denver Home Buyers: Get an Inspection!
FYI: Read this column and hear how Buyers are being advised not to inspect "As Is" properties (such as HUD Homes and bank foreclosures). While these sellers are not necessarily going to repair any damage you find, this is an additional reason to find the damage rather than reason to forgo this critical check. You could be purchasing a home that is replete with expensive repairs not evident to you, the Buyer, or to your Agent (who is NOT a home-repair expert).
Oftentimes you can get out of the contract after the inspection of homes sold "As Is" if the repairs seem too much to you. An exception to this can be the HUD purchase, which provides their inspection on the website for your review before bidding and you may not enter the home for a full inspection until you have successfully bid. However, losing earnest funds may pale in perspective to the cost of repairs and there may be recourse, depending on your bid circumstances.
There are an unprecendented flood of HUDS and bank foreclosures in Denver and many Agents are selling them for the first time or are not experienced in working with HUD or foreclosures. The typical negotiations surrounding the inspection of the "As Is" property and the usual owner-occupied home are very different, but an inspection is still the rule. Always get an inspection! Happy Hunting, Marie
Inman News Features
Get inspection before buying repossessed house
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Agent's advice can't always be trusted
Tuesday, December 12, 2006
Dear Barry,
We recently purchased a bank-repossessed house. When we made our offer, our agent advised us not to get a home inspection since it was just an additional cost to us and the bank would not fix anything anyway. In hindsight, we realize that we should have had an inspection because the roof leaks and we get standing water around the foundation during wet weather. Do we have recourse or did we just make a huge mistake in not getting an inspection? --Barbara
Dear Barbara,
Let me begin with a message for everyone who may consider buying a home and for every agent who is reading this column: Any agent who advises a client not to have a home inspection, regardless of the circumstances of the transaction, should be placed in stocks, as was common punishment for disgraceful behavior in 17th century colonial America.
Advising a client to forego a home inspection is the height of misrepresentation. It is a major ethical breach -- the act of a "slick" salesperson or of someone who is inexcusably naive.
The purpose of a home inspection is not to prepare a repair list for the seller. Your agent's reasoning, therefore, was irrelevant. A home inspection is meant to inform you of the condition of what you are buying. A home inspector does not merely report on conditions that the seller might repair, but on conditions that you might have to repair or on safety violations that could have life-threatening consequences.
Your agent is clearly in need of re-education as to the meaning and intent of real estate disclosure. Whether you have recourse is a legal question that can be answered only by a real estate attorney. In the mean time, it would be wise to have an after-purchase home inspection to learn what additional defects await discovery. And be sure to find a highly experienced home inspector with a reputation for comprehensive thoroughness.
Dear Barry,
We bought our home six months ago and had it professionally inspected. At that time, there were no apparent problems with the swimming pool. But two weeks after moving in, we could tell that the pool was losing water. Sure enough, a leak detection company discovered leakage in the underground piping, a condition no home inspector could have discovered. The sellers reimbursed the $200 leak detection fee but refused to pay for repairs. They claim no knowledge of any previous leakage, but this does not seem plausible to us. Do we have any recourse? --Matt
Dear Matt,
It seems highly unlikely that the pool level only began to recede when you took possession of the property. The sellers, it would seem, must have known the pool was losing water, because periodic refilling would have been necessary to provide a full pool at the close of escrow.
Depending upon the cost of repairs, you might try testing this case in small claims court. In preparing your case, you should ask the neighbors if they are aware of any problems with the pool. Additionally, you should call as many pool maintenance companies as are listed in your phone book to see if any have worked on your pool and if their records show that this problem was diagnosed.
To write to Barry Stone, please visit him on the Web at www.housedetective.com.
Oftentimes you can get out of the contract after the inspection of homes sold "As Is" if the repairs seem too much to you. An exception to this can be the HUD purchase, which provides their inspection on the website for your review before bidding and you may not enter the home for a full inspection until you have successfully bid. However, losing earnest funds may pale in perspective to the cost of repairs and there may be recourse, depending on your bid circumstances.
There are an unprecendented flood of HUDS and bank foreclosures in Denver and many Agents are selling them for the first time or are not experienced in working with HUD or foreclosures. The typical negotiations surrounding the inspection of the "As Is" property and the usual owner-occupied home are very different, but an inspection is still the rule. Always get an inspection! Happy Hunting, Marie
Inman News Features
Get inspection before buying repossessed house
--------------------------------------------------------------------------------
Agent's advice can't always be trusted
Tuesday, December 12, 2006
Dear Barry,
We recently purchased a bank-repossessed house. When we made our offer, our agent advised us not to get a home inspection since it was just an additional cost to us and the bank would not fix anything anyway. In hindsight, we realize that we should have had an inspection because the roof leaks and we get standing water around the foundation during wet weather. Do we have recourse or did we just make a huge mistake in not getting an inspection? --Barbara
Dear Barbara,
Let me begin with a message for everyone who may consider buying a home and for every agent who is reading this column: Any agent who advises a client not to have a home inspection, regardless of the circumstances of the transaction, should be placed in stocks, as was common punishment for disgraceful behavior in 17th century colonial America.
Advising a client to forego a home inspection is the height of misrepresentation. It is a major ethical breach -- the act of a "slick" salesperson or of someone who is inexcusably naive.
The purpose of a home inspection is not to prepare a repair list for the seller. Your agent's reasoning, therefore, was irrelevant. A home inspection is meant to inform you of the condition of what you are buying. A home inspector does not merely report on conditions that the seller might repair, but on conditions that you might have to repair or on safety violations that could have life-threatening consequences.
Your agent is clearly in need of re-education as to the meaning and intent of real estate disclosure. Whether you have recourse is a legal question that can be answered only by a real estate attorney. In the mean time, it would be wise to have an after-purchase home inspection to learn what additional defects await discovery. And be sure to find a highly experienced home inspector with a reputation for comprehensive thoroughness.
Dear Barry,
We bought our home six months ago and had it professionally inspected. At that time, there were no apparent problems with the swimming pool. But two weeks after moving in, we could tell that the pool was losing water. Sure enough, a leak detection company discovered leakage in the underground piping, a condition no home inspector could have discovered. The sellers reimbursed the $200 leak detection fee but refused to pay for repairs. They claim no knowledge of any previous leakage, but this does not seem plausible to us. Do we have any recourse? --Matt
Dear Matt,
It seems highly unlikely that the pool level only began to recede when you took possession of the property. The sellers, it would seem, must have known the pool was losing water, because periodic refilling would have been necessary to provide a full pool at the close of escrow.
Depending upon the cost of repairs, you might try testing this case in small claims court. In preparing your case, you should ask the neighbors if they are aware of any problems with the pool. Additionally, you should call as many pool maintenance companies as are listed in your phone book to see if any have worked on your pool and if their records show that this problem was diagnosed.
To write to Barry Stone, please visit him on the Web at www.housedetective.com.
Monday, December 11, 2006
Selling Your Home in Denver? A Must-Read!
Inman News Features
Overpricing a home could lead to no sale
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Sellers need to stay on top of rapidly changing markets
Monday, December 11, 2006
Overpriced home listings usually don't sell in any market. In today's market, there's no margin for error when selecting a list price. If your price is too high, the market can literally pass you by.
Many sellers ask: What's the harm in pricing high initially? You can always come down. While this is true enough, you may end up with a lower selling price if you start too high to begin with, particularly if the market is declining.
Today's real estate market is generally balanced, although there have been modest declines in median sales price in some areas. Prices are still going up in areas with low inventory and high demand, but the appreciation rate in these areas is slower than it has been in recent years.
Given today's market conditions, buyers are more cautious about home purchases than they were last year. They are looking for value. A high price sends a message that you are out of touch with the market. Making an offer takes a lot of time and energy. Most buyers aren't willing to do this if they think that the seller is unreasonable.
Another factor that can keep buyers from making offers on overpriced listings is that they don't want to offend the sellers. Buyers feel that a low offer might jeopardize their chances of buying the property. They'd rather wait to see if the sellers lower their price before making an offer.
There is more emotion involved in a home purchase than in most other business negotiations. Home buyers usually need to feel passionate about a property before they'll make an offer. Today's buyers are concerned about overpaying in a soft market. It's hard for them be enthusiastic enough to make an offer if a listing is priced too high. A listing that might look great to them at the right price might not even be appealing at an above-market price.
So, one risk of overpricing is that you don't receive any offers at all. Another related risk is that your home might not even be shown to buyers if it's priced too high. There usually is a direct correlation between the amount of showings a listing receives and the time it takes to sell.
HOME SELLER TIP: Sellers who live in areas where prices are declining need to be particularly careful not to overprice their homes. Before your home goes on the market, ask your agent to update the market evaluation of your home that was done before you listed to make sure that the recommended price range still holds. If not, readjust the price before you hit the market. Your home is most marketable when it's new on the market. So capitalize on this enthusiasm by presenting a good product at the right price.
Since the market is always changing, you may find that your list price could be too high soon after your home is on the market. Many sellers object to lowering their price too quickly. They're afraid they'll leave money on the table.
However, the best time to lower your price is as soon as you discover that the price is high. This way you quickly rekindle interest in your property. Leaving your home on the market too long at a high price can cost you money if prices decline.
After your home is on the market, keep an eye on your competition. Ask your agent to keep you informed about listing activity in your area. Find out which listings are selling and which aren't. How does your home stack up in comparison?
THE CLOSING: Pricing lower than your competitors can often bring about the desired result.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Overpricing a home could lead to no sale
--------------------------------------------------------------------------------
Sellers need to stay on top of rapidly changing markets
Monday, December 11, 2006
Overpriced home listings usually don't sell in any market. In today's market, there's no margin for error when selecting a list price. If your price is too high, the market can literally pass you by.
Many sellers ask: What's the harm in pricing high initially? You can always come down. While this is true enough, you may end up with a lower selling price if you start too high to begin with, particularly if the market is declining.
Today's real estate market is generally balanced, although there have been modest declines in median sales price in some areas. Prices are still going up in areas with low inventory and high demand, but the appreciation rate in these areas is slower than it has been in recent years.
Given today's market conditions, buyers are more cautious about home purchases than they were last year. They are looking for value. A high price sends a message that you are out of touch with the market. Making an offer takes a lot of time and energy. Most buyers aren't willing to do this if they think that the seller is unreasonable.
Another factor that can keep buyers from making offers on overpriced listings is that they don't want to offend the sellers. Buyers feel that a low offer might jeopardize their chances of buying the property. They'd rather wait to see if the sellers lower their price before making an offer.
There is more emotion involved in a home purchase than in most other business negotiations. Home buyers usually need to feel passionate about a property before they'll make an offer. Today's buyers are concerned about overpaying in a soft market. It's hard for them be enthusiastic enough to make an offer if a listing is priced too high. A listing that might look great to them at the right price might not even be appealing at an above-market price.
So, one risk of overpricing is that you don't receive any offers at all. Another related risk is that your home might not even be shown to buyers if it's priced too high. There usually is a direct correlation between the amount of showings a listing receives and the time it takes to sell.
HOME SELLER TIP: Sellers who live in areas where prices are declining need to be particularly careful not to overprice their homes. Before your home goes on the market, ask your agent to update the market evaluation of your home that was done before you listed to make sure that the recommended price range still holds. If not, readjust the price before you hit the market. Your home is most marketable when it's new on the market. So capitalize on this enthusiasm by presenting a good product at the right price.
Since the market is always changing, you may find that your list price could be too high soon after your home is on the market. Many sellers object to lowering their price too quickly. They're afraid they'll leave money on the table.
However, the best time to lower your price is as soon as you discover that the price is high. This way you quickly rekindle interest in your property. Leaving your home on the market too long at a high price can cost you money if prices decline.
After your home is on the market, keep an eye on your competition. Ask your agent to keep you informed about listing activity in your area. Find out which listings are selling and which aren't. How does your home stack up in comparison?
THE CLOSING: Pricing lower than your competitors can often bring about the desired result.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Sunday, December 10, 2006
A Real Estate Library for Denver's Home Buyers, Sellers and Investors
Inman News Features
10 best real estate books of 2006
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Explore art of negotiation, buying home with bad credit, timing market
Friday, December 08, 2006
Each week I read and review at least one new real estate book. At the end of each year, it is my honor to select from these 52 books the "top 10" real estate books. 2006 was an especially difficult year to select the best because there were so many new, high-quality realty books.
All of these excellent real estate books are available in stock or by special order at local bookstores, public libraries, and www.Amazon.com. Here are the 10 best real estate books of 2006, plus five Honorable Mentions:
Purchase Bob Bruss reports online.
1. "Trump-Style Negotiation," by George Ross (John Wiley and Sons, Hoboken, NJ), $24.95, 259 pages. This unique book offers insights into Donald J. Trump's big-thinking negotiation style, which leaves the contract details to his trusted adviser, George Ross. Only serious real estate buyers, sellers, real estate agents and investors will study this extremely well-written book that reveals negotiation tactics not found elsewhere, illustrated with many actual examples from Trump acquisitions.
2. "The Automatic Millionaire Homeowner," by David Bach (Broadway Books, New York), $19.95, 244 pages. If you could read only one real estate book, whether you are a renter considering a home purchase, a current homeowner, a seasoned realty investor or a real estate agent, this is the book for you because it shows how home ownership can lead to wealth. The book's two themes are (a) renters can become millionaires by investing in their first house or condo and (b) that residence can become the foundation for a better home or more investment property in future years.
3. "Buy Even Lower," by Scott Frank and Andy Heller (Kaplan Publishing Co., Chicago) $18.95, 238 pages. Aimed at real estate investors and real estate sales agents, this book, by two full-time corporate executives and part-time realty investors, shows how they buy single-family houses at targeted below-market prices and then either buy and hold, buy and flip, or (their favorite) buy and lease-purchase. The authors favor "ugly and awful" three-bedroom, two-bathroom houses in middle-income neighborhoods.
4. "Real Estate Debt Can Make You Rich," by Steve Dexter (McGraw-Hill, New York), $21.95, 156 pages. The two audiences for this book, which explains why real estate debt is good, are (a) home buyers and realty agents who want to understand the inner-workings of the mortgage industry and (b) investors who need to know how "good debt" can be created to maximize realty profits. The mortgage-broker author reveals how avoiding "inexperienced and inept loan hacks" can obtain the best mortgages to buy a home or investment property. The book includes the best compilation of real estate Web sites available.
5. "Bubbles, Booms, and Busts; Make Money in Any Real Estate Market," by Blanche Evans (McGraw-Hill, New York), $16.95, 167 pages. This extremely well-researched and up-to-date book explains the signals of local rising, falling or neutral local home sales markets, and how to profit in any situation if you take a long-term perspective on home sales. "Except for local economic shocks, like the collapse or exit of a major employer, home prices nationwide have not gone down since the Great Depression," the author reminds readers.
6. "Success as a Real Estate Agent for Dummies," by Dirk Zeller (Wiley Publishing Co., Indianapolis, IN), $21.99, 350 pages. Whether you are a new real estate agent, a longtime "old pro" agent or an individual thinking about becoming an agent, this basic book by a real estate "coach" explains what is involved in selling real estate for sales commissions, how to use sales time management profitably, and how to get started fast by contacting expired listings and "for sale by owners." The book includes an invaluable list of Web sites for realty agents plus the author's advice how to gain competitive advantages by obtaining a "slice of the market."
7. "Everything You Need to Know Before Buying a Co-Op, Condo, or Townhouse," by Ken Roth (AMACOM Publishing, New York), $18.95, 197 pages. The real estate attorney author shares his many legal and real-life personal experiences so readers don't make costly mistakes when buying into the unique lifestyle of these properties. Heavy emphasis is placed on the pros and cons of homeowner associations, including "condo commando" members who seek to take charge of the "mini-democracy" members.
8. "Who Says You Can't Buy a Home?" by David Reed (AMACOM Publishing, New York), $17.95, 182 pages. This mortgage-broker author is on the side of home buyers and real estate agents as he explains how mortgage lenders look at borrowers in this "tell all" book." "Anyone with steady income, no matter how bad their credit rating, or even with no credit, can find a mortgage to buy a home," the author reveals.
9. "Confessions of a Real Estate Entrepreneur," by James A. Randel (McGraw-Hill, New York), $29.95, 256 pages. This book's theme is "add value" to real estate, whether you invest in raw land, houses, run-down factory buildings with rezoning potential, or fixer-upper apartments and offices. The self-deprecating author shares his mistakes and his successes, along with his advice to invest with as little of your own cash as possible so profits can be maximized. Negotiation strategies are heavily emphasized throughout this unusual book.
10. "The Reverse Mortgage Advantage," by Warren Boroson (McGraw-Hill, New York), $21.95, 169 pages. Virtually all the key aspects of senior-citizen reverse mortgages are thoroughly explained in this detailed but easy-to-read book that emphasizes the potential pitfalls as well as the major benefits. The author shatters the reverse-mortgage myths, such as "the bank owns the house," the supposed high costs, and even the scary stories of early reverse mortgages, which are no longer possible.
HONORABLE MENTION:
11. "Trump: The Best Real Estate Advice I Ever Received," by Donald J. Trump (Thomas Nelson Publishers-Rutledge Hill Press, Nashville), $19.99, 273 pages. This is the most unusual real estate book of 2006 because it has 100 successful real estate investing, brokerage and marketing co-authors (including me) who contributed 100 chapters revealing the best realty advice ever received. What do all these realty entrepreneurs have in common (other than being very diverse individuals)? "Apprentice" Bill Ransic said it best: "Learn to recognize value."
12. "Find it, Fix it, Flip it!" by Michael Corbett (Plume Books-Penquin Group, New York), $15.00, 323 pages. This author, host of the TV Extra program "Mansions and Millionaires," created a technique of changing a fix-up home's lifestyle from dull routine to upscale, but without high renovation costs. The before-and-after photos are amazing. The "profit calculator chart" shows readers how to spot the potential profit by purchasing problem houses and correcting drawbacks to add value. This book is unique because the author shows how to add market value by improving the lifestyle of the buyer.
13. "Landlording on Auto-Pilot," by Mike Butler (John Wiley and Sons, Hoboken, NJ), $19.95, 190 pages. Both "old pro" residential landlords and beginner novice property managers will profit from this unusual book about how to profitably manage the tenants in your properties. "Your tenants are your employees" is the philosophy of the retired, no-nonsense cop author who shares his basic belief that most tenants would own their own homes if they had adequate income and good credit.
14. "Two Years to a Million in Real Estate," by Matthew A. Martinez (McGraw-Hill, New York), $21.95, 182 pages. This is the success story of an ex-dot-com employee who got tired of working long hours at a great job for 10 years and watching his fellow workers lose their jobs. He accidentally discovered real estate's market-value appreciation, leverage, tax savings, cash flow, reliability and freedom from a 9-to-5 workday. In the process, he became a multimillionaire, and he shows readers how they can have the same result.
15. "Home Buying for Dummies, Third Edition," by Eric Tyson and Ray Brown (Wiley Publishing, Inc., Indianapolis, IN), $21.99, 328 pages. Because of its ultra-complete coverage of virtually every home-buying topic, this 600,000-copy best-seller in prior editions is still the best "how to buy a home" book. The new edition adds extensive coverage of Internet resources for home buyers, where more than 75 percent of today's buyers begin their quest. This ultra-honest book even takes a few swipes at inept real estate agents who make the home-buying process more difficult than it needs to be.
10 best real estate books of 2006
--------------------------------------------------------------------------------
Explore art of negotiation, buying home with bad credit, timing market
Friday, December 08, 2006
Each week I read and review at least one new real estate book. At the end of each year, it is my honor to select from these 52 books the "top 10" real estate books. 2006 was an especially difficult year to select the best because there were so many new, high-quality realty books.
All of these excellent real estate books are available in stock or by special order at local bookstores, public libraries, and www.Amazon.com. Here are the 10 best real estate books of 2006, plus five Honorable Mentions:
Purchase Bob Bruss reports online.
1. "Trump-Style Negotiation," by George Ross (John Wiley and Sons, Hoboken, NJ), $24.95, 259 pages. This unique book offers insights into Donald J. Trump's big-thinking negotiation style, which leaves the contract details to his trusted adviser, George Ross. Only serious real estate buyers, sellers, real estate agents and investors will study this extremely well-written book that reveals negotiation tactics not found elsewhere, illustrated with many actual examples from Trump acquisitions.
2. "The Automatic Millionaire Homeowner," by David Bach (Broadway Books, New York), $19.95, 244 pages. If you could read only one real estate book, whether you are a renter considering a home purchase, a current homeowner, a seasoned realty investor or a real estate agent, this is the book for you because it shows how home ownership can lead to wealth. The book's two themes are (a) renters can become millionaires by investing in their first house or condo and (b) that residence can become the foundation for a better home or more investment property in future years.
3. "Buy Even Lower," by Scott Frank and Andy Heller (Kaplan Publishing Co., Chicago) $18.95, 238 pages. Aimed at real estate investors and real estate sales agents, this book, by two full-time corporate executives and part-time realty investors, shows how they buy single-family houses at targeted below-market prices and then either buy and hold, buy and flip, or (their favorite) buy and lease-purchase. The authors favor "ugly and awful" three-bedroom, two-bathroom houses in middle-income neighborhoods.
4. "Real Estate Debt Can Make You Rich," by Steve Dexter (McGraw-Hill, New York), $21.95, 156 pages. The two audiences for this book, which explains why real estate debt is good, are (a) home buyers and realty agents who want to understand the inner-workings of the mortgage industry and (b) investors who need to know how "good debt" can be created to maximize realty profits. The mortgage-broker author reveals how avoiding "inexperienced and inept loan hacks" can obtain the best mortgages to buy a home or investment property. The book includes the best compilation of real estate Web sites available.
5. "Bubbles, Booms, and Busts; Make Money in Any Real Estate Market," by Blanche Evans (McGraw-Hill, New York), $16.95, 167 pages. This extremely well-researched and up-to-date book explains the signals of local rising, falling or neutral local home sales markets, and how to profit in any situation if you take a long-term perspective on home sales. "Except for local economic shocks, like the collapse or exit of a major employer, home prices nationwide have not gone down since the Great Depression," the author reminds readers.
6. "Success as a Real Estate Agent for Dummies," by Dirk Zeller (Wiley Publishing Co., Indianapolis, IN), $21.99, 350 pages. Whether you are a new real estate agent, a longtime "old pro" agent or an individual thinking about becoming an agent, this basic book by a real estate "coach" explains what is involved in selling real estate for sales commissions, how to use sales time management profitably, and how to get started fast by contacting expired listings and "for sale by owners." The book includes an invaluable list of Web sites for realty agents plus the author's advice how to gain competitive advantages by obtaining a "slice of the market."
7. "Everything You Need to Know Before Buying a Co-Op, Condo, or Townhouse," by Ken Roth (AMACOM Publishing, New York), $18.95, 197 pages. The real estate attorney author shares his many legal and real-life personal experiences so readers don't make costly mistakes when buying into the unique lifestyle of these properties. Heavy emphasis is placed on the pros and cons of homeowner associations, including "condo commando" members who seek to take charge of the "mini-democracy" members.
8. "Who Says You Can't Buy a Home?" by David Reed (AMACOM Publishing, New York), $17.95, 182 pages. This mortgage-broker author is on the side of home buyers and real estate agents as he explains how mortgage lenders look at borrowers in this "tell all" book." "Anyone with steady income, no matter how bad their credit rating, or even with no credit, can find a mortgage to buy a home," the author reveals.
9. "Confessions of a Real Estate Entrepreneur," by James A. Randel (McGraw-Hill, New York), $29.95, 256 pages. This book's theme is "add value" to real estate, whether you invest in raw land, houses, run-down factory buildings with rezoning potential, or fixer-upper apartments and offices. The self-deprecating author shares his mistakes and his successes, along with his advice to invest with as little of your own cash as possible so profits can be maximized. Negotiation strategies are heavily emphasized throughout this unusual book.
10. "The Reverse Mortgage Advantage," by Warren Boroson (McGraw-Hill, New York), $21.95, 169 pages. Virtually all the key aspects of senior-citizen reverse mortgages are thoroughly explained in this detailed but easy-to-read book that emphasizes the potential pitfalls as well as the major benefits. The author shatters the reverse-mortgage myths, such as "the bank owns the house," the supposed high costs, and even the scary stories of early reverse mortgages, which are no longer possible.
HONORABLE MENTION:
11. "Trump: The Best Real Estate Advice I Ever Received," by Donald J. Trump (Thomas Nelson Publishers-Rutledge Hill Press, Nashville), $19.99, 273 pages. This is the most unusual real estate book of 2006 because it has 100 successful real estate investing, brokerage and marketing co-authors (including me) who contributed 100 chapters revealing the best realty advice ever received. What do all these realty entrepreneurs have in common (other than being very diverse individuals)? "Apprentice" Bill Ransic said it best: "Learn to recognize value."
12. "Find it, Fix it, Flip it!" by Michael Corbett (Plume Books-Penquin Group, New York), $15.00, 323 pages. This author, host of the TV Extra program "Mansions and Millionaires," created a technique of changing a fix-up home's lifestyle from dull routine to upscale, but without high renovation costs. The before-and-after photos are amazing. The "profit calculator chart" shows readers how to spot the potential profit by purchasing problem houses and correcting drawbacks to add value. This book is unique because the author shows how to add market value by improving the lifestyle of the buyer.
13. "Landlording on Auto-Pilot," by Mike Butler (John Wiley and Sons, Hoboken, NJ), $19.95, 190 pages. Both "old pro" residential landlords and beginner novice property managers will profit from this unusual book about how to profitably manage the tenants in your properties. "Your tenants are your employees" is the philosophy of the retired, no-nonsense cop author who shares his basic belief that most tenants would own their own homes if they had adequate income and good credit.
14. "Two Years to a Million in Real Estate," by Matthew A. Martinez (McGraw-Hill, New York), $21.95, 182 pages. This is the success story of an ex-dot-com employee who got tired of working long hours at a great job for 10 years and watching his fellow workers lose their jobs. He accidentally discovered real estate's market-value appreciation, leverage, tax savings, cash flow, reliability and freedom from a 9-to-5 workday. In the process, he became a multimillionaire, and he shows readers how they can have the same result.
15. "Home Buying for Dummies, Third Edition," by Eric Tyson and Ray Brown (Wiley Publishing, Inc., Indianapolis, IN), $21.99, 328 pages. Because of its ultra-complete coverage of virtually every home-buying topic, this 600,000-copy best-seller in prior editions is still the best "how to buy a home" book. The new edition adds extensive coverage of Internet resources for home buyers, where more than 75 percent of today's buyers begin their quest. This ultra-honest book even takes a few swipes at inept real estate agents who make the home-buying process more difficult than it needs to be.
Saturday, December 09, 2006
Foreclosures: Dealing in Denver's Foreclosed Homes Market
Cash in on foreclosures
Fast-rising default rates and widely available market data have made it easy to become a real estate closer. Here are some essential tips for rookies.
(Business 2.0 Magazine) -- Two years of interest rate hikes and flattening home prices have put the squeeze on homeowners who gorged on debt during the boom. Now they're struggling to keep up with ballooning payments or, worse, losing their homes to creditors.
In September alone, more than 112,000 U.S. homes fell into foreclosure - a 63 percent jump from September 2005, according to RealtyTrac.
Ideal market conditions, in other words, for a niche group of real estate investors -foreclosure gurus who deliver panicked homeowners fast cash in return for property acquired at enviable discounts. They used to go door-to-door and staple ads to telephone poles.
Top 10 foreclosure markets in the U.S.
Today, though, an array of new online services like PropertyShark.com and Foreclosures.com is making a once-shady business more respectable - and teaching a new class of investors how to turn hard times into sweet profits.
Take 37-year-old John Cordero. From 9 to 5, he's a broker for a financial-services firm in Burlingame, Calif. In his spare time? Relying on Foreclosures.com for good leads and guidance, Cordero has purchased and resold nine houses in some stage of foreclosure since 2003.
What Cordero calls a hobby is looking more and more like a dream career: Foreclosure sales have so far padded his net worth by $700,000.
Web sites haven't changed the basic rules of the game, of course; they've simply sped it up and invited more players.
Here's what several pros consider essential knowledge for rookies.
1. Find diamonds in the rough from the comfort of your desk.
Many sites update foreclosure listings as soon as they're available, and often include the amount owed and the estimated value. Some even mention code violations or complaints against previous owners.
"It's stunning," says Bill Rohlfing, who does about half his business of acquiring "shell" buildings in Harlem through foreclosure. "I'd be doing hours and hours more work if I didn't have PropertyShark." Other sites provide useful hand-holding for first-timers.
2. Time your attack.
Don't even consider attending public foreclosure auctions, which are typically controlled by banks and other big lenders. Small players get their best shot by scouting a property right after it goes into default, when there's a brief window to negotiate directly with the owner.
"The whole idea is to get the property before it goes to the [auction] table," Rohlfing says.
After spotting a default notice online - the first stage before the formal auction process - he goes into action.
"First I call the lawyer who represents the owner to ask if there is a way I can negotiate with the owner before it goes into auction," he says. The typical answer is a firm no, but Rohlfing takes that as his cue to try to do it anyway, preferably in person.
3. Make the owner your partner.
Currying favor with the owner is another way a small player can get the necessary leverage to strike a quick deal. Cordero, for instance, often promises to solve the owner's immediate problem by covering enough mortgage back payments to get the loan out of default.
Then, in exchange for the deed to the property, he provides the owner with an apartment, rent-free, while he refurbishes the house. When he sells the home, Cordero cuts the owner a check for a portion of the profit - usually 10 to 20 percent.
Fast-rising default rates and widely available market data have made it easy to become a real estate closer. Here are some essential tips for rookies.
(Business 2.0 Magazine) -- Two years of interest rate hikes and flattening home prices have put the squeeze on homeowners who gorged on debt during the boom. Now they're struggling to keep up with ballooning payments or, worse, losing their homes to creditors.
In September alone, more than 112,000 U.S. homes fell into foreclosure - a 63 percent jump from September 2005, according to RealtyTrac.
Ideal market conditions, in other words, for a niche group of real estate investors -foreclosure gurus who deliver panicked homeowners fast cash in return for property acquired at enviable discounts. They used to go door-to-door and staple ads to telephone poles.
Top 10 foreclosure markets in the U.S.
Today, though, an array of new online services like PropertyShark.com and Foreclosures.com is making a once-shady business more respectable - and teaching a new class of investors how to turn hard times into sweet profits.
Take 37-year-old John Cordero. From 9 to 5, he's a broker for a financial-services firm in Burlingame, Calif. In his spare time? Relying on Foreclosures.com for good leads and guidance, Cordero has purchased and resold nine houses in some stage of foreclosure since 2003.
What Cordero calls a hobby is looking more and more like a dream career: Foreclosure sales have so far padded his net worth by $700,000.
Web sites haven't changed the basic rules of the game, of course; they've simply sped it up and invited more players.
Here's what several pros consider essential knowledge for rookies.
1. Find diamonds in the rough from the comfort of your desk.
Many sites update foreclosure listings as soon as they're available, and often include the amount owed and the estimated value. Some even mention code violations or complaints against previous owners.
"It's stunning," says Bill Rohlfing, who does about half his business of acquiring "shell" buildings in Harlem through foreclosure. "I'd be doing hours and hours more work if I didn't have PropertyShark." Other sites provide useful hand-holding for first-timers.
2. Time your attack.
Don't even consider attending public foreclosure auctions, which are typically controlled by banks and other big lenders. Small players get their best shot by scouting a property right after it goes into default, when there's a brief window to negotiate directly with the owner.
"The whole idea is to get the property before it goes to the [auction] table," Rohlfing says.
After spotting a default notice online - the first stage before the formal auction process - he goes into action.
"First I call the lawyer who represents the owner to ask if there is a way I can negotiate with the owner before it goes into auction," he says. The typical answer is a firm no, but Rohlfing takes that as his cue to try to do it anyway, preferably in person.
3. Make the owner your partner.
Currying favor with the owner is another way a small player can get the necessary leverage to strike a quick deal. Cordero, for instance, often promises to solve the owner's immediate problem by covering enough mortgage back payments to get the loan out of default.
Then, in exchange for the deed to the property, he provides the owner with an apartment, rent-free, while he refurbishes the house. When he sells the home, Cordero cuts the owner a check for a portion of the profit - usually 10 to 20 percent.
Friday, December 08, 2006
Hey Denver - Are You Ready for This? Zillow Listing Service!
From the ZILLOW BLOG:
We're Opening It Up!
By Lloyd Frink President
Categories: Real Estate , Real Estate Industry , Zestimate , Zillow
With those four words -- "We're Opening It Up!" -- I am pleased, proud, eager and bursting with excitement to announce that we just launched a major upgrade to our site. Ready? We now offer the ability for real estate agents and homeowners to plant virtual "For Sale" signs on Zillow.com. Since we launched in February 2006, this has been one of our most-requested features and now, agents and owners can post homes for sale on Zillow, for free. Our easy posting tool allows photos to be uploaded, space for home descriptions to be written -- including "What I love about my home" -- and room for ever-important neighborhood commentary. Agents who post homes for sale can publish their own contact information, upload a photo of themselves, and add links to listings on their own Web sites.
Another feature that we've just launched -- and I must say this feature has planted a permanent smile on everyone's faces around here since it was conceived -- is "Make Me Move™". MMM, as we affectionately call it, is our twist on what it means to be "For Sale." Here's the concept: Think about a price that would entice you to hand over the keys to your home and move. We think it's a unique and creative way for homeowners to test the waters and gauge interest in their home, even if it's not actually on the market. Interested home shoppers can then contact them via an e-mail "anonymizer" to get the conversation started. We're excited to see what happens by facilitating this type of contact for the first time. We invite homeowners to post a Make Me Move price on their home.
In geek speak, Zillow is moving from "read-only" mode to "read-write". When we launched in February, our goal was to open up the deep repository of information about every home in America — which had been collecting cobwebs in county courthouses for decades -- and then layering our Zestimates on top. Today, we begin our second phase, which means owners and real estate professionals can "write to the site."
And last, we've also launched what we call the Real Estate Wiki. We've seeded the wiki with 100+ articles to build a strong foundation, and have opened that up to you, the real estate community, to improve and expand. We're eager to see what you add, edit and create.
We don't know how many For Sale postings or Make Me Move postings we'll get, but we'll be watching and you can, too. In this world of opening up the Web, we've added a "snapshot" counter on the home page so we can all watch how many postings and MMM's we get. Without a doubt, this is going to be very interesting and we're ready for the ride. As always, we're eager for your feedback.
Update (12/7, 4am): Our apologies, but we're experiencing issues with our website related to the release of the new version of the site. We're working hard on remedying the situation and we'll keep you updated.
Update (12/7 4:45am): OK, we're up and the site is stable. Go post your MMM!
We're Opening It Up!
By Lloyd Frink President
Categories: Real Estate , Real Estate Industry , Zestimate , Zillow
With those four words -- "We're Opening It Up!" -- I am pleased, proud, eager and bursting with excitement to announce that we just launched a major upgrade to our site. Ready? We now offer the ability for real estate agents and homeowners to plant virtual "For Sale" signs on Zillow.com. Since we launched in February 2006, this has been one of our most-requested features and now, agents and owners can post homes for sale on Zillow, for free. Our easy posting tool allows photos to be uploaded, space for home descriptions to be written -- including "What I love about my home" -- and room for ever-important neighborhood commentary. Agents who post homes for sale can publish their own contact information, upload a photo of themselves, and add links to listings on their own Web sites.
Another feature that we've just launched -- and I must say this feature has planted a permanent smile on everyone's faces around here since it was conceived -- is "Make Me Move™". MMM, as we affectionately call it, is our twist on what it means to be "For Sale." Here's the concept: Think about a price that would entice you to hand over the keys to your home and move. We think it's a unique and creative way for homeowners to test the waters and gauge interest in their home, even if it's not actually on the market. Interested home shoppers can then contact them via an e-mail "anonymizer" to get the conversation started. We're excited to see what happens by facilitating this type of contact for the first time. We invite homeowners to post a Make Me Move price on their home.
In geek speak, Zillow is moving from "read-only" mode to "read-write". When we launched in February, our goal was to open up the deep repository of information about every home in America — which had been collecting cobwebs in county courthouses for decades -- and then layering our Zestimates on top. Today, we begin our second phase, which means owners and real estate professionals can "write to the site."
And last, we've also launched what we call the Real Estate Wiki. We've seeded the wiki with 100+ articles to build a strong foundation, and have opened that up to you, the real estate community, to improve and expand. We're eager to see what you add, edit and create.
We don't know how many For Sale postings or Make Me Move postings we'll get, but we'll be watching and you can, too. In this world of opening up the Web, we've added a "snapshot" counter on the home page so we can all watch how many postings and MMM's we get. Without a doubt, this is going to be very interesting and we're ready for the ride. As always, we're eager for your feedback.
Update (12/7, 4am): Our apologies, but we're experiencing issues with our website related to the release of the new version of the site. We're working hard on remedying the situation and we'll keep you updated.
Update (12/7 4:45am): OK, we're up and the site is stable. Go post your MMM!
Wednesday, December 06, 2006
Denver Home Buyers: Want a Fixer-Upper?
From CNN/Money - A group of lessons for those in the Denver Real Estate Market!
Getting started
Erika and Greg Tansey couldn't afford the house they really wanted in Lake Oswego, an upscale suburb of Portland, Oregon, so they opted for Plan B: buying an outdated, dilapidated Cape and remodeling it.
"The bathroom was so small that your knees hit the tub when you used the toilet. The hallways were narrow and dark. And the garage was basically falling over," says Erika.
What the house lacked in charm it made up for in location and a terrific school district.
"Originally, we didn't think it'd be that big a project," says Erika. "We ended up gutting the house."
Erika and Greg started demolition in September 2005, with more significant plans than they'd first imagined: raising the roof, putting in an addition, doubling the square footage and reconfiguring the floor plan. Erika, 34, a freelance marketing consultant, and Greg, 35, a venture capitalist, budgeted $200,000 for their extreme home makeover.
But the project took six months longer than expected, cost $80,000 more than planned and finished just as the bubble began deflating. By the time they finished this past August, they were exhausted but eager to share the lessons they'd learned.
Lesson 1
The words "under" and "budget" do not coexist
The first step is usually to hire a general contractor (G.C.) to create a budget, shop for materials and hire subcontractors. Doing this yourself is a full-time job but can save as much as 20 percent of the bill. The Tanseys, with family friend and G.C. Dave Fahlman on speed dial, dared to do it. They expected to save $50,000, which they could put back into the house.
But, says Erika, "Some of our estimates were way off." Upgrades were the biggest culprit. They budgeted $7,000 for siding but found they preferred cedar shingles, which cost five times that. They compromised on cedar siding, which still rang up at $21,000. Other last-minute upgrades, such as mahogany decking, added to budget woes.
It's crucial to have room in the budget for errors and uncertainties. Even a seasoned G.C. can't know exactly what's needed until the walls come down or know how a natural disaster will affect wood prices. "Add 10 percent to your total budget," says Carl Heldman, author of Be Your Own House Contractor. "I promise you'll spend every penny."
Lesson 2
You can get a better price
The Tanseys' diligence in pricing out subcontractors and materials saved thousands. Quoted $7,000 to cut down a tree, Erika called seven more services before she got a $4,000 bid. Interior-trim painting estimates varied from $5,000 to $15,000. She found a landscaper for $11,000 when another bid $35,000. It pays to get three quotes on any major job.
Don't, however, make money the sole basis of your decision. You want to be confident - via references and track record - that the person will get the job done right in a reasonable amount of time.
Lesson 3
Don't count on hosting New Year's Eve dinner
When the Tanseys' windows didn't make it onto the back of a delivery truck, it set off a chain reaction. Without windows, the siding couldn't be put on. Without siding, no insulation could be installed, which meant no drywall, trim, light fixtures or flooring. One snag resulted in a three-week delay.
Torrential rain flooded the basement. The framer came down with pneumonia. The flooring guy shot a nail into a pipe, triggering a leak. Because the Tanseys weren't married to deadlines they were able to cope with the delays. Although they hoped to be in by April, they had signed a month-to-month lease on the apartment they were renting.
Some delays will be beyond your control. If you're trying to have the house finished before the birth of your triplets, you're setting yourself up for a bad case of acid reflux.
Lesson 4
Even Bob Vila has his limits
Erika dealt with subcontractors, kept track of materials and cared for their infant daughter, Claire. Greg spent his weekends and evenings at the house. "The poor guy works all day then goes to work again," said Erika during construction.
You can save a lot rolling up your sleeves but there's a price to pay. "The three key elements of a remodel are cost, quality and time - and they could conflict," says G.C. and family friend Dave Fahlman. "You are constantly having to pick which is more important."
Greg helped with the demolition work, the framing and the electrical installation. He planned to tackle the tiling as well but after months of 16-hour days, he thought better of it and hired three workers. "It was the best $12,000 we've ever spent," says Erika.
The finish line
The final remodeling cost, with landscaping, came to $280,000 for a total of $726,000. "We had a crazy year but we love our house," says Erika. And they've made money, at least on paper. Based on comparables, local real estate agent Trista Nelson values the house at $980,000.
We wouldn't have been able to afford a house nearly so nice if we hadn't remodeled," says Greg. He and Erika are now planning their next project: a relaxing family vacation.
Getting started
Erika and Greg Tansey couldn't afford the house they really wanted in Lake Oswego, an upscale suburb of Portland, Oregon, so they opted for Plan B: buying an outdated, dilapidated Cape and remodeling it.
"The bathroom was so small that your knees hit the tub when you used the toilet. The hallways were narrow and dark. And the garage was basically falling over," says Erika.
What the house lacked in charm it made up for in location and a terrific school district.
"Originally, we didn't think it'd be that big a project," says Erika. "We ended up gutting the house."
Erika and Greg started demolition in September 2005, with more significant plans than they'd first imagined: raising the roof, putting in an addition, doubling the square footage and reconfiguring the floor plan. Erika, 34, a freelance marketing consultant, and Greg, 35, a venture capitalist, budgeted $200,000 for their extreme home makeover.
But the project took six months longer than expected, cost $80,000 more than planned and finished just as the bubble began deflating. By the time they finished this past August, they were exhausted but eager to share the lessons they'd learned.
Lesson 1
The words "under" and "budget" do not coexist
The first step is usually to hire a general contractor (G.C.) to create a budget, shop for materials and hire subcontractors. Doing this yourself is a full-time job but can save as much as 20 percent of the bill. The Tanseys, with family friend and G.C. Dave Fahlman on speed dial, dared to do it. They expected to save $50,000, which they could put back into the house.
But, says Erika, "Some of our estimates were way off." Upgrades were the biggest culprit. They budgeted $7,000 for siding but found they preferred cedar shingles, which cost five times that. They compromised on cedar siding, which still rang up at $21,000. Other last-minute upgrades, such as mahogany decking, added to budget woes.
It's crucial to have room in the budget for errors and uncertainties. Even a seasoned G.C. can't know exactly what's needed until the walls come down or know how a natural disaster will affect wood prices. "Add 10 percent to your total budget," says Carl Heldman, author of Be Your Own House Contractor. "I promise you'll spend every penny."
Lesson 2
You can get a better price
The Tanseys' diligence in pricing out subcontractors and materials saved thousands. Quoted $7,000 to cut down a tree, Erika called seven more services before she got a $4,000 bid. Interior-trim painting estimates varied from $5,000 to $15,000. She found a landscaper for $11,000 when another bid $35,000. It pays to get three quotes on any major job.
Don't, however, make money the sole basis of your decision. You want to be confident - via references and track record - that the person will get the job done right in a reasonable amount of time.
Lesson 3
Don't count on hosting New Year's Eve dinner
When the Tanseys' windows didn't make it onto the back of a delivery truck, it set off a chain reaction. Without windows, the siding couldn't be put on. Without siding, no insulation could be installed, which meant no drywall, trim, light fixtures or flooring. One snag resulted in a three-week delay.
Torrential rain flooded the basement. The framer came down with pneumonia. The flooring guy shot a nail into a pipe, triggering a leak. Because the Tanseys weren't married to deadlines they were able to cope with the delays. Although they hoped to be in by April, they had signed a month-to-month lease on the apartment they were renting.
Some delays will be beyond your control. If you're trying to have the house finished before the birth of your triplets, you're setting yourself up for a bad case of acid reflux.
Lesson 4
Even Bob Vila has his limits
Erika dealt with subcontractors, kept track of materials and cared for their infant daughter, Claire. Greg spent his weekends and evenings at the house. "The poor guy works all day then goes to work again," said Erika during construction.
You can save a lot rolling up your sleeves but there's a price to pay. "The three key elements of a remodel are cost, quality and time - and they could conflict," says G.C. and family friend Dave Fahlman. "You are constantly having to pick which is more important."
Greg helped with the demolition work, the framing and the electrical installation. He planned to tackle the tiling as well but after months of 16-hour days, he thought better of it and hired three workers. "It was the best $12,000 we've ever spent," says Erika.
The finish line
The final remodeling cost, with landscaping, came to $280,000 for a total of $726,000. "We had a crazy year but we love our house," says Erika. And they've made money, at least on paper. Based on comparables, local real estate agent Trista Nelson values the house at $980,000.
We wouldn't have been able to afford a house nearly so nice if we hadn't remodeled," says Greg. He and Erika are now planning their next project: a relaxing family vacation.
Sunday, December 03, 2006
Are Your Emotions Playing a Role in the Sale of Your Denver Home?
For Sale, By the Owner's Ego
Feelings Often Play as Big A Role as Logic in Setting Prices, Research Finds
By Kirstin Downey
Washington Post Staff Writer
Saturday, November 4, 2006; Page F01
Sam LeBlanc tried to cushion the blow when he gave his wife, Karyn, the bad news. He told her to take a breath and think it over, because he knew that what he was telling her would hurt.
Her condominium isn't worth nearly as much as she thought.
"I was a little crushed," Karyn recalled.
People may think they make cold, hard decisions in financial transactions such as buying and selling a house. Increasingly, though, research shows that emotions play as big a role as intellect.
For Karyn, for example, the condo she bought in the District's Palisades neighborhood in 2002 was the first big, independent purchase she had ever made. She proudly added many special touches, including a closet organizing system she thought would be the envy of any woman. But she and Sam got married, had a baby and decided to sell the condo. Over the past few months, Sam did a lot of market research and decided they should ask $269,000.
The number came as a blow to Karyn, because she knew similar units, including some she thinks weren't as nice, sold last year for $280,000.
"You want to believe it's worth a lot more because you've invested your time and energy on it," Karyn said.
Evidence is mounting that people set prices, particularly for housing, as much on ego and self-image as on an objective review of the market. That's one reason for the phenomenon known as "sticky prices" -- home sellers who won't cut their demands enough to make a deal. It helps explain why the unsold inventory of homes has risen so high, and why, despite this rise, home prices in the Washington area have fallen only slightly. There were 24,741 homes for sale in September in Washington and the close-in suburbs, up from 13,950 a year earlier.
Economic researchers have found that emotions are a bigger influence than was previously believed in how people make financial decisions. For a long time, economists believed that human beings made decisions like robots, that people applied simple logic in making financial choices. But a body of research developed over the past two decades, known as neuroeconomics or behavioral economics, has shed light on how powerful a role the unconscious mind plays. New imaging technology, meanwhile, is allowing scientists to peer inside people's brains while they wrestle with financial decisions.
These studies have illuminated a few key concepts: Many people will pass up sure profits for illusory ones. Some will turn down profits if they believe someone else is unfairly profiting more. Some will even refuse to sell if they believe they may come to regret it, because fear of future regret can be as powerful a motivator as money in the pocket today.
In other words, people will cling to prices they recall from a brighter day, even when market conditions have changed; they will walk away from a sale if they feel the buyer is getting too good a deal at their expense; and they are terrified that [if they sell now] the market will rebound and they will feel like fools.
"There's a whole emotional processing system that goes on in the brain that's largely beyond our control," said Kevin McCabe, a professor of economics, law and neuroscience at George Mason University. "The general view is that our emotions control us, and not vice versa."
Little of this research has been applied directly to real estate, but neuroeconomists say the principles would logically apply to housing, too. For example, much work has been done on the concept of "loss aversion," which shows that people tend to deny reality when something they own, such as stock, declines in value. They will keep holding that stock, confident the price will rise again if they wait long enough.
They do the same with their homes, maintaining the asking price even at a level that makes no sense, economists said. Similarly, home sellers become attached to the prices their neighbors received at the top of the market rather than current prices, and they become reluctant to sell unless they get that higher price.
"It's classic loss aversion," said Christopher J. Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School in New York. "You could do it, but you don't want to. You don't want to realize the loss. It leads to housing markets that don't function very well. You've got a lot of houses on the market and they aren't selling."
Mayer said that people allow their wishful thinking to overcome realistic perceptions because they don't want to view themselves as having made a mistake.
"People should recognize that what they do won't change the housing market," he said. "They could wish their house could sell for more money but it doesn't mean it will do so."
David Laibson, who teaches psychology and economics at Harvard University, said a common error people make is believing that homes can't drop in value below what they paid for them, and, in particular, that they can't fall below their mortgage amounts.
"There seems to be a psychological resistance to taking losses on the sale of a house," Laibson said. "People think they'll make money on it. . . . That logic worked for a long time, and now anyone who bet on that logic is being burned."
Generally speaking, according to the evolving body of neuroeconomic research, people logically make rather simple dollars-and-cents analyses when they buy small items, but become more emotional around large decisions, particularly those that affect their futures.
"For decisions we make frequently, like buying eggs or which route to take driving to work, we're pretty rational," Laibson said. In areas that involve choices people make rarely, they have to extrapolate based on what they have heard or rely on limited previous experience. When people sell a house, they may have done so only once or twice before, he said. That means they may experience anguish similar to what people feel when they decide whom to marry or whether and when to retire.
Some sellers are able to be more dispassionate. Six months ago, mortgage broker Steven Waller of Stephens City, Va., bought three dilapidated townhouses in nearby Front Royal for about $100,000 each. They had been used as rentals; he spent about $20,000 refurbishing each. Other similar units are for sale by their owners, who live in them, for $165,000 to $200,000, but Waller is flipping his properties by pricing them at $149,000 each. He said they have been appraised at about $180,000.
"I'm making a profit, that's all that matters," Waller said. "I have no emotional attachment to it. You can stay ahead of the game if you price at where they will sell rather than sit on them for a year."
Fairfax resident Sharon Stapleton, in contrast, knew she had a "major ego involvement" when her family set out to sell their vacation home on Lake George in upstate New York. They held out for nine months, and three years ago, they finally got their price. Recently, however, she sought to do the same with the home she owns in Fairfax County. Stapleton has wondered if it is overpriced, but she believes the house, on a forested lot, is unique in a highly urbanized area, and so she has kept the price at $795,000. She's wondering now if she has been wise.
"I just need time to emotionally deal with the price drop," she wrote in an e-mail. "EGO. Not greed."
The difference in the ways that real estate investors vs. ordinary home sellers are reacting to the market can also be seen in national trends. Last week, the National Association of Realtors reported that nationwide, the median price of existing homes, sold mostly by people who live in them, fell 2.2 percent in September compared with September 2005, dropping to $220,000 from $225,000. The median is the point at which half the homes cost more and half cost less.
The next day, the Commerce Department reported that home builders -- in business to make a profit -- had more aggressively cut their prices. The price of new houses declined 9.7 percent in September, compared with the same month a year earlier. Analysts said that cutting prices helped boost sales after a slow summer.
Neuroeconomic research may provide buyers and sellers with some clues about how to psych out the market themselves.
Sellers, neuroeconomist McCabe suggests, might need to realize that no matter how passionately they wish things were different, prices have fallen and they need to accept that. They can hold on and wait, but may actually lose more money by making payments on a home in a place they no longer want to live -- in effect, throwing good money after bad.
Buyers, he said, need to be aware that they are dealing not just with a house but also with a seller wrestling with his ego. Sometimes it might be smarter to let the poor fellow keep his price, but ask for other concessions that might actually be more valuable. A new roof, new appliances or substantial assistance toward the closing costs all have material value, but they allow the seller the dignity of maintaining the price at a level that leaves him standing tall in his neighbors' eyes.
"Haggle less over price and more over other stuff," McCabe said the research indicates. "Change the bargaining so you still get the deal you want."
Of course, real estate agents say they haven't needed research laboratories to teach them about buyer and seller behavior.
"You always view your house as more valuable than the numbers will justify," said Owen Heine, a real estate with Sager Real Estate in Strasburg, Va. "Every person views his house as a castle. It's human nature to love what you have."
Feelings Often Play as Big A Role as Logic in Setting Prices, Research Finds
By Kirstin Downey
Washington Post Staff Writer
Saturday, November 4, 2006; Page F01
Sam LeBlanc tried to cushion the blow when he gave his wife, Karyn, the bad news. He told her to take a breath and think it over, because he knew that what he was telling her would hurt.
Her condominium isn't worth nearly as much as she thought.
"I was a little crushed," Karyn recalled.
People may think they make cold, hard decisions in financial transactions such as buying and selling a house. Increasingly, though, research shows that emotions play as big a role as intellect.
For Karyn, for example, the condo she bought in the District's Palisades neighborhood in 2002 was the first big, independent purchase she had ever made. She proudly added many special touches, including a closet organizing system she thought would be the envy of any woman. But she and Sam got married, had a baby and decided to sell the condo. Over the past few months, Sam did a lot of market research and decided they should ask $269,000.
The number came as a blow to Karyn, because she knew similar units, including some she thinks weren't as nice, sold last year for $280,000.
"You want to believe it's worth a lot more because you've invested your time and energy on it," Karyn said.
Evidence is mounting that people set prices, particularly for housing, as much on ego and self-image as on an objective review of the market. That's one reason for the phenomenon known as "sticky prices" -- home sellers who won't cut their demands enough to make a deal. It helps explain why the unsold inventory of homes has risen so high, and why, despite this rise, home prices in the Washington area have fallen only slightly. There were 24,741 homes for sale in September in Washington and the close-in suburbs, up from 13,950 a year earlier.
Economic researchers have found that emotions are a bigger influence than was previously believed in how people make financial decisions. For a long time, economists believed that human beings made decisions like robots, that people applied simple logic in making financial choices. But a body of research developed over the past two decades, known as neuroeconomics or behavioral economics, has shed light on how powerful a role the unconscious mind plays. New imaging technology, meanwhile, is allowing scientists to peer inside people's brains while they wrestle with financial decisions.
These studies have illuminated a few key concepts: Many people will pass up sure profits for illusory ones. Some will turn down profits if they believe someone else is unfairly profiting more. Some will even refuse to sell if they believe they may come to regret it, because fear of future regret can be as powerful a motivator as money in the pocket today.
In other words, people will cling to prices they recall from a brighter day, even when market conditions have changed; they will walk away from a sale if they feel the buyer is getting too good a deal at their expense; and they are terrified that [if they sell now] the market will rebound and they will feel like fools.
"There's a whole emotional processing system that goes on in the brain that's largely beyond our control," said Kevin McCabe, a professor of economics, law and neuroscience at George Mason University. "The general view is that our emotions control us, and not vice versa."
Little of this research has been applied directly to real estate, but neuroeconomists say the principles would logically apply to housing, too. For example, much work has been done on the concept of "loss aversion," which shows that people tend to deny reality when something they own, such as stock, declines in value. They will keep holding that stock, confident the price will rise again if they wait long enough.
They do the same with their homes, maintaining the asking price even at a level that makes no sense, economists said. Similarly, home sellers become attached to the prices their neighbors received at the top of the market rather than current prices, and they become reluctant to sell unless they get that higher price.
"It's classic loss aversion," said Christopher J. Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School in New York. "You could do it, but you don't want to. You don't want to realize the loss. It leads to housing markets that don't function very well. You've got a lot of houses on the market and they aren't selling."
Mayer said that people allow their wishful thinking to overcome realistic perceptions because they don't want to view themselves as having made a mistake.
"People should recognize that what they do won't change the housing market," he said. "They could wish their house could sell for more money but it doesn't mean it will do so."
David Laibson, who teaches psychology and economics at Harvard University, said a common error people make is believing that homes can't drop in value below what they paid for them, and, in particular, that they can't fall below their mortgage amounts.
"There seems to be a psychological resistance to taking losses on the sale of a house," Laibson said. "People think they'll make money on it. . . . That logic worked for a long time, and now anyone who bet on that logic is being burned."
Generally speaking, according to the evolving body of neuroeconomic research, people logically make rather simple dollars-and-cents analyses when they buy small items, but become more emotional around large decisions, particularly those that affect their futures.
"For decisions we make frequently, like buying eggs or which route to take driving to work, we're pretty rational," Laibson said. In areas that involve choices people make rarely, they have to extrapolate based on what they have heard or rely on limited previous experience. When people sell a house, they may have done so only once or twice before, he said. That means they may experience anguish similar to what people feel when they decide whom to marry or whether and when to retire.
Some sellers are able to be more dispassionate. Six months ago, mortgage broker Steven Waller of Stephens City, Va., bought three dilapidated townhouses in nearby Front Royal for about $100,000 each. They had been used as rentals; he spent about $20,000 refurbishing each. Other similar units are for sale by their owners, who live in them, for $165,000 to $200,000, but Waller is flipping his properties by pricing them at $149,000 each. He said they have been appraised at about $180,000.
"I'm making a profit, that's all that matters," Waller said. "I have no emotional attachment to it. You can stay ahead of the game if you price at where they will sell rather than sit on them for a year."
Fairfax resident Sharon Stapleton, in contrast, knew she had a "major ego involvement" when her family set out to sell their vacation home on Lake George in upstate New York. They held out for nine months, and three years ago, they finally got their price. Recently, however, she sought to do the same with the home she owns in Fairfax County. Stapleton has wondered if it is overpriced, but she believes the house, on a forested lot, is unique in a highly urbanized area, and so she has kept the price at $795,000. She's wondering now if she has been wise.
"I just need time to emotionally deal with the price drop," she wrote in an e-mail. "EGO. Not greed."
The difference in the ways that real estate investors vs. ordinary home sellers are reacting to the market can also be seen in national trends. Last week, the National Association of Realtors reported that nationwide, the median price of existing homes, sold mostly by people who live in them, fell 2.2 percent in September compared with September 2005, dropping to $220,000 from $225,000. The median is the point at which half the homes cost more and half cost less.
The next day, the Commerce Department reported that home builders -- in business to make a profit -- had more aggressively cut their prices. The price of new houses declined 9.7 percent in September, compared with the same month a year earlier. Analysts said that cutting prices helped boost sales after a slow summer.
Neuroeconomic research may provide buyers and sellers with some clues about how to psych out the market themselves.
Sellers, neuroeconomist McCabe suggests, might need to realize that no matter how passionately they wish things were different, prices have fallen and they need to accept that. They can hold on and wait, but may actually lose more money by making payments on a home in a place they no longer want to live -- in effect, throwing good money after bad.
Buyers, he said, need to be aware that they are dealing not just with a house but also with a seller wrestling with his ego. Sometimes it might be smarter to let the poor fellow keep his price, but ask for other concessions that might actually be more valuable. A new roof, new appliances or substantial assistance toward the closing costs all have material value, but they allow the seller the dignity of maintaining the price at a level that leaves him standing tall in his neighbors' eyes.
"Haggle less over price and more over other stuff," McCabe said the research indicates. "Change the bargaining so you still get the deal you want."
Of course, real estate agents say they haven't needed research laboratories to teach them about buyer and seller behavior.
"You always view your house as more valuable than the numbers will justify," said Owen Heine, a real estate with Sager Real Estate in Strasburg, Va. "Every person views his house as a castle. It's human nature to love what you have."
Friday, December 01, 2006
Real Estate Dreams Dashed, Debts Mount
Giant Scam? Real Estate Dreams Dashed, Debts Mount
Investing Club Turns into Nightmare Idea
It seemed like an answer to a prayer for people facing hard times.
The sales pitch sounded too good to be true, and it was.
One of the largest mortgage frauds in living memory began with a small-town lay minister and her daughter, a hairdresser. They gathered friends, neighbors and clients, and pitched a get-rich-quick scheme tinted with religion and targeted specifically at African-Americans.
"'This is what the white man has done to get ahead their whole life.' …. That was their exact words," said Barry Moore, a resident of Virginia who found himself the unwitting owner of two houses in Indiana.
Federal authorities are still investigating, but it appears the fraud ensnared more than 100 people, as many as 400 properties and as much as $80 million.
"Fannie Mae … believed it was the mother of all mortgage fraud," said Robin Pickett, an Indiana real estate agent working with the fraud's victims.
Mortgage fraud has become an "epidemic," according to an FBI report issued last year. According to the report, the value of total fraud ballooned from about $400 million in 2004 to more than $1 billion in 2005 — and is on pace this year to go even higher.
Outline of a Fraud
Beulah Penn was a lay minister in Martinsville, Va. Her daughter, Sharon, worked in a beauty salon in the town, which had lost thousands of factory jobs in recent years. Bealuh's son, Robert Penn, was a successful property speculator who lived — literally — on Easy Street, in Indianapolis. One evening in 2005, Beulah Penn and her daughter gathered friends and neighbors, and Robert Penn came into town for a dinner that Moore said felt "like a festive celebration."
According to investors, the Penns offered the opportunity to join what they called a "real estate investment group" as a blessing from God. They emphasized that no individual would bear responsibility. Instead, each would have a stake in a portfolio of properties that one of Robert Penn's companies companies. When the properties were eventually sold, the profit would be returned to the members. And according to the group, all that Robert Penn asked for was their Social Security numbers so that he could verify their credit ratings.
Many of the investors were reluctant to join, and did so only after months of persistent urging. Once they had been persuaded, the next stage required signing some documents. And on this point, Beulah and Sharon Penn always seemed to be in a hurry, investors said.
"You get over there and you get to signing, everything was highlighted, where you need to initial it, initial here, sign here, initial here, sign here, date here, put yesterday's date on here or what not," Moore recalled. "Literally standing over me, flipping the pages for me."
The investors expected the next they would hear of their investment would be a check in the mail. It wasn't until months later that they realized they had been swindled, they said.
Kelvin Thompson went to his credit union for a small loan, "a little extra money for the holidays," he said, and was surprised to find that five Indiana properties were registered in his name. He owed nearly $1 million on the mortgages.
The victims of the alleged fraud found their credit ratings, in some cases nearly perfect before they signed those documents, ruined. Small or simple transactions had suddenly become arduous.
Unexpected Support
Robin and Tony Pickett, real estate agents in Indianapolis, discovered a large number of big mortgages registered in the names of people living outside Indiana. They became suspicious.
"Once we saw the values that they had been sold for we immediately thought there was something a little strange about this," Tony Pickett said. "So the next day I went over to the properties and did an assessment myself. And what we found was most of them were abandoned. Most of them were in total disrepair."
Robert Penn had secured appraisals of the properties, which the Picketts said were as much as four times their value. One of the five properties in Thompson's name was worth only $29,000, but the mortgage issued was for $139,000.
According to the Pickets, Robert Penn pocketed huge sums of money by purchasing dilapidated homes at market value, while arranging mortgages of far greater value in the names of his investors. The difference between the two became his profit.
In June, New York-based Countrywide Home Loans Inc., the nation's largest home lender, filed a lawsuit in Indiana's Marion Superior Court, charging Robert Penn with masterminding the fraud.
When Beulah Penn was deposed by another lender involved in the case earlier this week, she decided to invoke her right to silence, even refusing to answer when asked if Robert Penn was her son.
"Nightline" has learned that federal investigators are now interviewing members of other investment groups started by Robert Penn in Michigan and Indiana. Sharon Penn has closed her hair salon.
Copyright © 2006 ABC News Internet Ventures
Investing Club Turns into Nightmare Idea
It seemed like an answer to a prayer for people facing hard times.
The sales pitch sounded too good to be true, and it was.
One of the largest mortgage frauds in living memory began with a small-town lay minister and her daughter, a hairdresser. They gathered friends, neighbors and clients, and pitched a get-rich-quick scheme tinted with religion and targeted specifically at African-Americans.
"'This is what the white man has done to get ahead their whole life.' …. That was their exact words," said Barry Moore, a resident of Virginia who found himself the unwitting owner of two houses in Indiana.
Federal authorities are still investigating, but it appears the fraud ensnared more than 100 people, as many as 400 properties and as much as $80 million.
"Fannie Mae … believed it was the mother of all mortgage fraud," said Robin Pickett, an Indiana real estate agent working with the fraud's victims.
Mortgage fraud has become an "epidemic," according to an FBI report issued last year. According to the report, the value of total fraud ballooned from about $400 million in 2004 to more than $1 billion in 2005 — and is on pace this year to go even higher.
Outline of a Fraud
Beulah Penn was a lay minister in Martinsville, Va. Her daughter, Sharon, worked in a beauty salon in the town, which had lost thousands of factory jobs in recent years. Bealuh's son, Robert Penn, was a successful property speculator who lived — literally — on Easy Street, in Indianapolis. One evening in 2005, Beulah Penn and her daughter gathered friends and neighbors, and Robert Penn came into town for a dinner that Moore said felt "like a festive celebration."
According to investors, the Penns offered the opportunity to join what they called a "real estate investment group" as a blessing from God. They emphasized that no individual would bear responsibility. Instead, each would have a stake in a portfolio of properties that one of Robert Penn's companies companies. When the properties were eventually sold, the profit would be returned to the members. And according to the group, all that Robert Penn asked for was their Social Security numbers so that he could verify their credit ratings.
Many of the investors were reluctant to join, and did so only after months of persistent urging. Once they had been persuaded, the next stage required signing some documents. And on this point, Beulah and Sharon Penn always seemed to be in a hurry, investors said.
"You get over there and you get to signing, everything was highlighted, where you need to initial it, initial here, sign here, initial here, sign here, date here, put yesterday's date on here or what not," Moore recalled. "Literally standing over me, flipping the pages for me."
The investors expected the next they would hear of their investment would be a check in the mail. It wasn't until months later that they realized they had been swindled, they said.
Kelvin Thompson went to his credit union for a small loan, "a little extra money for the holidays," he said, and was surprised to find that five Indiana properties were registered in his name. He owed nearly $1 million on the mortgages.
The victims of the alleged fraud found their credit ratings, in some cases nearly perfect before they signed those documents, ruined. Small or simple transactions had suddenly become arduous.
Unexpected Support
Robin and Tony Pickett, real estate agents in Indianapolis, discovered a large number of big mortgages registered in the names of people living outside Indiana. They became suspicious.
"Once we saw the values that they had been sold for we immediately thought there was something a little strange about this," Tony Pickett said. "So the next day I went over to the properties and did an assessment myself. And what we found was most of them were abandoned. Most of them were in total disrepair."
Robert Penn had secured appraisals of the properties, which the Picketts said were as much as four times their value. One of the five properties in Thompson's name was worth only $29,000, but the mortgage issued was for $139,000.
According to the Pickets, Robert Penn pocketed huge sums of money by purchasing dilapidated homes at market value, while arranging mortgages of far greater value in the names of his investors. The difference between the two became his profit.
In June, New York-based Countrywide Home Loans Inc., the nation's largest home lender, filed a lawsuit in Indiana's Marion Superior Court, charging Robert Penn with masterminding the fraud.
When Beulah Penn was deposed by another lender involved in the case earlier this week, she decided to invoke her right to silence, even refusing to answer when asked if Robert Penn was her son.
"Nightline" has learned that federal investigators are now interviewing members of other investment groups started by Robert Penn in Michigan and Indiana. Sharon Penn has closed her hair salon.
Copyright © 2006 ABC News Internet Ventures
Thursday, November 30, 2006
Buying or Selling Your Denver Home over the Holidays
Searching for or selling a home in Denver during November or December can be stressful in addition to the built-in holiday frenzy. Simple tips for Denver's buyers and sellers can minimize stress and possibly facilitate a sale.
Tips for Home Sellers in Denver:
-Less is more when decorating a home for the holidays while you are trying to sell. Streamline the amount of holiday specific decorations you display.
-Large over-size Christmas trees and other holiday decorations consume space that might make rooms or landscapes appear smaller.
-Install and remove exterior holiday decorations 2 weeks before and after holiday.
-Turn off lighted holiday decorations before showings, buyers should focus on your home and not your decorations.
-If you are having out-of-town house guests, ask your real estate agent to postpone showings until after your guests depart.
-Display summer photos of home and gardens to inform buyers of the features of the home in other seasons.
-Before showings remove snow, ice and leaves from walkways and driveways. Don't overlook outside entrances to basements, garages, and porches. Pet dropping are a turn-off to buyers.
NOTE: You can request your Denver Real Estate Broker to place your listed home on a "Temporarily Off The Market" status during the holidays. The con is that your house is still accruing "Days on Market" while off, but the pro is that you can decorate as you wish and feel free to enjoy the holidays in your space with your family and guests and then clear away, preparing your home to be shown once more.
Denver Holiday Home Buying Tips:
-You can find motivated sellers at year-end, but don't think they'll give away their home. Do your homework before drafting a real estate contract. Look only at sold comparables in the Denver neighborhood you are shopping from the last six months.
-Don't be afraid to ask for concessions from sellers. Popular give-backs from sellers to buyers are: property and transfer tax rebates, closing cost credits and paying mortgage points.
-When performing a home inspection in wintry weather, it's easy to forgo adequate roof and air-conditioning condenser reviews. If you can't see or operate a structural or mechanical system, ask for an extension until the weather improves.
-Patience rules at the holidays. Everyone is busy, and if it takes an extra day to view a property, it's not uncommon.
Denver Buyers and Sellers, remember:
-If you plan to close the purchase or sale of a home near a holiday, check with your agent, title company and lender to verify two business days before closing that they have all the required documents and funds have been wired to complete the transaction.
-If you are closing on your new home, select a mid-week day, early in the day, to schedule your closing time, to accommodate last minute delays by a mortgage loan processor, insurance or title company.
-If you plan to move during the holidays, keep in mind that moving companies will require more notice and could charge additional fees for packing, moving and delivering household goods on week-ends and holidays.
Tips for Home Sellers in Denver:
-Less is more when decorating a home for the holidays while you are trying to sell. Streamline the amount of holiday specific decorations you display.
-Large over-size Christmas trees and other holiday decorations consume space that might make rooms or landscapes appear smaller.
-Install and remove exterior holiday decorations 2 weeks before and after holiday.
-Turn off lighted holiday decorations before showings, buyers should focus on your home and not your decorations.
-If you are having out-of-town house guests, ask your real estate agent to postpone showings until after your guests depart.
-Display summer photos of home and gardens to inform buyers of the features of the home in other seasons.
-Before showings remove snow, ice and leaves from walkways and driveways. Don't overlook outside entrances to basements, garages, and porches. Pet dropping are a turn-off to buyers.
NOTE: You can request your Denver Real Estate Broker to place your listed home on a "Temporarily Off The Market" status during the holidays. The con is that your house is still accruing "Days on Market" while off, but the pro is that you can decorate as you wish and feel free to enjoy the holidays in your space with your family and guests and then clear away, preparing your home to be shown once more.
Denver Holiday Home Buying Tips:
-You can find motivated sellers at year-end, but don't think they'll give away their home. Do your homework before drafting a real estate contract. Look only at sold comparables in the Denver neighborhood you are shopping from the last six months.
-Don't be afraid to ask for concessions from sellers. Popular give-backs from sellers to buyers are: property and transfer tax rebates, closing cost credits and paying mortgage points.
-When performing a home inspection in wintry weather, it's easy to forgo adequate roof and air-conditioning condenser reviews. If you can't see or operate a structural or mechanical system, ask for an extension until the weather improves.
-Patience rules at the holidays. Everyone is busy, and if it takes an extra day to view a property, it's not uncommon.
Denver Buyers and Sellers, remember:
-If you plan to close the purchase or sale of a home near a holiday, check with your agent, title company and lender to verify two business days before closing that they have all the required documents and funds have been wired to complete the transaction.
-If you are closing on your new home, select a mid-week day, early in the day, to schedule your closing time, to accommodate last minute delays by a mortgage loan processor, insurance or title company.
-If you plan to move during the holidays, keep in mind that moving companies will require more notice and could charge additional fees for packing, moving and delivering household goods on week-ends and holidays.
Sunday, November 26, 2006
Slow Market Solutions: Denver Homeowners Can Sell Quicker with 1031 Exchange
1031 exchange:
Owner Carry Financing Devalues 1031 Exchange
In a slow market sellers are often asked to carry back part of their sales price.
The following procedure allows the seller to have his cake and eat it too:
Prior to sale, the seller takes a cash out mortgage on the property equal to the amount of the owner carry.
At closing, instead of carrying back the loan, the seller lends to the buyer the cash from the refinance.
The seller receives the full sales price in cash or as 1031 exchange proceeds in the case of an investment property sale.
The seller now has a tax basis in the note equal to its face value, and will only pay tax on the interest received, not on repayment of principal.
If however, you do not provide this "private financing," but instead finance the owner carryback directly from your proceeds, you will often owe capital gains on the amount of the note.
Owner Carry Financing Devalues 1031 Exchange
In a slow market sellers are often asked to carry back part of their sales price.
The following procedure allows the seller to have his cake and eat it too:
Prior to sale, the seller takes a cash out mortgage on the property equal to the amount of the owner carry.
At closing, instead of carrying back the loan, the seller lends to the buyer the cash from the refinance.
The seller receives the full sales price in cash or as 1031 exchange proceeds in the case of an investment property sale.
The seller now has a tax basis in the note equal to its face value, and will only pay tax on the interest received, not on repayment of principal.
If however, you do not provide this "private financing," but instead finance the owner carryback directly from your proceeds, you will often owe capital gains on the amount of the note.
Saturday, November 25, 2006
Thinking of Buying a Second or Vacation Home in Colorado?
How to buy a second home
By Holden Lewis • Bankrate.com
Not long ago, Frank Kwok moved from a 900-square-foot townhouse on the North Shore of Oahu "because we wanted our own home with a yard and everything." So he bought a 2,500-square-foot home in what he calls the "bustling suburb" of Kapolei, not far from Honolulu.
He kept the tiny townhouse in the beach town of Haleiwa. It's now his family's second home: "We go back there whenever we don't want to be bothered by neighbors."
Kwok did it backward -- turning the first home into the getaway home -- but he did something that many Americans do or dream of doing: He bought a second home.
Buying a second home isn't much different from buying a primary residence. If you don't rent it out regularly, so it's not considered an investment property, you can get the same mortgage rate that you would get on your primary house. Depending on circumstances, you might be able to deduct the mortgage interest from income taxes.
When you shop for a second or vacation home, you have two friends: time and your primary home's equity.
"If they look for a second home, people need to be patient," Kwok says. "Don't rush into it. They already have a place to live. Weigh the pros and cons of each place."
Bob Walters, vice president of Quicken Mortgage, delivers the same advice. "Don't make any rash decisions," he says. "There's no reason you have to buy it right now. If you find a place and love the place, stew on it a couple of months. It'll still be there."
The cooling-off period
During your self-imposed cooling-off period, think long and hard about how often you will visit and how much time you will spend. Are you the type of person who buys a 12-month health-club membership, then stops going after a few weeks? If you are, what makes you think you will treat the vacation home differently?
Even if you feel positive that you will spend sufficient time at the second home, you must decide whether it's worth the money. "I think second homes, more so than primary residences, have to be treated as an investment," Walters says. And he's not talking about investment properties that are rented out.
"You have to view it with a cold and calculated eye," Walters says.
How much time will you spend there? What will be the price appreciation -- realistically? How much will you have to pay every year for landscaping, association dues, garbage collection and taxes?
"They have got to do the math," Walters says. "Calculate how much it will cost them annually. Calculate their financial return."
And don't try to time the purchase to get a better price. That tactic rarely works, says Diane Saatchi, a real estate agent who sells homes in the Hamptons on Long Island. Buyers sometimes think they'll get a better deal on a home in the Hamptons in the winter, or on a home in Florida in the summer. But sellers are savvy, and home values don't fluctuate by season.
"What I tell people all the time is that the best time to buy a house is when you want a house," Saatchi says.
Ease your doubts
She also recommends that you request photos of the property taken during different seasons. If you go house-hunting in the Hamptons during the winter, neighboring houses might seem too close because of the lack of leaves on the trees. A picture taken during the summer, when you'll spend most of your time there, can allay your fears of being crowded by your neighbors.
Saatchi adds that you should ask around for a trustworthy real estate agent to show you around -- someone who will tell you about the all-night parties that are often held on a particular stretch of beach, or about the next-door neighbors who plan to build a tennis court just a few feet from your bedroom.
Finally, she says, make sure you can get the insurance you need, particularly if you want to buy a home near the beach. "That's a good thing to know -- the availability and cost of insurance -- before you pay for legal fees and inspections," she says.
Financing the deal
OK, you have done the math, looked at year-round photos of the property, and thought it over for a while. You have decided that, yes, you want to buy that cabin in the mountains or that condo on the beach. If you don't have the cash to pay for it outright, the next step is to find a mortgage. The lender or broker who handled the mortgage on your primary home is an excellent place to start if you were satisfied with the service you got.
But you might have to shop around. Different lenders have different standards when it comes to mortgages on vacation homes, as Bill Andrus of Denver has discovered. He owns two condos in major ski areas, and rents them out as much as possible.
"Some lenders won't touch second or third homes, others solicit them, and yet others offer normal rates without the investor penalties, as long as we occupy them sometimes," Andrus says.
Walters says that the loan standards for primary and secondary homes are virtually identical, especially for conventional loans -- in other words, loans for amounts under the jumbo limit (in 2005, that's 359,650). Rates are about the same, unless the lender considers the house an investment property. In that case, expect to pay an interest rate about 1.5 to 2 percentage points higher. As Andrus points out, some lenders might grant a lot of leeway when deciding whether a vacation home is an investment property.
When it's time to make a down payment on your second home, you can use the equity in your primary home. You can either extract the equity by doing a "cash-out" refinance, or by getting a home equity loan or an equity line of credit. You can use that equity to make all or some of the down payment on the second home.
There are complex tax implications to borrowing to buy a second home. Generally speaking, the interest is deductible from federal income taxes. But if you borrow from the equity on your first home to make a down payment on the second home, you can write off the interest on only the first $100,000 of equity debt.
If you rent out the second home, you have to spend a certain amount of time in the home every year to be able to deduct the interest. Your best bet is to read IRS Publication 936, Home Mortgage Interest Deduction and Publication 527, Residential Rental Property. Once those have confused you, consult an accountant.
By Holden Lewis • Bankrate.com
Not long ago, Frank Kwok moved from a 900-square-foot townhouse on the North Shore of Oahu "because we wanted our own home with a yard and everything." So he bought a 2,500-square-foot home in what he calls the "bustling suburb" of Kapolei, not far from Honolulu.
He kept the tiny townhouse in the beach town of Haleiwa. It's now his family's second home: "We go back there whenever we don't want to be bothered by neighbors."
Kwok did it backward -- turning the first home into the getaway home -- but he did something that many Americans do or dream of doing: He bought a second home.
Buying a second home isn't much different from buying a primary residence. If you don't rent it out regularly, so it's not considered an investment property, you can get the same mortgage rate that you would get on your primary house. Depending on circumstances, you might be able to deduct the mortgage interest from income taxes.
When you shop for a second or vacation home, you have two friends: time and your primary home's equity.
"If they look for a second home, people need to be patient," Kwok says. "Don't rush into it. They already have a place to live. Weigh the pros and cons of each place."
Bob Walters, vice president of Quicken Mortgage, delivers the same advice. "Don't make any rash decisions," he says. "There's no reason you have to buy it right now. If you find a place and love the place, stew on it a couple of months. It'll still be there."
The cooling-off period
During your self-imposed cooling-off period, think long and hard about how often you will visit and how much time you will spend. Are you the type of person who buys a 12-month health-club membership, then stops going after a few weeks? If you are, what makes you think you will treat the vacation home differently?
Even if you feel positive that you will spend sufficient time at the second home, you must decide whether it's worth the money. "I think second homes, more so than primary residences, have to be treated as an investment," Walters says. And he's not talking about investment properties that are rented out.
"You have to view it with a cold and calculated eye," Walters says.
How much time will you spend there? What will be the price appreciation -- realistically? How much will you have to pay every year for landscaping, association dues, garbage collection and taxes?
"They have got to do the math," Walters says. "Calculate how much it will cost them annually. Calculate their financial return."
And don't try to time the purchase to get a better price. That tactic rarely works, says Diane Saatchi, a real estate agent who sells homes in the Hamptons on Long Island. Buyers sometimes think they'll get a better deal on a home in the Hamptons in the winter, or on a home in Florida in the summer. But sellers are savvy, and home values don't fluctuate by season.
"What I tell people all the time is that the best time to buy a house is when you want a house," Saatchi says.
Ease your doubts
She also recommends that you request photos of the property taken during different seasons. If you go house-hunting in the Hamptons during the winter, neighboring houses might seem too close because of the lack of leaves on the trees. A picture taken during the summer, when you'll spend most of your time there, can allay your fears of being crowded by your neighbors.
Saatchi adds that you should ask around for a trustworthy real estate agent to show you around -- someone who will tell you about the all-night parties that are often held on a particular stretch of beach, or about the next-door neighbors who plan to build a tennis court just a few feet from your bedroom.
Finally, she says, make sure you can get the insurance you need, particularly if you want to buy a home near the beach. "That's a good thing to know -- the availability and cost of insurance -- before you pay for legal fees and inspections," she says.
Financing the deal
OK, you have done the math, looked at year-round photos of the property, and thought it over for a while. You have decided that, yes, you want to buy that cabin in the mountains or that condo on the beach. If you don't have the cash to pay for it outright, the next step is to find a mortgage. The lender or broker who handled the mortgage on your primary home is an excellent place to start if you were satisfied with the service you got.
But you might have to shop around. Different lenders have different standards when it comes to mortgages on vacation homes, as Bill Andrus of Denver has discovered. He owns two condos in major ski areas, and rents them out as much as possible.
"Some lenders won't touch second or third homes, others solicit them, and yet others offer normal rates without the investor penalties, as long as we occupy them sometimes," Andrus says.
Walters says that the loan standards for primary and secondary homes are virtually identical, especially for conventional loans -- in other words, loans for amounts under the jumbo limit (in 2005, that's 359,650). Rates are about the same, unless the lender considers the house an investment property. In that case, expect to pay an interest rate about 1.5 to 2 percentage points higher. As Andrus points out, some lenders might grant a lot of leeway when deciding whether a vacation home is an investment property.
When it's time to make a down payment on your second home, you can use the equity in your primary home. You can either extract the equity by doing a "cash-out" refinance, or by getting a home equity loan or an equity line of credit. You can use that equity to make all or some of the down payment on the second home.
There are complex tax implications to borrowing to buy a second home. Generally speaking, the interest is deductible from federal income taxes. But if you borrow from the equity on your first home to make a down payment on the second home, you can write off the interest on only the first $100,000 of equity debt.
If you rent out the second home, you have to spend a certain amount of time in the home every year to be able to deduct the interest. Your best bet is to read IRS Publication 936, Home Mortgage Interest Deduction and Publication 527, Residential Rental Property. Once those have confused you, consult an accountant.
Friday, November 24, 2006
Buying a Home in Denver - Making an Offer
This article covers some of the basics of making an offer - Happy Hunting!
Making an Offer on a Home
by Janet Wickell
Determine Value Before You Make an Offer
If you've been home shopping for awhile you might feel confident that you understand the market value of houses in your area, but it's not unusual for even seasoned home buyers to feel a bit queasy when it's time to make a formal offer. Use these tips to begin investigating your local real estate market.
Attend Open Houses
Attending open houses helps you track the actual condition of homes on the market--insight you won't get by looking only at recorded stats. Keep the handouts you are given at open houses and then watch for the For Sale signs to come down. Go to the courthouse to make sure the house sold and to research its sales price.
Find Home Sales Prices
Advertising gives you a feel for the average asking prices of homes, but asking prices are often inflated. Your focus should be on the sales prices of similar homes that have sold recently.
Ask the staff at your local courthouse (or equivalent) to explain how to find deeds and other records and how to interpret notations on them. For example, where I live, each real estate deed is stamped with the amount of excise tax paid at closing, and each tax dollar paid represents $500 in sales price, making it easy to calculate how much the buyer paid for the property.
You might find that records for your area are available on disk or online, but in many towns they are not.
Use local records to help you see where prices are now, but don't make the mistake of basing an offer on the amount a current owner paid for a property--it doesn't usually work. Value has nothing to do with a previous sales price if real estate prices have escalated since the sale.
Tax Values
Tax valuations are not a good measure of a property's market value. Your community might have a general guideline, such as tax value = 80% of market value, but the figures are not usually reliable. Ask your local tax assessor for details about your specific area.
Appraisals
It will slow you down, but you can probably order an appraisal before making an offer. Make sure the results will not be shared with others and keep in mind that the opinions of different appraisers often vary.
Working with Real Estate Agents
Seller's Agents
A seller's agent won't become too involved in your pricing dilemma, because it's that agent's duty to get the best deal for the seller. You'll get facts from the agent, but not opinions. Most seller's agents will print out information about similar properties that have sold recently, called comparables, for you to study.
Buyer's Agents
A true real estate buyer's agent will help you determine the best price and terms to offer for a property. The agent will discuss comparable properties and should be fully involved in offer strategies.
Neutral Agents
Some real estate agents work as neutral parties rather than representing either the buyer or seller. Ask your agent to explain how your local laws affect his efforts on your behalf.
Low vs. High Offers
Come in too low and you'll run the risk of alienating the seller. That's fine if low is all you'll go, or if the property is truly overpriced, but it can create problems with future negotiations if the seller interprets your offer as a personal insult. She may not be as anxious to deal with you as she would have been had you made a more realistic first offer.
Come in too high and you probably won't find the seller's low point, but if you really want the house, and if competition is swift, an offer near or above the asking price might be a must. Learn as much as possible about your local real estate market before you make a move.
Factors that Can Affect Seller Motivation
How long has the house been on the market? If only a short time the sellers might not be ready to lower the price.
How does the house compare with others for sale in the same neighborhood? Too high or too low? Can you determine why?
Is the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
How old is the roof? How many more years should it last?
What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Bottom Line
Analyze each home's condition and compare it to others on the market, but realize that your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you've been searching for a home for awhile, you will probably know the answer to that question the minute you walk in the door.
Making an Offer on a Home
by Janet Wickell
Determine Value Before You Make an Offer
If you've been home shopping for awhile you might feel confident that you understand the market value of houses in your area, but it's not unusual for even seasoned home buyers to feel a bit queasy when it's time to make a formal offer. Use these tips to begin investigating your local real estate market.
Attend Open Houses
Attending open houses helps you track the actual condition of homes on the market--insight you won't get by looking only at recorded stats. Keep the handouts you are given at open houses and then watch for the For Sale signs to come down. Go to the courthouse to make sure the house sold and to research its sales price.
Find Home Sales Prices
Advertising gives you a feel for the average asking prices of homes, but asking prices are often inflated. Your focus should be on the sales prices of similar homes that have sold recently.
Ask the staff at your local courthouse (or equivalent) to explain how to find deeds and other records and how to interpret notations on them. For example, where I live, each real estate deed is stamped with the amount of excise tax paid at closing, and each tax dollar paid represents $500 in sales price, making it easy to calculate how much the buyer paid for the property.
You might find that records for your area are available on disk or online, but in many towns they are not.
Use local records to help you see where prices are now, but don't make the mistake of basing an offer on the amount a current owner paid for a property--it doesn't usually work. Value has nothing to do with a previous sales price if real estate prices have escalated since the sale.
Tax Values
Tax valuations are not a good measure of a property's market value. Your community might have a general guideline, such as tax value = 80% of market value, but the figures are not usually reliable. Ask your local tax assessor for details about your specific area.
Appraisals
It will slow you down, but you can probably order an appraisal before making an offer. Make sure the results will not be shared with others and keep in mind that the opinions of different appraisers often vary.
Working with Real Estate Agents
Seller's Agents
A seller's agent won't become too involved in your pricing dilemma, because it's that agent's duty to get the best deal for the seller. You'll get facts from the agent, but not opinions. Most seller's agents will print out information about similar properties that have sold recently, called comparables, for you to study.
Buyer's Agents
A true real estate buyer's agent will help you determine the best price and terms to offer for a property. The agent will discuss comparable properties and should be fully involved in offer strategies.
Neutral Agents
Some real estate agents work as neutral parties rather than representing either the buyer or seller. Ask your agent to explain how your local laws affect his efforts on your behalf.
Low vs. High Offers
Come in too low and you'll run the risk of alienating the seller. That's fine if low is all you'll go, or if the property is truly overpriced, but it can create problems with future negotiations if the seller interprets your offer as a personal insult. She may not be as anxious to deal with you as she would have been had you made a more realistic first offer.
Come in too high and you probably won't find the seller's low point, but if you really want the house, and if competition is swift, an offer near or above the asking price might be a must. Learn as much as possible about your local real estate market before you make a move.
Factors that Can Affect Seller Motivation
How long has the house been on the market? If only a short time the sellers might not be ready to lower the price.
How does the house compare with others for sale in the same neighborhood? Too high or too low? Can you determine why?
Is the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
How old is the roof? How many more years should it last?
What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Bottom Line
Analyze each home's condition and compare it to others on the market, but realize that your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you've been searching for a home for awhile, you will probably know the answer to that question the minute you walk in the door.
Wednesday, November 22, 2006
An Important Issue: Home Inspections!
FROM: Inman News Features
Home inspectors avoid liability for certain defects
--------------------------------------------------------------------------------
Accessibility, weather play key roles
Tuesday, November 21, 2006
Dear Barry,
When people write to you regarding negligent home inspectors, you always seem to advise against suing the inspectors. This was the case in one of your recent columns and in others I've read. Whenever the question involves suing an inspector, the answer always seems to be "no." Could you please explain this? --Jock
Dear Jock,
A large number of e-mails I receive involve dissatisfaction with various home inspectors. When asked whether these inspectors should be held accountable for alleged acts of negligence, the answer is sometimes yes and sometimes no, depending upon the circumstances. If you've read only columns where the answer was no, you've gotten the wrong impression.
A common saying in the home inspection business holds that there are two kinds of home inspectors: those who have been sued and those who will be. The fact is, most home inspectors will be sued at some time in their careers. There are, however, specific circumstances that determine whether a home inspector is truly liable.
When property defects are overlooked by a home inspector, liability ensues if the defect is: (1) within the scope of the inspection; and (2) visible and accessible at the time of the inspection. For example, a leaking drain below a sink would be within the scope, and in most cases would be visible and accessible. A deteriorated roof would also be within the scope and, with rare exceptions, would also be visible and accessible. An inspector who fails to report such defects could be subject to a lawsuit. However, if the bathroom was filled with storage, barring access below the sink, or if weather conditions prevented the inspector from walking on the roof, the inspector would not be liable, if -- and this is critical -- the inspection report clearly stated that these areas were not inspected and that further inspection was recommended prior to close of escrow.
Conditions not within the scope of a home inspection are typically itemized in the inspector's contract and in the report. These include portions of the property that are concealed within the construction, buried in the ground, or hidden behind personal property. Other exclusions include structural and geological engineering deficiencies, infestation by wood-destroying organisms (such as termites), low-voltage electrical systems (such as intercoms), septic systems, water wells, and more.
Home inspection contracts typically include language that limits the likelihood of being sued. These include requirements to mediate or arbitrate disputes, rather than filing suit, but these clauses are not enforceable in all states. Additionally, contracts may include specific monetary limits on liability, but these also are not enforceable in all states.
One of the ways that home buyers can undermine a good case against a home inspector is to have a defect repaired before notifying the home inspector about the problem. Inspectors should be given the opportunity to view defects and to discuss whether they are within the scope and were accessible at the time of inspection. If the inspector is liable, he should have the opportunity to repair the defect or pay for repairs. If repairs are completed before the inspector can take a second look, the validity of the claim is subject to argument and uncertainty.
If a home inspector is given fair notice of the problem but fails to respond, he should be held liable, even if that means being sued. This has been my recommendation in many past columns and will continue to be my advice to home buyers whose inspectors are professionally negligent.
Home inspectors avoid liability for certain defects
--------------------------------------------------------------------------------
Accessibility, weather play key roles
Tuesday, November 21, 2006
Dear Barry,
When people write to you regarding negligent home inspectors, you always seem to advise against suing the inspectors. This was the case in one of your recent columns and in others I've read. Whenever the question involves suing an inspector, the answer always seems to be "no." Could you please explain this? --Jock
Dear Jock,
A large number of e-mails I receive involve dissatisfaction with various home inspectors. When asked whether these inspectors should be held accountable for alleged acts of negligence, the answer is sometimes yes and sometimes no, depending upon the circumstances. If you've read only columns where the answer was no, you've gotten the wrong impression.
A common saying in the home inspection business holds that there are two kinds of home inspectors: those who have been sued and those who will be. The fact is, most home inspectors will be sued at some time in their careers. There are, however, specific circumstances that determine whether a home inspector is truly liable.
When property defects are overlooked by a home inspector, liability ensues if the defect is: (1) within the scope of the inspection; and (2) visible and accessible at the time of the inspection. For example, a leaking drain below a sink would be within the scope, and in most cases would be visible and accessible. A deteriorated roof would also be within the scope and, with rare exceptions, would also be visible and accessible. An inspector who fails to report such defects could be subject to a lawsuit. However, if the bathroom was filled with storage, barring access below the sink, or if weather conditions prevented the inspector from walking on the roof, the inspector would not be liable, if -- and this is critical -- the inspection report clearly stated that these areas were not inspected and that further inspection was recommended prior to close of escrow.
Conditions not within the scope of a home inspection are typically itemized in the inspector's contract and in the report. These include portions of the property that are concealed within the construction, buried in the ground, or hidden behind personal property. Other exclusions include structural and geological engineering deficiencies, infestation by wood-destroying organisms (such as termites), low-voltage electrical systems (such as intercoms), septic systems, water wells, and more.
Home inspection contracts typically include language that limits the likelihood of being sued. These include requirements to mediate or arbitrate disputes, rather than filing suit, but these clauses are not enforceable in all states. Additionally, contracts may include specific monetary limits on liability, but these also are not enforceable in all states.
One of the ways that home buyers can undermine a good case against a home inspector is to have a defect repaired before notifying the home inspector about the problem. Inspectors should be given the opportunity to view defects and to discuss whether they are within the scope and were accessible at the time of inspection. If the inspector is liable, he should have the opportunity to repair the defect or pay for repairs. If repairs are completed before the inspector can take a second look, the validity of the claim is subject to argument and uncertainty.
If a home inspector is given fair notice of the problem but fails to respond, he should be held liable, even if that means being sued. This has been my recommendation in many past columns and will continue to be my advice to home buyers whose inspectors are professionally negligent.
Tuesday, November 21, 2006
Great Advice for Sellers in Denver's Real Estate Market
Will Denver Home Sellers Cost Themselves Money by Rejecting Offers?
Sellers who aren't happy with the first offer they receive are often inclined to refuse it and wait to see if something better comes along. However, some sellers are finding out the hard way that the first offer was their best offer.
A Piedmont, Calif., homeowner listed his home for sale this summer at a price that he'd hoped would generate multiple offers and a higher price. Not long after the house went on the market, a buyer made an offer for over the list price. However, although it was a good price, the seller wanted even more. So, he issued a counteroffer for an even higher price. The buyer rejected the counteroffer and bought a different property.
The seller then increased his list price to a price he would be willing to accept. The property sat on the market for weeks with no offers. Finally, the seller lowered the price to his original asking price. This action did generate two offers, both for less than the asking price. He accepted the better of the two offers. However, he ended up selling for far less than the amount of his first offer.
A year ago, many sellers listed for an under-market price that resulted in a successful sale for more money. There was a limited inventory of homes for sale and a lot of buyers who were anxious to buy.
Now, buyers have more to choose from and can afford to be discerning. Sellers, on the other hand, need to carefully consider every offer even if they think the price is low.
It's difficult for most sellers to accept an offer for less than they want if the offer is made soon after the listing is marketed. The natural inclination is to think that more exposure will bring buyers who will pay more. This is always possible.
However, serious buyers who've searched for a considerable time usually come forward with an offer as soon as the right property comes along. These buyers tend to know local market values well. They are motivated to buy and will often make their best offer -- or close to it -- initially.
HOME SELLER TIP: Make sure you carefully evaluate the merits of an offer that is presented soon after your home hits the market. Ask your listing agent to give you feedback about your list price and the local market conditions. How many homes like yours are currently on the market? Have any sold within the last few weeks? How do the list prices of these properties compare to yours? Is there serious interest from any other buyers?
In the above example, the seller's mistake was to expect too much for his house. This is a common mistake sellers make in today's market. Unfortunately, misreading the market costs time and money.
In order to be a successful seller, particularly in the current market, you need to divorce yourself emotionally from your home and look at it objectively. Ask yourself if you would pay the price you're asking a buyer to pay. Try to put yourself in the buyer's shoes.
Another Piedmont homeowner put his home on the market at the end of July. Several similar listings came on the market the same week. The listing agent planned to hold two open houses before the seller listened to offers.
However, several days after the first open house, an offer was written. The buyers were the very first people to look at the house. The seller had been hoping for multiple offers and a higher price. But, he accepted the buyers' asking-price offer. The deal closed in 30 days.
THE CLOSING: The other listings that came on the market at the same time in the above example sold one to two months later only after price reductions.
Sellers who aren't happy with the first offer they receive are often inclined to refuse it and wait to see if something better comes along. However, some sellers are finding out the hard way that the first offer was their best offer.
A Piedmont, Calif., homeowner listed his home for sale this summer at a price that he'd hoped would generate multiple offers and a higher price. Not long after the house went on the market, a buyer made an offer for over the list price. However, although it was a good price, the seller wanted even more. So, he issued a counteroffer for an even higher price. The buyer rejected the counteroffer and bought a different property.
The seller then increased his list price to a price he would be willing to accept. The property sat on the market for weeks with no offers. Finally, the seller lowered the price to his original asking price. This action did generate two offers, both for less than the asking price. He accepted the better of the two offers. However, he ended up selling for far less than the amount of his first offer.
A year ago, many sellers listed for an under-market price that resulted in a successful sale for more money. There was a limited inventory of homes for sale and a lot of buyers who were anxious to buy.
Now, buyers have more to choose from and can afford to be discerning. Sellers, on the other hand, need to carefully consider every offer even if they think the price is low.
It's difficult for most sellers to accept an offer for less than they want if the offer is made soon after the listing is marketed. The natural inclination is to think that more exposure will bring buyers who will pay more. This is always possible.
However, serious buyers who've searched for a considerable time usually come forward with an offer as soon as the right property comes along. These buyers tend to know local market values well. They are motivated to buy and will often make their best offer -- or close to it -- initially.
HOME SELLER TIP: Make sure you carefully evaluate the merits of an offer that is presented soon after your home hits the market. Ask your listing agent to give you feedback about your list price and the local market conditions. How many homes like yours are currently on the market? Have any sold within the last few weeks? How do the list prices of these properties compare to yours? Is there serious interest from any other buyers?
In the above example, the seller's mistake was to expect too much for his house. This is a common mistake sellers make in today's market. Unfortunately, misreading the market costs time and money.
In order to be a successful seller, particularly in the current market, you need to divorce yourself emotionally from your home and look at it objectively. Ask yourself if you would pay the price you're asking a buyer to pay. Try to put yourself in the buyer's shoes.
Another Piedmont homeowner put his home on the market at the end of July. Several similar listings came on the market the same week. The listing agent planned to hold two open houses before the seller listened to offers.
However, several days after the first open house, an offer was written. The buyers were the very first people to look at the house. The seller had been hoping for multiple offers and a higher price. But, he accepted the buyers' asking-price offer. The deal closed in 30 days.
THE CLOSING: The other listings that came on the market at the same time in the above example sold one to two months later only after price reductions.
Monday, November 20, 2006
Denver Real Estate Sellers: Don't Be A Victim!
Story from CNN Money / Fortune Magazine
The Bonnie and Clyde of Mortgage Fraud
A master con artist and his partner went on a six-state crime spree, ripping off homeowners, stealing identities and defrauding lenders.
By Marcia Vickers, Fortune senior writer
(Fortune Magazine) -- In December 2004, Dr. Bruce Brown and his wife, Bridget, got a call around seven in the evening from a man who had seen the sales listing for their Columbia, S.C., house. He asked if he could come over right away. The Browns agreed.
They desperately wanted to sell the property, which had been on the market for six months. Dr. Brown was starting a new job in Augusta, Ga., in weeks. Just days before, they had amended their listing to offer $201,000 in owner financing, "hoping to broaden the pool of candidates," says Bridget. They did.
Within an hour, a man showed up in a fancy sports car and introduced himself as Gary Sullivan. With him was a petite blond woman he said was his realtor. Sullivan told the Browns he owned a temp staffing agency called Labor on Demand but had run up too much credit card debt and needed owner financing to buy a home. The two cased the traditional two-story house quickly and left. Within days, the Browns had a deal.
At the closing Sullivan was charming and self-effacing, recalls Bridget. He chatted about how great it would feel to own his own home and rebuild his equity, how he traveled quite a bit in his job and wanted to slow down, how he hoped to get married and have a family.
"He said he'd just gotten invisible braces on his teeth. He said, 'When you're as short as I am, you don't have much to work with!' I actually felt a little sorry for him."
Then it came time for them all to show identification, a common practice at real estate closings. As Bridget took out her driver's license, she casually mentioned she'd once been an identity-theft victim. Sullivan "suddenly looked at me, very startled. His eyes actually bored into mine. It was jarring," she recalls. Before she could react, one of the lawyers present shouted, "Sold!"
Four months later the Browns returned from a trip to Disney World to find a chilling message on the answering machine in their new home in Augusta. It was from a U.S. Secret Service agent named Andrea Peacock. Peacock informed the Browns that their old house had been bought by a con man - an exceptionally sinister one who had committed dozens, possibly hundreds, of mortgage frauds and identity thefts, netting millions of dollars.
The man who had seemed a bit of an earnest loser at the closing was in fact on the Secret Service's Most Wanted list. His real name was Matthew Bevan Cox, he was 34, and he used more than ten aliases. Peacock ended the voicemail with an unsettling directive: By no means should they approach Cox, since he was considered "armed and dangerous."
Bruce Brown fumed for five days, and then, on a Saturday, he hustled the family into the car and drove the 78 miles to Columbia. As soon as they arrived at the house's driveway, Bridget became terrified. "I told Bruce, 'You shouldn't go in,'" says Bridget. "I thought, he could be a murderer!"
Dr. Brown, a career military doctor who has "seen it all," according to his wife, got out of the car, told his wife to lock it, and carefully approached the front door. Surprisingly, his old key worked.
Brown stepped inside and flipped on the lights. Cox wasn't there. But there were moving boxes, a new couch and coffee table in the living room, and a huge carton that seemed to contain a large-screen plasma TV. The place certainly looked as though someone were moving in -- and that was part of the con.
The boxes were stuffed with trash, even the gigantic TV box. Everything had been staged to throw off inquisitive neighbors. "It was like something out of the back lot at MGM Studios," says Bridget. In the kitchen they found a fax machine with dozens of pages spilling out. The faxes would turn out to be evidence: falsified mortgage documents to and from dozens of lenders, title agencies, and appraisers addressed to various Matthew Cox aliases.
Mortgage fraud frenzy
The real estate market has never offered such opportunity for graft. Since the housing market started to soar in 2001, mortgage fraud has become the fastest-growing white-collar crime, according to the FBI. Last year crooks skimmed at least $1 billion from the $3 trillion U.S. mortgage market.
Now that the market is slowing, fraud is only rising. As business dries up, there's increasing pressure on lenders, brokers, title companies and appraisers to be profitable. That means loan and title documents aren't scrutinized as carefully as they might be, and courts - many of them so low-tech they resemble Mayberry - can't keep up with the volume of paper.
Then there's the mad rush to sell, particularly by people who paid high prices for homes and suddenly can't afford the mortgages.
It's like a tasting menu for con artists and grifters, so tempting that in some cities drug dealers have turned to mortgage fraud, plaguing lower-income neighborhoods with crooked mortgages rather than crystal meth.
"It's an easier, more surreptitious crime," says Gale McKenzie, a U.S. attorney in Atlanta (and chief prosecutor on the Cox case).
And with a con man like Matthew Cox still at large, any homeowner in the land is vulnerable. "Master con men like Cox are charming, manipulative, cunning. They have an amiable facade, which makes them very adept at getting others to like them," says Louis B. Schlesinger, a professor of forensic psychology at John Jay College of Criminal Justice in New York.
For the better part of the past decade Cox has stalked his prey through MLS (multiple listing service) real estate ads. He has studied county courts, looking for ones he could easily dupe with falsified documents.
Schooled as an artist, he is an expert at forging signatures. He knows how to obtain corporate seals of actual banks. He launders money in complex webs of cashier's checks made out to counterfeit names. Authorities suspect he has stolen at least $15 million through fraudulent mortgages, although the figure could be much higher.
Cox's victims have been forced to pay tens of thousands of dollars to lawyers to save their property from foreclosure on unpaid fraudulent loans. They have had to clean up ruined credit. "It's been so stressful, both financially and psychologically," says Bridget Brown.
Schlesinger says classic con men, besides being psychopathic and greedy, are driven by a need to show the world how clever they are. "Their thinking is, 'Look at all these schmucks who actually go to work and earn so much less than I do. I get up at 11, work four hours a day, and make millions.' "
Their crimes are meticulously planned, and not just to elude law enforcement. "They have an overwhelming need to let others know how smart they are," says Schlesinger. "That's why they often leave notes and various clues behind."
Like, for instance, a 317-page hard-boiled crime novel about a serial con artist who becomes a mortgage fraud ace. Federal authorities believe an unpublished book by Cox, called "The Associates," is a blueprint for his crimes.
They say he started writing it while running a mortgage company in Tampa. To research it, he interviewed top real estate lawyers, mortgage brokers, title agency owners and others - telling them he was working on a novel and quizzing them about the ins and outs of real estate cons.
The main character in the book, Christian Locke, is a hard-working Tampa mortgage broker who ends up running his own company. He gets more crooked as the pages turn.
Locke is constantly pursued by beautiful women; his advice is sought by real estate pros and con artists. Naturally he gets involved with old-style mobsters when the company he owns helps them obtain fraudulent loans.
The gangsters knock off his partner for cooperating with the feds in an eerily detailed staged suicide involving a Taser stun gun and a Mercedes sports coupe. From then on, Locke is on the run from the Mob, as well as the FBI, the IRS, and the Secret Service, which are trying to pin fraud charges on him. The story Cox spins is chock-full of how-tos:
Christian studied the Florida identification card very carefully for several minutes and realized the name and address portions of the Florida ID and driver's license could be easily sanded off with 220-grade sandpaper. He could then print the new borrower's name and address on the computer in the identical Florida ID fonts, go to Kinko's, make a transparency of the new name and address and paste it over the altered ID. The result was a virtually perfect ID.
Bonnie v. Clyde
Like all great con men, Cox recognized early on he needed a moll, a charming frontperson who exudes innocence and engenders trust. Rebecca Marie Hauck, a perky, petite blond in her mid-30s, fit the bill perfectly.
Cox and Hauck, starting in December 2003, embarked on a crime spree crisscrossing six states, engaging in identity theft, money laundering and bank fraud, according to an indictment filed in U.S. District Court in Atlanta.
While on the run with Cox, Hauck assumed at least five identities and forged numerous documents, obtained fake driver's licenses, leased mail drops, rented apartments and opened bank accounts.
The details of their life on the run are the stuff of tabloid fodder: the sinister parting gifts Cox left behind for his victims after vacating a property he'd stolen; the flashy sports cars they fraudulently purchased, then abandoned in parking lots; the way he posed as a Red Cross worker to steal identities of homeless people ("The homeless just aren't utilized enough," he often quipped); the twisted use of aliases like "David Freeman" when Cox first went on the lam, and "C. Montgomery Burns," the aging moneybags on "The Simpsons" television cartoon.
The papers in Florida like to call Hauck and Cox the Bonnie and Clyde of mortgage fraud. Captured in March, Hauck has pleaded guilty to mortgage fraud conspiracy and bank fraud charges that together carry maximum penalties of 35 years in jail plus restitution of $1.25 million. Now Bonnie has turned on Clyde, trying to get her sentence reduced.
At the Atlanta Correction and Detention Center, off a gritty section of Peachtree Street, surrounded by get-out-of-jail outfits with catchy names like Free at Last Bail Bonds, Hauck, 35, sits in an arraignment room. With its wooden pews, it resembles a chapel. It's chilly in jail, about 60 degrees, she says, so under her standard-issue bright-orange jumpsuit she's wearing white long underwear.
She recently cropped her strawberry blond hair with a men's electric razor she was allowed to use. She says she's popular in prison because she cuts her fellow inmates' hair and doles out beauty tips.
When her attorney, Paula Hutchinson, arrives, Hauck is thrilled that she's brought makeup for a Fortune photo session. Hauck, who is called "Becky" by almost everyone, has no more than a high school education, yet she's quite articulate. She says, "People naturally like me 'cause they say I have the gift of gab. I can talk to anyone about anything."
She breathlessly tells everything she knows about Matthew Cox - things she thinks might lead to his capture: He takes Paxil and Xanax. She believes he still has the Shar-Pei dog, Pinky, they adopted together. His two front teeth are capped. He wears shoe lifts. He constantly Googles himself. She says he carries a gun.
Hauck says Cox has talents that handily accompany his chosen profession, like the ability to dramatically alter his appearance and demeanor. He can play the unassuming guy in jeans and a T-shirt, sometimes with blond, spiked or curled (with a curling iron) hair, and just as easily, the straitlaced banker. Hauck says he frequents tanning salons and has had numerous cosmetic surgeries, including male breast reduction, chin liposuction and a nose job.
Cox, she says, grew up in a strict middle-class Catholic family in Tampa. He was diagnosed with dyslexia and attention deficit disorder as a child, and got an art degree from the University of South Florida. Hauck says his insecurity may account for his need to bloodlessly manipulate people.
"Matthew had a way of controlling me that it's hard for me to explain or even understand myself," she says. One way was buying her stuff: a $3,000 Rolex, thousands of dollars' worth of clothes - and three years ago, a diamond engagement ring. "I loved him, but I can see now how dysfunctional it was. He told me I was ugly, that I wasn't really his type. All that stuff just made me want to please him more."
Hauck says Cox also tried to convince her that theirs were victimless crimes -that no one really ever got hurt, and everyone was in on the con.
Hell, one of the owners of a bank was in my office the other day, and he told me that as long as the borrower makes his first mortgage payment and the bank sells the loan to his secondary investors before the loan goes into foreclosure, he really doesn't give a crap whether the loans contain fraudulent documents or not.
'The answer to my prayers'
Hauck met Cox on Match.com, the Internet dating service, in September 2003. Both were living in Tampa; she was new in town. Cox had described himself in his ad as a wealthy real estate pro. Plus, "he had posted images of some of his paintings on his Match.com page. I was blown away by his art," Hauck says. "I thought, here's a guy who's both sensitive and successful."
Married and divorced twice by the time she was 30, Hauck had had a bit of a scattered life. She was raised in Chicago and Florida and graduated from high school in Arizona in 1989. She worked various jobs in Salt Lake City, Fresno and Las Vegas - Kmart clerk, actuarial assistant order taker for an adult publisher selling sex toys and magazines.
She had a son, Bryce. In Vegas she got hooked on video poker and eventually racked up $7,500 in gambling debts. She forged checks in her boss's name to pay them off. He found out and axed her. She filed for personal bankruptcy. Her next move with young Bryce was to Tampa, where she got a secretarial job at the greyhound racing track in St. Petersburg.
"Matt Cox seemed the answer to my prayers," she says. On their first date, he took her to his company, Urban Equity Inc. "There were about 20 people working for him, calling him 'Mr. Cox.' He was really running the show. His employees adored him," she says.
Then he took her to a fancy sushi restaurant in Ybor City. There was more to the attraction. "He drove this great Audi TT. He had a fabulous Mediterranean-style triplex apartment." His walls were covered by his Dali-esque murals: One depicted nuns smoking, another in the bathroom showed a priest oddly peering over a shower curtain. "I would say, 'Why don't you make a living selling your art? You could do it!'"
He had other valuable art. One evening as the couple was headed out to dinner, Cox took one of his paintings off the wall and pulled a stack of bills out of the back. He told Hauck he always kept $35,000 in cash there: "He said it was his emergency money." She didn't ask any questions.
Cox was obsessed, naturally, with crime movies. One night they saw the edgy film "Matchstick Men," in which Nicolas Cage plays an ace con who ends up victimized himself by the mother of all cons. It provided a conversation starter.
Cox confessed to Hauck he was on state and federal probation for mortgage fraud. Hauck says he somewhat proudly showed her an article about his company that had recently appeared in the St. Petersburg Times.
"I thought, 'Oh, we all make mistakes. I want to give him a chance,'" says Hauck. It was all too alluring, if dangerous, for the lonely single mom working at the dog track who seemed to crave living on the edge a little too much herself.
[Christian Locke confesses to his girlfriend:] "I got a little to [sic] creative with some of my own personal loan applications. And well, the FBI has subpoenaed the lender files, title company files, bank accounts and God only knows what else. That's several million in fraudulent mortgage loans."
"Could you go to jail?"
Christian began to laugh and said, "Yeah, I can go to jail."
Life on the lam
Cox's probation grew out of a 2002 guilty plea for bank fraud and grand theft. He had started out after college as an insurance agent, but soon noticed that friends in the mortgage business were driving fancy cars and living in posh apartments. He jumped into real estate just as the market started to take off.
At first Cox studied the business, learning the ropes legitimately (and working on his novel), but soon he was lured to the seedy side, shrewdly doing small-time mortgage frauds - typically targeting low-end properties, taking out loans around $100,000. That kept him under the radar.
But after Cox inadvertently sent a forged appraisal to the very appraiser whose name he had forged - a man who happened to be a former deputy sheriff - he was arrested and convicted in 2002.
After his sentencing, Cox's criminal activities only increased. He joined Urban Equity as a partner and allegedly masterminded a scheme to buy 21 run-down Tampa properties and inflate their value using corrupt appraisers and title companies.
One way Cox got the deals done, authorities say, was to hire so-called straw men - people willing to pose or act as buyers. The straw man would tell the homeowner, "I want to buy your house - I'll pay you the full price you're asking. But I need a loan for triple the purchase price to make improvements. Would you agree to up the price just for the paperwork?"
The unsophisticated sellers agreed. Why not? They were getting their price, and heck, the house needed repairs anyway. After the price was artificially inflated, the straw man would take out a loan, pay the homeowner the full price, pocket some cash, and give the biggest cut by far - around 90 percent - to Cox. Cox and his associates netted $2.7 million in fraudulent loans, authorities say.
That alleged scam was big enough to draw the interest of the FBI, which started investigating Cox, and also of a determined reporter, Jeff Testerman of the St. Petersburg Times, who wrote a series of stories about the straw-men deals.
Cox discovered that the newspaper was planning to print a major article on him and Urban Equity on Dec. 14, 2003. "The shit was going to hit the fan," says Hauck. Cox knew he'd be nabbed if he stuck around Tampa.
So just days before the piece ran - it was called "Dubious Deals" - the two took off up the highway in another Audi, a new, $80,000 S6 coupe Cox bought using an alias. Hauck's son was in Vegas with his grandparents for Christmas. Cox left his 5-year-old son, Casio, behind with his ex-wife.
At first the couple had no idea where to go. "Matt had hardly been outside of Tampa his whole life," she says. They drove north to the Atlanta area, barely stopping.
On the road Cox came up with a scheme: If they lived in one state and committed frauds in another, it would be harder for authorities to track them. So they moved into a residence hotel in Atlanta and within a few weeks developed a plan to defraud a homeowner in Tallahassee, a wheelchair-bound former office manager named Theresa A. Knight.
That's when Hauck committed her first crime with Cox: She leased a mail drop at a UPS store outside Atlanta, presenting a fake Florida driver's license in Theresa Knight's name, according to court documents.
That same day, Cox drove from Atlanta to Tallahassee, where he made a visit to the local county clerk. There, he filed a fraudulent satisfaction-of-mortgage form, forging the signatures of Knight and two purported bank officers, showing that Knight's mortgage had been paid off.
Copies of the court-approved mortgage satisfaction were sent to the mail drop Hauck had opened. Now that the property was "free and clear," in real estate parlance, the couple could apply for new mortgages on it. Hauck, still posing as Knight, and Cox received $53,000 at a closing weeks later in Tallahassee. "That's when Matt said to me, 'There's no going back now. You're in just as deep as I am,'" says Hauck.
Swindlers by day, couch potatoes in the evening, Cox and Hauck became hooked on the HBO series Oz, a hard-core account of prison life complete with gang rapes and murders. Cox, says Hauck, warned her that's what jail was like. "He was always trying to scare me so I wouldn't turn us in," she says, adding, "Matt was terrified of going to jail - he was scared of getting raped by another guy."
"I'm not going to prison, Amy. Look at me. A cute little morsel like me in prison? Hell, no."
Nearly nabbed
Back in Atlanta they zeroed in on their next victim. Michael A. Shanahan was a newly engaged finance manager who had spent his nest egg to buy a house, a rental investment property, in Alpharetta, Ga., a suburb north of Atlanta.
Hauck, this time posing as Grace Hudson ("a totally made-up name," she says), showed up on Shanahan's doorstep in January 2004 pretending to be new to the area and an employee of Lloyd's & Associates ("a totally made-up company. Matt said to tell people it was a Lloyd's of London subsidiary").
When she explained that she lacked a credit history - she said she was just divorced and nothing had been in her name - he told her not to worry. "You seem trustworthy," he said.
The couple then pulled the same scam they'd done in Tallahassee. But this time they upped the ante, netting $329,000 on Shanahan's home from three different lenders. With the ill-gotten gains, Hauck visited Alpharetta's Swan Center for Plastic Surgery in March and spent almost $12,000 on liposuction, a tummy tuck, and breast implants. Cox bought a brand-new silver Honda Element.
It wasn't until June that Shanahan discovered that his identity and property had been stolen and that fraudulent loans had been taken out on his home. "Grace Hudson" had been sending him monthly rent checks, so his suspicions weren't aroused. But when he went to check on the house, he found a stack of mail addressed to different aliases. He also found a particularly disturbing piece of art created by Cox: a bizarre papier-machâ statue of a man kneeling on the floor. The statue's face resembled Edvard Munch's masterpiece, "The Scream."
"It was like Cox was saying, 'You sucker.' It wasn't enough for him to practically ruin someone's life," says Paula Hutchinson, Hauck's defense lawyer. By then, Cox and Hauck had vanished again. But this time the Secret Service was on their tail, searching for the couple they knew only as "John and Jane Doe."
Cox and Hauck moved to Charlotte, N.C. Cox commuted to Columbia, S.C., an hour and a half away, to commit more scams.
The Secret Service put together a "Wanted" poster for the couple, using images obtained from fake IDs the pair had used at a bank closing, and the Charlotte television news aired a piece about them. A Florida FBI agent had identified them, and their real names were now being publicized. Cox and Hauck knew they had to escape again.
Late one night, "I told Matt, 'I can't go on anymore, this is it for me!'" says Hauck. He lost his temper, threw her on the floor, and started choking her. She screamed, and a neighbor knocked on the door. He shushed her: "Shut up, bitch, or you'll get us caught!" She says, "I realized then he could kill me. No one knew who I really was, and my family thought I was dead. He'd get away with it."
Soon after, she says, she headed off to Houston in a sparkling new Infiniti FX 35 SUV - a vehicle she'd fraudulently bought. The plan was that Cox would follow after wrapping up some business.
One day in February 2005, Mary Nell Degenhart, a Columbia, S.C., real estate lawyer, met a man known as Gary Sullivan at a loan closing. "He talked a great game. He made you feel like you were dealing with a pro. He had all the right documentation, all in perfect order. Though in retrospect, all fake," she says.
"You could tell he wanted things to go as smoothly as possible so he could just get out of there quickly." At the same time, an abstractor researching records for Degenhart in the local courthouse noticed Sullivan had obtained six loans totaling nearly $1 million on two separate properties within a four-day period. "It was outright illegal," she says.
She arranged for a fraud alert to be sent to Columbia banks, and a few days later, when Cox was walking out of a Wachovia Bank in Columbia, cops nabbed him. They allowed him to drive his own car to the police station. On the way he called Hauck in Houston on his cell phone and said, "You might be on your own from here!"
She says they were both freaking out. At the station he played it cool, showing police another fake ID. When one cop noted that Cox seemed shorter than the 5 feet 9 inches listed on it, Cox joked, "Hey, fellas, you do what you gotta do to impress the ladies!"
Astoundingly, he convinced them he wasn't Sullivan. The police let him go. Degenhart, who mutters something in her Southern drawl about the Keystone Kops, says, "It was unbelievable. Cox had the police laughing at his jokes. He charmed them!"
That night Christian had nightmares of John Walsh profiling him on "America's Most Wanted".... Christian tossed and turned while the "America's Most Wanted" phones lit up and calls poured in from around the world.
There was a follow-up nightmare where Christian was shown handcuffed, wearing an orange prison uniform and trying to hide his face from the camera. Walsh said, "Thanks to your tips, we caught this sleazy bastard and tonight, he's behind bars where he belongs."
Vanishing act Cox then motored down to Houston in a new Infiniti sedan. When he got there, Hauck says, he told her he wanted his own apartment, he wanted to break up. They argued, yelling and throwing things. The next morning, when Hauck got out of the shower, Cox had vanished.
Hauck says she took it stoically. She took a new name, Rebecca Hickey, and though still in hiding, she says she went straight. She cocktail-waitressed at night and attended beauty school by day. She got back in touch with her family, letting them know she was okay.
One day in March she was styling a mannequin's hair in beauty school when five federal agents burst through the door. "My classmates were terrified. But I stayed pretty calm," she says. "It was like I was just waiting for this to happen."
Hauck, who will be sentenced on Nov. 15, remains at the Atlanta correction facility (locally referred to as the "ACDC"). Her attorney argues that she was manipulated by Cox. "Becky was totally controlled by Matt, there's no question," says Hutchinson.
Turns out Hauck wasn't the only one. In a Tampa jail sits Alison Arnold, 32, finishing a two-year sentence. Also a single mom and a petite blond, Arnold became Matt Cox's accomplice in Tampa in 2003, right before Hauck, pulling off similar schemes until she was charged with fraud.
Hutchinson believes Cox has worked with yet another small-framed blond since Hauck, possibly in South Carolina. She contends the woman Cox introduced to the Browns as his realtor wasn't Hauck. In fact, Hauck says she caught Cox going on Match.com one day in Charlotte. "Matt told me he always needs a woman like me to help him - that people trust women more than men," says Hauck, who adds that he said people's basic nature was to trust, "and because of that, you could easily take advantage of them."
Homeowners scammed by Cox say they'll never be the same. Says Bridget Brown: "We kind of liked the guy. My husband even went out of his way to have termites exterminated before he moved in." Cox forged the Browns' signatures on a false satisfaction-of-mortgage form and got new mortgages. In February 2005, Cox scored as many as five loans on the Browns' house, totaling around $800,000.
Michael Shanahan, who declined to be interviewed, was crushed by the entire ordeal, according to law enforcement officials. When he first approached the police, he had to convince them he wasn't part of the property scam. One problem is that Cox had also stolen Shanahan's identity, using it to obtain credit cards and financing, and open bank accounts.
Meanwhile, Cox, who faces a 42-count indictment carrying a 400-year jail sentence, could be anywhere. Some believe he may have made his way to Cuba - Hauck says he was strangely obsessed with the country. Others think he's still in the U.S., working his frauds as usual.
As Gerald Scott Cugno, a former business partner, told the local paper: "It's a game. He wants to see if he can pull it off." Cugno, who had his identity stolen by Cox, believes he's influenced by Frank Abagnale Jr., the con man played by Leonardo DiCaprio in the movie "Catch Me If You Can." In the 1960s, Abagnale impersonated a professor, doctor, lawyer and airline pilot while passing $2.5 million in bad checks until the FBI nailed him.
After Cox left Hauck in Houston, he vanished. In "The Associates," after a wild chase during which he manages to somewhat heroically lose the feds and mobsters on his tail, he also abandons a silver Audi TT in Tampa airport's long-term parking, boards a cruise ship, and makes his way to the Cayman Islands, where he plans to stash his millions and live the good life. As he writes:
He was free and about to start a new adventure, a new life in a new country.... [He] stared out at the glittering lights and the fading shore line.
But that's just fiction.
Mortgage fraud hot spots Reports of mortgage fraud Reported mortgage fraud losses
Reporter Associate Doris Burke contributed to this article.
The Bonnie and Clyde of Mortgage Fraud
A master con artist and his partner went on a six-state crime spree, ripping off homeowners, stealing identities and defrauding lenders.
By Marcia Vickers, Fortune senior writer
(Fortune Magazine) -- In December 2004, Dr. Bruce Brown and his wife, Bridget, got a call around seven in the evening from a man who had seen the sales listing for their Columbia, S.C., house. He asked if he could come over right away. The Browns agreed.
They desperately wanted to sell the property, which had been on the market for six months. Dr. Brown was starting a new job in Augusta, Ga., in weeks. Just days before, they had amended their listing to offer $201,000 in owner financing, "hoping to broaden the pool of candidates," says Bridget. They did.
Within an hour, a man showed up in a fancy sports car and introduced himself as Gary Sullivan. With him was a petite blond woman he said was his realtor. Sullivan told the Browns he owned a temp staffing agency called Labor on Demand but had run up too much credit card debt and needed owner financing to buy a home. The two cased the traditional two-story house quickly and left. Within days, the Browns had a deal.
At the closing Sullivan was charming and self-effacing, recalls Bridget. He chatted about how great it would feel to own his own home and rebuild his equity, how he traveled quite a bit in his job and wanted to slow down, how he hoped to get married and have a family.
"He said he'd just gotten invisible braces on his teeth. He said, 'When you're as short as I am, you don't have much to work with!' I actually felt a little sorry for him."
Then it came time for them all to show identification, a common practice at real estate closings. As Bridget took out her driver's license, she casually mentioned she'd once been an identity-theft victim. Sullivan "suddenly looked at me, very startled. His eyes actually bored into mine. It was jarring," she recalls. Before she could react, one of the lawyers present shouted, "Sold!"
Four months later the Browns returned from a trip to Disney World to find a chilling message on the answering machine in their new home in Augusta. It was from a U.S. Secret Service agent named Andrea Peacock. Peacock informed the Browns that their old house had been bought by a con man - an exceptionally sinister one who had committed dozens, possibly hundreds, of mortgage frauds and identity thefts, netting millions of dollars.
The man who had seemed a bit of an earnest loser at the closing was in fact on the Secret Service's Most Wanted list. His real name was Matthew Bevan Cox, he was 34, and he used more than ten aliases. Peacock ended the voicemail with an unsettling directive: By no means should they approach Cox, since he was considered "armed and dangerous."
Bruce Brown fumed for five days, and then, on a Saturday, he hustled the family into the car and drove the 78 miles to Columbia. As soon as they arrived at the house's driveway, Bridget became terrified. "I told Bruce, 'You shouldn't go in,'" says Bridget. "I thought, he could be a murderer!"
Dr. Brown, a career military doctor who has "seen it all," according to his wife, got out of the car, told his wife to lock it, and carefully approached the front door. Surprisingly, his old key worked.
Brown stepped inside and flipped on the lights. Cox wasn't there. But there were moving boxes, a new couch and coffee table in the living room, and a huge carton that seemed to contain a large-screen plasma TV. The place certainly looked as though someone were moving in -- and that was part of the con.
The boxes were stuffed with trash, even the gigantic TV box. Everything had been staged to throw off inquisitive neighbors. "It was like something out of the back lot at MGM Studios," says Bridget. In the kitchen they found a fax machine with dozens of pages spilling out. The faxes would turn out to be evidence: falsified mortgage documents to and from dozens of lenders, title agencies, and appraisers addressed to various Matthew Cox aliases.
Mortgage fraud frenzy
The real estate market has never offered such opportunity for graft. Since the housing market started to soar in 2001, mortgage fraud has become the fastest-growing white-collar crime, according to the FBI. Last year crooks skimmed at least $1 billion from the $3 trillion U.S. mortgage market.
Now that the market is slowing, fraud is only rising. As business dries up, there's increasing pressure on lenders, brokers, title companies and appraisers to be profitable. That means loan and title documents aren't scrutinized as carefully as they might be, and courts - many of them so low-tech they resemble Mayberry - can't keep up with the volume of paper.
Then there's the mad rush to sell, particularly by people who paid high prices for homes and suddenly can't afford the mortgages.
It's like a tasting menu for con artists and grifters, so tempting that in some cities drug dealers have turned to mortgage fraud, plaguing lower-income neighborhoods with crooked mortgages rather than crystal meth.
"It's an easier, more surreptitious crime," says Gale McKenzie, a U.S. attorney in Atlanta (and chief prosecutor on the Cox case).
And with a con man like Matthew Cox still at large, any homeowner in the land is vulnerable. "Master con men like Cox are charming, manipulative, cunning. They have an amiable facade, which makes them very adept at getting others to like them," says Louis B. Schlesinger, a professor of forensic psychology at John Jay College of Criminal Justice in New York.
For the better part of the past decade Cox has stalked his prey through MLS (multiple listing service) real estate ads. He has studied county courts, looking for ones he could easily dupe with falsified documents.
Schooled as an artist, he is an expert at forging signatures. He knows how to obtain corporate seals of actual banks. He launders money in complex webs of cashier's checks made out to counterfeit names. Authorities suspect he has stolen at least $15 million through fraudulent mortgages, although the figure could be much higher.
Cox's victims have been forced to pay tens of thousands of dollars to lawyers to save their property from foreclosure on unpaid fraudulent loans. They have had to clean up ruined credit. "It's been so stressful, both financially and psychologically," says Bridget Brown.
Schlesinger says classic con men, besides being psychopathic and greedy, are driven by a need to show the world how clever they are. "Their thinking is, 'Look at all these schmucks who actually go to work and earn so much less than I do. I get up at 11, work four hours a day, and make millions.' "
Their crimes are meticulously planned, and not just to elude law enforcement. "They have an overwhelming need to let others know how smart they are," says Schlesinger. "That's why they often leave notes and various clues behind."
Like, for instance, a 317-page hard-boiled crime novel about a serial con artist who becomes a mortgage fraud ace. Federal authorities believe an unpublished book by Cox, called "The Associates," is a blueprint for his crimes.
They say he started writing it while running a mortgage company in Tampa. To research it, he interviewed top real estate lawyers, mortgage brokers, title agency owners and others - telling them he was working on a novel and quizzing them about the ins and outs of real estate cons.
The main character in the book, Christian Locke, is a hard-working Tampa mortgage broker who ends up running his own company. He gets more crooked as the pages turn.
Locke is constantly pursued by beautiful women; his advice is sought by real estate pros and con artists. Naturally he gets involved with old-style mobsters when the company he owns helps them obtain fraudulent loans.
The gangsters knock off his partner for cooperating with the feds in an eerily detailed staged suicide involving a Taser stun gun and a Mercedes sports coupe. From then on, Locke is on the run from the Mob, as well as the FBI, the IRS, and the Secret Service, which are trying to pin fraud charges on him. The story Cox spins is chock-full of how-tos:
Christian studied the Florida identification card very carefully for several minutes and realized the name and address portions of the Florida ID and driver's license could be easily sanded off with 220-grade sandpaper. He could then print the new borrower's name and address on the computer in the identical Florida ID fonts, go to Kinko's, make a transparency of the new name and address and paste it over the altered ID. The result was a virtually perfect ID.
Bonnie v. Clyde
Like all great con men, Cox recognized early on he needed a moll, a charming frontperson who exudes innocence and engenders trust. Rebecca Marie Hauck, a perky, petite blond in her mid-30s, fit the bill perfectly.
Cox and Hauck, starting in December 2003, embarked on a crime spree crisscrossing six states, engaging in identity theft, money laundering and bank fraud, according to an indictment filed in U.S. District Court in Atlanta.
While on the run with Cox, Hauck assumed at least five identities and forged numerous documents, obtained fake driver's licenses, leased mail drops, rented apartments and opened bank accounts.
The details of their life on the run are the stuff of tabloid fodder: the sinister parting gifts Cox left behind for his victims after vacating a property he'd stolen; the flashy sports cars they fraudulently purchased, then abandoned in parking lots; the way he posed as a Red Cross worker to steal identities of homeless people ("The homeless just aren't utilized enough," he often quipped); the twisted use of aliases like "David Freeman" when Cox first went on the lam, and "C. Montgomery Burns," the aging moneybags on "The Simpsons" television cartoon.
The papers in Florida like to call Hauck and Cox the Bonnie and Clyde of mortgage fraud. Captured in March, Hauck has pleaded guilty to mortgage fraud conspiracy and bank fraud charges that together carry maximum penalties of 35 years in jail plus restitution of $1.25 million. Now Bonnie has turned on Clyde, trying to get her sentence reduced.
At the Atlanta Correction and Detention Center, off a gritty section of Peachtree Street, surrounded by get-out-of-jail outfits with catchy names like Free at Last Bail Bonds, Hauck, 35, sits in an arraignment room. With its wooden pews, it resembles a chapel. It's chilly in jail, about 60 degrees, she says, so under her standard-issue bright-orange jumpsuit she's wearing white long underwear.
She recently cropped her strawberry blond hair with a men's electric razor she was allowed to use. She says she's popular in prison because she cuts her fellow inmates' hair and doles out beauty tips.
When her attorney, Paula Hutchinson, arrives, Hauck is thrilled that she's brought makeup for a Fortune photo session. Hauck, who is called "Becky" by almost everyone, has no more than a high school education, yet she's quite articulate. She says, "People naturally like me 'cause they say I have the gift of gab. I can talk to anyone about anything."
She breathlessly tells everything she knows about Matthew Cox - things she thinks might lead to his capture: He takes Paxil and Xanax. She believes he still has the Shar-Pei dog, Pinky, they adopted together. His two front teeth are capped. He wears shoe lifts. He constantly Googles himself. She says he carries a gun.
Hauck says Cox has talents that handily accompany his chosen profession, like the ability to dramatically alter his appearance and demeanor. He can play the unassuming guy in jeans and a T-shirt, sometimes with blond, spiked or curled (with a curling iron) hair, and just as easily, the straitlaced banker. Hauck says he frequents tanning salons and has had numerous cosmetic surgeries, including male breast reduction, chin liposuction and a nose job.
Cox, she says, grew up in a strict middle-class Catholic family in Tampa. He was diagnosed with dyslexia and attention deficit disorder as a child, and got an art degree from the University of South Florida. Hauck says his insecurity may account for his need to bloodlessly manipulate people.
"Matthew had a way of controlling me that it's hard for me to explain or even understand myself," she says. One way was buying her stuff: a $3,000 Rolex, thousands of dollars' worth of clothes - and three years ago, a diamond engagement ring. "I loved him, but I can see now how dysfunctional it was. He told me I was ugly, that I wasn't really his type. All that stuff just made me want to please him more."
Hauck says Cox also tried to convince her that theirs were victimless crimes -that no one really ever got hurt, and everyone was in on the con.
Hell, one of the owners of a bank was in my office the other day, and he told me that as long as the borrower makes his first mortgage payment and the bank sells the loan to his secondary investors before the loan goes into foreclosure, he really doesn't give a crap whether the loans contain fraudulent documents or not.
'The answer to my prayers'
Hauck met Cox on Match.com, the Internet dating service, in September 2003. Both were living in Tampa; she was new in town. Cox had described himself in his ad as a wealthy real estate pro. Plus, "he had posted images of some of his paintings on his Match.com page. I was blown away by his art," Hauck says. "I thought, here's a guy who's both sensitive and successful."
Married and divorced twice by the time she was 30, Hauck had had a bit of a scattered life. She was raised in Chicago and Florida and graduated from high school in Arizona in 1989. She worked various jobs in Salt Lake City, Fresno and Las Vegas - Kmart clerk, actuarial assistant order taker for an adult publisher selling sex toys and magazines.
She had a son, Bryce. In Vegas she got hooked on video poker and eventually racked up $7,500 in gambling debts. She forged checks in her boss's name to pay them off. He found out and axed her. She filed for personal bankruptcy. Her next move with young Bryce was to Tampa, where she got a secretarial job at the greyhound racing track in St. Petersburg.
"Matt Cox seemed the answer to my prayers," she says. On their first date, he took her to his company, Urban Equity Inc. "There were about 20 people working for him, calling him 'Mr. Cox.' He was really running the show. His employees adored him," she says.
Then he took her to a fancy sushi restaurant in Ybor City. There was more to the attraction. "He drove this great Audi TT. He had a fabulous Mediterranean-style triplex apartment." His walls were covered by his Dali-esque murals: One depicted nuns smoking, another in the bathroom showed a priest oddly peering over a shower curtain. "I would say, 'Why don't you make a living selling your art? You could do it!'"
He had other valuable art. One evening as the couple was headed out to dinner, Cox took one of his paintings off the wall and pulled a stack of bills out of the back. He told Hauck he always kept $35,000 in cash there: "He said it was his emergency money." She didn't ask any questions.
Cox was obsessed, naturally, with crime movies. One night they saw the edgy film "Matchstick Men," in which Nicolas Cage plays an ace con who ends up victimized himself by the mother of all cons. It provided a conversation starter.
Cox confessed to Hauck he was on state and federal probation for mortgage fraud. Hauck says he somewhat proudly showed her an article about his company that had recently appeared in the St. Petersburg Times.
"I thought, 'Oh, we all make mistakes. I want to give him a chance,'" says Hauck. It was all too alluring, if dangerous, for the lonely single mom working at the dog track who seemed to crave living on the edge a little too much herself.
[Christian Locke confesses to his girlfriend:] "I got a little to [sic] creative with some of my own personal loan applications. And well, the FBI has subpoenaed the lender files, title company files, bank accounts and God only knows what else. That's several million in fraudulent mortgage loans."
"Could you go to jail?"
Christian began to laugh and said, "Yeah, I can go to jail."
Life on the lam
Cox's probation grew out of a 2002 guilty plea for bank fraud and grand theft. He had started out after college as an insurance agent, but soon noticed that friends in the mortgage business were driving fancy cars and living in posh apartments. He jumped into real estate just as the market started to take off.
At first Cox studied the business, learning the ropes legitimately (and working on his novel), but soon he was lured to the seedy side, shrewdly doing small-time mortgage frauds - typically targeting low-end properties, taking out loans around $100,000. That kept him under the radar.
But after Cox inadvertently sent a forged appraisal to the very appraiser whose name he had forged - a man who happened to be a former deputy sheriff - he was arrested and convicted in 2002.
After his sentencing, Cox's criminal activities only increased. He joined Urban Equity as a partner and allegedly masterminded a scheme to buy 21 run-down Tampa properties and inflate their value using corrupt appraisers and title companies.
One way Cox got the deals done, authorities say, was to hire so-called straw men - people willing to pose or act as buyers. The straw man would tell the homeowner, "I want to buy your house - I'll pay you the full price you're asking. But I need a loan for triple the purchase price to make improvements. Would you agree to up the price just for the paperwork?"
The unsophisticated sellers agreed. Why not? They were getting their price, and heck, the house needed repairs anyway. After the price was artificially inflated, the straw man would take out a loan, pay the homeowner the full price, pocket some cash, and give the biggest cut by far - around 90 percent - to Cox. Cox and his associates netted $2.7 million in fraudulent loans, authorities say.
That alleged scam was big enough to draw the interest of the FBI, which started investigating Cox, and also of a determined reporter, Jeff Testerman of the St. Petersburg Times, who wrote a series of stories about the straw-men deals.
Cox discovered that the newspaper was planning to print a major article on him and Urban Equity on Dec. 14, 2003. "The shit was going to hit the fan," says Hauck. Cox knew he'd be nabbed if he stuck around Tampa.
So just days before the piece ran - it was called "Dubious Deals" - the two took off up the highway in another Audi, a new, $80,000 S6 coupe Cox bought using an alias. Hauck's son was in Vegas with his grandparents for Christmas. Cox left his 5-year-old son, Casio, behind with his ex-wife.
At first the couple had no idea where to go. "Matt had hardly been outside of Tampa his whole life," she says. They drove north to the Atlanta area, barely stopping.
On the road Cox came up with a scheme: If they lived in one state and committed frauds in another, it would be harder for authorities to track them. So they moved into a residence hotel in Atlanta and within a few weeks developed a plan to defraud a homeowner in Tallahassee, a wheelchair-bound former office manager named Theresa A. Knight.
That's when Hauck committed her first crime with Cox: She leased a mail drop at a UPS store outside Atlanta, presenting a fake Florida driver's license in Theresa Knight's name, according to court documents.
That same day, Cox drove from Atlanta to Tallahassee, where he made a visit to the local county clerk. There, he filed a fraudulent satisfaction-of-mortgage form, forging the signatures of Knight and two purported bank officers, showing that Knight's mortgage had been paid off.
Copies of the court-approved mortgage satisfaction were sent to the mail drop Hauck had opened. Now that the property was "free and clear," in real estate parlance, the couple could apply for new mortgages on it. Hauck, still posing as Knight, and Cox received $53,000 at a closing weeks later in Tallahassee. "That's when Matt said to me, 'There's no going back now. You're in just as deep as I am,'" says Hauck.
Swindlers by day, couch potatoes in the evening, Cox and Hauck became hooked on the HBO series Oz, a hard-core account of prison life complete with gang rapes and murders. Cox, says Hauck, warned her that's what jail was like. "He was always trying to scare me so I wouldn't turn us in," she says, adding, "Matt was terrified of going to jail - he was scared of getting raped by another guy."
"I'm not going to prison, Amy. Look at me. A cute little morsel like me in prison? Hell, no."
Nearly nabbed
Back in Atlanta they zeroed in on their next victim. Michael A. Shanahan was a newly engaged finance manager who had spent his nest egg to buy a house, a rental investment property, in Alpharetta, Ga., a suburb north of Atlanta.
Hauck, this time posing as Grace Hudson ("a totally made-up name," she says), showed up on Shanahan's doorstep in January 2004 pretending to be new to the area and an employee of Lloyd's & Associates ("a totally made-up company. Matt said to tell people it was a Lloyd's of London subsidiary").
When she explained that she lacked a credit history - she said she was just divorced and nothing had been in her name - he told her not to worry. "You seem trustworthy," he said.
The couple then pulled the same scam they'd done in Tallahassee. But this time they upped the ante, netting $329,000 on Shanahan's home from three different lenders. With the ill-gotten gains, Hauck visited Alpharetta's Swan Center for Plastic Surgery in March and spent almost $12,000 on liposuction, a tummy tuck, and breast implants. Cox bought a brand-new silver Honda Element.
It wasn't until June that Shanahan discovered that his identity and property had been stolen and that fraudulent loans had been taken out on his home. "Grace Hudson" had been sending him monthly rent checks, so his suspicions weren't aroused. But when he went to check on the house, he found a stack of mail addressed to different aliases. He also found a particularly disturbing piece of art created by Cox: a bizarre papier-machâ statue of a man kneeling on the floor. The statue's face resembled Edvard Munch's masterpiece, "The Scream."
"It was like Cox was saying, 'You sucker.' It wasn't enough for him to practically ruin someone's life," says Paula Hutchinson, Hauck's defense lawyer. By then, Cox and Hauck had vanished again. But this time the Secret Service was on their tail, searching for the couple they knew only as "John and Jane Doe."
Cox and Hauck moved to Charlotte, N.C. Cox commuted to Columbia, S.C., an hour and a half away, to commit more scams.
The Secret Service put together a "Wanted" poster for the couple, using images obtained from fake IDs the pair had used at a bank closing, and the Charlotte television news aired a piece about them. A Florida FBI agent had identified them, and their real names were now being publicized. Cox and Hauck knew they had to escape again.
Late one night, "I told Matt, 'I can't go on anymore, this is it for me!'" says Hauck. He lost his temper, threw her on the floor, and started choking her. She screamed, and a neighbor knocked on the door. He shushed her: "Shut up, bitch, or you'll get us caught!" She says, "I realized then he could kill me. No one knew who I really was, and my family thought I was dead. He'd get away with it."
Soon after, she says, she headed off to Houston in a sparkling new Infiniti FX 35 SUV - a vehicle she'd fraudulently bought. The plan was that Cox would follow after wrapping up some business.
One day in February 2005, Mary Nell Degenhart, a Columbia, S.C., real estate lawyer, met a man known as Gary Sullivan at a loan closing. "He talked a great game. He made you feel like you were dealing with a pro. He had all the right documentation, all in perfect order. Though in retrospect, all fake," she says.
"You could tell he wanted things to go as smoothly as possible so he could just get out of there quickly." At the same time, an abstractor researching records for Degenhart in the local courthouse noticed Sullivan had obtained six loans totaling nearly $1 million on two separate properties within a four-day period. "It was outright illegal," she says.
She arranged for a fraud alert to be sent to Columbia banks, and a few days later, when Cox was walking out of a Wachovia Bank in Columbia, cops nabbed him. They allowed him to drive his own car to the police station. On the way he called Hauck in Houston on his cell phone and said, "You might be on your own from here!"
She says they were both freaking out. At the station he played it cool, showing police another fake ID. When one cop noted that Cox seemed shorter than the 5 feet 9 inches listed on it, Cox joked, "Hey, fellas, you do what you gotta do to impress the ladies!"
Astoundingly, he convinced them he wasn't Sullivan. The police let him go. Degenhart, who mutters something in her Southern drawl about the Keystone Kops, says, "It was unbelievable. Cox had the police laughing at his jokes. He charmed them!"
That night Christian had nightmares of John Walsh profiling him on "America's Most Wanted".... Christian tossed and turned while the "America's Most Wanted" phones lit up and calls poured in from around the world.
There was a follow-up nightmare where Christian was shown handcuffed, wearing an orange prison uniform and trying to hide his face from the camera. Walsh said, "Thanks to your tips, we caught this sleazy bastard and tonight, he's behind bars where he belongs."
Vanishing act Cox then motored down to Houston in a new Infiniti sedan. When he got there, Hauck says, he told her he wanted his own apartment, he wanted to break up. They argued, yelling and throwing things. The next morning, when Hauck got out of the shower, Cox had vanished.
Hauck says she took it stoically. She took a new name, Rebecca Hickey, and though still in hiding, she says she went straight. She cocktail-waitressed at night and attended beauty school by day. She got back in touch with her family, letting them know she was okay.
One day in March she was styling a mannequin's hair in beauty school when five federal agents burst through the door. "My classmates were terrified. But I stayed pretty calm," she says. "It was like I was just waiting for this to happen."
Hauck, who will be sentenced on Nov. 15, remains at the Atlanta correction facility (locally referred to as the "ACDC"). Her attorney argues that she was manipulated by Cox. "Becky was totally controlled by Matt, there's no question," says Hutchinson.
Turns out Hauck wasn't the only one. In a Tampa jail sits Alison Arnold, 32, finishing a two-year sentence. Also a single mom and a petite blond, Arnold became Matt Cox's accomplice in Tampa in 2003, right before Hauck, pulling off similar schemes until she was charged with fraud.
Hutchinson believes Cox has worked with yet another small-framed blond since Hauck, possibly in South Carolina. She contends the woman Cox introduced to the Browns as his realtor wasn't Hauck. In fact, Hauck says she caught Cox going on Match.com one day in Charlotte. "Matt told me he always needs a woman like me to help him - that people trust women more than men," says Hauck, who adds that he said people's basic nature was to trust, "and because of that, you could easily take advantage of them."
Homeowners scammed by Cox say they'll never be the same. Says Bridget Brown: "We kind of liked the guy. My husband even went out of his way to have termites exterminated before he moved in." Cox forged the Browns' signatures on a false satisfaction-of-mortgage form and got new mortgages. In February 2005, Cox scored as many as five loans on the Browns' house, totaling around $800,000.
Michael Shanahan, who declined to be interviewed, was crushed by the entire ordeal, according to law enforcement officials. When he first approached the police, he had to convince them he wasn't part of the property scam. One problem is that Cox had also stolen Shanahan's identity, using it to obtain credit cards and financing, and open bank accounts.
Meanwhile, Cox, who faces a 42-count indictment carrying a 400-year jail sentence, could be anywhere. Some believe he may have made his way to Cuba - Hauck says he was strangely obsessed with the country. Others think he's still in the U.S., working his frauds as usual.
As Gerald Scott Cugno, a former business partner, told the local paper: "It's a game. He wants to see if he can pull it off." Cugno, who had his identity stolen by Cox, believes he's influenced by Frank Abagnale Jr., the con man played by Leonardo DiCaprio in the movie "Catch Me If You Can." In the 1960s, Abagnale impersonated a professor, doctor, lawyer and airline pilot while passing $2.5 million in bad checks until the FBI nailed him.
After Cox left Hauck in Houston, he vanished. In "The Associates," after a wild chase during which he manages to somewhat heroically lose the feds and mobsters on his tail, he also abandons a silver Audi TT in Tampa airport's long-term parking, boards a cruise ship, and makes his way to the Cayman Islands, where he plans to stash his millions and live the good life. As he writes:
He was free and about to start a new adventure, a new life in a new country.... [He] stared out at the glittering lights and the fading shore line.
But that's just fiction.
Mortgage fraud hot spots Reports of mortgage fraud Reported mortgage fraud losses
Reporter Associate Doris Burke contributed to this article.
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