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.
Thursday, November 30, 2006
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.
Friday, November 17, 2006
The FIRST Step in Buying a Denver Home: Pre-Approval
A lender's pre-approval is a limited-time commitment to fund your mortgage loan for a Denver home. A pre-approval may include an interest rate lock. To obtain a pre-approval, a lender evaluates your credit history, and calculates your housing and debt ratios. You should expect to verify your income, length of employment and source of down payment.
A pre-approval legitimizes you as a serious buyer and Denver real estate Brokers often require one before showing Denver homes to you. It also gives you additional negotiating leverage to negotiate a sale price, especially if the seller cannot find other pre-approved buyers.
When seeking a pre-approval, it's important not to misrepresent the facts on your application. If a lender learns later that you've misrepresented or omitted information on your application, your pre-approval may be rescinded.
As part of the pre-approval process, a lender obtains your credit report. You should be familiar with the contents of your credit reports from all three major credit bureaus.
If a lender denies your pre-approval, you should investigate immediately. Without a pre-approval, your chances of obtaining a mortgage loan are jeopardized. If a lender bases the decision, in part, on information in your credit report, you have the right to receive a free copy of the report.
A pre-approval legitimizes you as a serious buyer and Denver real estate Brokers often require one before showing Denver homes to you. It also gives you additional negotiating leverage to negotiate a sale price, especially if the seller cannot find other pre-approved buyers.
When seeking a pre-approval, it's important not to misrepresent the facts on your application. If a lender learns later that you've misrepresented or omitted information on your application, your pre-approval may be rescinded.
As part of the pre-approval process, a lender obtains your credit report. You should be familiar with the contents of your credit reports from all three major credit bureaus.
If a lender denies your pre-approval, you should investigate immediately. Without a pre-approval, your chances of obtaining a mortgage loan are jeopardized. If a lender bases the decision, in part, on information in your credit report, you have the right to receive a free copy of the report.
Thursday, November 16, 2006
Great Article from CNN Money Magazine - A definite Denver dilemma too!
Slow-Market Crisis: Stuck With Two Homes
Imagine buying your dream home only to discover you can't sell your current one.
By Stephen Gandel, Money Magazine senior writer
(Money Magazine) -- When Chicagoans John and Judy Peeler decided to move to Philadelphia last spring, they blithely assumed they'd get more space for their money. Indeed, the couple quickly found a 2,500-square-foot, four-bedroom colonial in a well-regarded school district for $440,000, just about what they figured their 2,000-square-foot Windy City condo would fetch.
Perfect. Or so they thought.
Since then the seemingly ideal move has devastated their finances. The Peelers' Chicago condo has generated little interest, even after they dropped the price -- twice -- to its current $389,000. And it has been four months since they relocated, which means they've been carrying two mortgages and a home-equity line of credit at a cost of $4,000 a month.
Having depleted their savings to pay for this, they've had to seriously cut back on spending. They went without air conditioning this past summer, despite sweltering heat and the fact that Judy was eight months pregnant.
They've also put off fixing the brakes of their second car, which the mechanic says should be replaced soon. "We don't spend money on anything that isn't critical," says Judy. "Everything goes toward the mortgages."
The Peelers are among the increasing ranks of "tweeners," or people who've inadvertently ended up juggling the costs of two homes as a result of the slowing market. Many victims of this fearsome financial trap have been wooed by the upsides of the new buyer's market: increased choice and better prices.
"But they forget the other side of the equation," says Albert Hepp, owner of BuySelfRealty.com in Minneapolis. Only when they try to unload their old house do they realize just how hard it is to sell.
Then, like the Peelers, they find themselves stuck with one more property and one more mortgage than they'd like or can afford.
Though no group has tallied the number of tweeners out there, it's clear that there are more of them around now and that they're bound to multiply if the housing market continues its current trend.
Nearly four million homes are for sale in the U.S., according to the most recent data from the National Association of Realtors (NAR). That's a million more sellers looking for buyers than this time a year ago.
What's more, the number of houses sold nationwide in August fell 12 percent from last year. For those who've just signed contracts to buy, it's less and less likely they'll be able to sell their old houses before closing on their new ones. To understand what that means, do the math: In Massachusetts, a state particularly slow for sales, it takes the average seller 114 days to find a buyer. That's almost four months of double house payments.
With a $300,000 mortgage, you'd pay about $10,000 in interest, taxes, upkeep and insurance while house No. 1 sits on the market.
Even the savviest sellers can get stuck in this situation. NAR head Tom Stevens is himself a tweener: He's been trying to off-load his Virginia home for more than a year. "The housing market is going through a period of adjustment," he told Congress. "I have experienced this firsthand."
HOW TO AVOID TWEENERDOM
Yes, it's grim out there for sellers, but consequently, it might just be the best time in years for buyers to trade up. So how can you take advantage of this market without getting hurt by it? By doing the following:
Sell First, Fall in Love Later
Indeed, it's hard to resist the bargains. All that inventory! Your dream home is finally on the market! But your best bet is to avoid shopping until you unload your current home. Better to get the harder part over with first.
Buying will be comparatively easy; in this market, there will always be another house to fall in love with. Even if you have to live in a hotel while you look, you will likely come out ahead compared with carrying two homes.
Price Like a Buyer
If you can't avoid buying before you've sold, however, there's a fallback plan: sell smarter. According to Chang-Tai Hsieh, professor of economics at the University of California at Berkeley, the growth of tweeners is caused not so much by a lack of buyers as by the inability of sellers to accept that prices are falling.
Owners grow attached to their homes, he says, and they find it difficult to reduce the price enough to get buyers interested. "It's not that you can't sell; it's that you can't sell at the price you want."
Thus you must think like a buyer when pricing your house. Start your research by visiting open houses of similar homes in the area. Consider not just what the house is listed for but what you'd offer for it. Apply that to your house. (Forget charging more because you have a newer kitchen; these days upgrades may get your house sold but usually won't get you more money.)
Then cut your price by at least half of your potential carrying costs, suggests Chicago financial planner Richard Potter. To calculate these, multiply your monthly expenses by the average selling time in your area, which a broker can tell you.
Leave Yourself a Loophole
Contingency clauses, which require the seller to wait until the buyer has sold his house to close, all but disappeared in the early 2000s. Back then most sellers had more than one buyer for a property, and bidding wars were common.
Now, realtors say, contingencies are making a comeback. "Sellers are realizing that they have to give buyers more time," says Mary Kaljian, a ReMax realtor in Los Banos, Calif. If a seller won't accept a traditional contingency clause on a property you want, ask for a 72-hour clause, which allows him to keep marketing his house while you try to sell yours.
If he gets a better offer, he must give you three days' notice to decide if you want to be a tweener or to let the other buyer have the home.
Going for it? Buy yourself extra time by asking for the longest closing period possible. Most sellers will agree to 90 days; some, 120.
HOW TO SURVIVE TWEENERDOM
Already stuck? Or think you're about to be? While you try to sell, these methods can ease the hit you'll take from the down payment and double mortgages.
Borrow From Yourself
To help you with the down payment on your new house, lenders will try to sell you on so-called bridge loans, short-term interest-only loans designed for buyers whose assets are tied up in another house. But these have upfront fees and interest rates of up to 10 percent.
"Avoid them if at all possible," says Chicago financial planner Todd Lebor.
There are two ways to do this: If you have not yet put your house on the market, open a home-equity line of credit, which can be as much as two percentage points lower than the average bridge loan. Most banks won't issue a HELOC on a house that's for sale, however. In that case, you might consider borrowing against a 401(k), says Lebor.
Though 401(k) loans normally are not recommended, rates on your retirement account will be as much as one percentage point better than those on a bridge loan and you'll pay the interest back to yourself.
Become a Landlord
Another way to use your vacant house to float you: rent it out. A combination of more renters and fewer units is expected to drive rents up 5 percent next year on average nationwide, according to the NAR, and that may be a boon to struggling sellers.
After Jeff Greene's company relocated him from Tampa to Boulder in June, he and his wife put $15,000 into their home to get it ready to sell. Didn't work. They cut the price $60,000. Still no takers.
Carrying the house while it sat on the market 90 days cost them $7,500; meanwhile, they were also paying the mortgage on their new house. It was fast becoming impossible for them to hold on to both.
Then, by chance, they found a renter. The $2,500 a month they collect covers mortgage, insurance and taxes. They now plan to rent their house out until the market recovers. "We still don't have as much freedom with our budget as we'd like," says Jeff. "But it's definitely stopped the bleeding."
© 2006 Cable News Network LP, LLLP. A Time Warner Company ALL RIGHTS RESERVED.
Imagine buying your dream home only to discover you can't sell your current one.
By Stephen Gandel, Money Magazine senior writer
(Money Magazine) -- When Chicagoans John and Judy Peeler decided to move to Philadelphia last spring, they blithely assumed they'd get more space for their money. Indeed, the couple quickly found a 2,500-square-foot, four-bedroom colonial in a well-regarded school district for $440,000, just about what they figured their 2,000-square-foot Windy City condo would fetch.
Perfect. Or so they thought.
Since then the seemingly ideal move has devastated their finances. The Peelers' Chicago condo has generated little interest, even after they dropped the price -- twice -- to its current $389,000. And it has been four months since they relocated, which means they've been carrying two mortgages and a home-equity line of credit at a cost of $4,000 a month.
Having depleted their savings to pay for this, they've had to seriously cut back on spending. They went without air conditioning this past summer, despite sweltering heat and the fact that Judy was eight months pregnant.
They've also put off fixing the brakes of their second car, which the mechanic says should be replaced soon. "We don't spend money on anything that isn't critical," says Judy. "Everything goes toward the mortgages."
The Peelers are among the increasing ranks of "tweeners," or people who've inadvertently ended up juggling the costs of two homes as a result of the slowing market. Many victims of this fearsome financial trap have been wooed by the upsides of the new buyer's market: increased choice and better prices.
"But they forget the other side of the equation," says Albert Hepp, owner of BuySelfRealty.com in Minneapolis. Only when they try to unload their old house do they realize just how hard it is to sell.
Then, like the Peelers, they find themselves stuck with one more property and one more mortgage than they'd like or can afford.
Though no group has tallied the number of tweeners out there, it's clear that there are more of them around now and that they're bound to multiply if the housing market continues its current trend.
Nearly four million homes are for sale in the U.S., according to the most recent data from the National Association of Realtors (NAR). That's a million more sellers looking for buyers than this time a year ago.
What's more, the number of houses sold nationwide in August fell 12 percent from last year. For those who've just signed contracts to buy, it's less and less likely they'll be able to sell their old houses before closing on their new ones. To understand what that means, do the math: In Massachusetts, a state particularly slow for sales, it takes the average seller 114 days to find a buyer. That's almost four months of double house payments.
With a $300,000 mortgage, you'd pay about $10,000 in interest, taxes, upkeep and insurance while house No. 1 sits on the market.
Even the savviest sellers can get stuck in this situation. NAR head Tom Stevens is himself a tweener: He's been trying to off-load his Virginia home for more than a year. "The housing market is going through a period of adjustment," he told Congress. "I have experienced this firsthand."
HOW TO AVOID TWEENERDOM
Yes, it's grim out there for sellers, but consequently, it might just be the best time in years for buyers to trade up. So how can you take advantage of this market without getting hurt by it? By doing the following:
Sell First, Fall in Love Later
Indeed, it's hard to resist the bargains. All that inventory! Your dream home is finally on the market! But your best bet is to avoid shopping until you unload your current home. Better to get the harder part over with first.
Buying will be comparatively easy; in this market, there will always be another house to fall in love with. Even if you have to live in a hotel while you look, you will likely come out ahead compared with carrying two homes.
Price Like a Buyer
If you can't avoid buying before you've sold, however, there's a fallback plan: sell smarter. According to Chang-Tai Hsieh, professor of economics at the University of California at Berkeley, the growth of tweeners is caused not so much by a lack of buyers as by the inability of sellers to accept that prices are falling.
Owners grow attached to their homes, he says, and they find it difficult to reduce the price enough to get buyers interested. "It's not that you can't sell; it's that you can't sell at the price you want."
Thus you must think like a buyer when pricing your house. Start your research by visiting open houses of similar homes in the area. Consider not just what the house is listed for but what you'd offer for it. Apply that to your house. (Forget charging more because you have a newer kitchen; these days upgrades may get your house sold but usually won't get you more money.)
Then cut your price by at least half of your potential carrying costs, suggests Chicago financial planner Richard Potter. To calculate these, multiply your monthly expenses by the average selling time in your area, which a broker can tell you.
Leave Yourself a Loophole
Contingency clauses, which require the seller to wait until the buyer has sold his house to close, all but disappeared in the early 2000s. Back then most sellers had more than one buyer for a property, and bidding wars were common.
Now, realtors say, contingencies are making a comeback. "Sellers are realizing that they have to give buyers more time," says Mary Kaljian, a ReMax realtor in Los Banos, Calif. If a seller won't accept a traditional contingency clause on a property you want, ask for a 72-hour clause, which allows him to keep marketing his house while you try to sell yours.
If he gets a better offer, he must give you three days' notice to decide if you want to be a tweener or to let the other buyer have the home.
Going for it? Buy yourself extra time by asking for the longest closing period possible. Most sellers will agree to 90 days; some, 120.
HOW TO SURVIVE TWEENERDOM
Already stuck? Or think you're about to be? While you try to sell, these methods can ease the hit you'll take from the down payment and double mortgages.
Borrow From Yourself
To help you with the down payment on your new house, lenders will try to sell you on so-called bridge loans, short-term interest-only loans designed for buyers whose assets are tied up in another house. But these have upfront fees and interest rates of up to 10 percent.
"Avoid them if at all possible," says Chicago financial planner Todd Lebor.
There are two ways to do this: If you have not yet put your house on the market, open a home-equity line of credit, which can be as much as two percentage points lower than the average bridge loan. Most banks won't issue a HELOC on a house that's for sale, however. In that case, you might consider borrowing against a 401(k), says Lebor.
Though 401(k) loans normally are not recommended, rates on your retirement account will be as much as one percentage point better than those on a bridge loan and you'll pay the interest back to yourself.
Become a Landlord
Another way to use your vacant house to float you: rent it out. A combination of more renters and fewer units is expected to drive rents up 5 percent next year on average nationwide, according to the NAR, and that may be a boon to struggling sellers.
After Jeff Greene's company relocated him from Tampa to Boulder in June, he and his wife put $15,000 into their home to get it ready to sell. Didn't work. They cut the price $60,000. Still no takers.
Carrying the house while it sat on the market 90 days cost them $7,500; meanwhile, they were also paying the mortgage on their new house. It was fast becoming impossible for them to hold on to both.
Then, by chance, they found a renter. The $2,500 a month they collect covers mortgage, insurance and taxes. They now plan to rent their house out until the market recovers. "We still don't have as much freedom with our budget as we'd like," says Jeff. "But it's definitely stopped the bleeding."
© 2006 Cable News Network LP, LLLP. A Time Warner Company ALL RIGHTS RESERVED.
Wednesday, November 15, 2006
Denver Real Estate Home Selling Strategy: Seller Carry Back
How can a Seller Carry-Back Help You Sell Your Denver Real Estate?
Basically, a Seller carry back is when the Seller of the property carries a second trust deed and note against the property. This benefits Buyers when the Buyer does not have enough down payment and the Seller lends at or below market interest rate with no closing costs. It helps the Seller by having an income that is usually at a rate above what they would get in a bank.
Sellers can limit their risk for doing such a transaction by making sure they are lending from the equity in their property or an assumable loan to a well-qualified Buyer. Buyers will want to have a means of ensuring that the Seller will be making payments on any assumable loans.
At Denver's current home mortgage interest rates, the primary benefit to the Seller carry-back is the benefit it brings to Buyers in enabling them to purchase a home with little or no money down and can encourage the sale of a home that is just sitting on the market.
Basically, a Seller carry back is when the Seller of the property carries a second trust deed and note against the property. This benefits Buyers when the Buyer does not have enough down payment and the Seller lends at or below market interest rate with no closing costs. It helps the Seller by having an income that is usually at a rate above what they would get in a bank.
Sellers can limit their risk for doing such a transaction by making sure they are lending from the equity in their property or an assumable loan to a well-qualified Buyer. Buyers will want to have a means of ensuring that the Seller will be making payments on any assumable loans.
At Denver's current home mortgage interest rates, the primary benefit to the Seller carry-back is the benefit it brings to Buyers in enabling them to purchase a home with little or no money down and can encourage the sale of a home that is just sitting on the market.
Tuesday, November 14, 2006
Increasing the Value of Your Denver Home - Renovations the Pay
Fixing up your Denver Metro area home for sale can be costly. So proceed with caution, since some home improvements pay off better than others.
"Bathrooms and kitchens are usually your best bet," said Wally Konrad, money editor for Good Housekeeping. "You can usually get about 90 percent of what you paid back when you sell you house. But you have to be careful. If you live in a neighborhood where there isn't a lot of fancy renovating going on and you put in granite countertops, you can't expect that a buyer in that neighborhood is going to pay a premium for that."
In today's Real Estate market in Denver, an updated kitchen is one of the most important selling points.
"Anything that makes a kitchen more homey, or useful, or open, that's a homerun," said Konrad.
This includes wood cabinets, solid-surface countertops, and new appliances. You can give your cabinets a quick and inexpensive facelift by replacing the hardware and scrubbing them with a degreaser. This could cost as little as $100.
But you get the biggest bang for your renovation buck by sprucing up your bathroom. New sink faucets can change the look of a bathroom fast.
"Moen, American Standard and Peerless have a lot of styles for really good prices. The price usually ranges from $65 to $160," Konrad said.
And if you only have one bathroom Good Housekeeping strongly suggests adding another.
Lots of older Denver homes have just one bathroom and this is a terrific place to make an improvement. "Most buyers won't even look at a house with less than two bathrooms these days," Konrad said.
If you are renovating your bathroom, some of the projects with the best returns are double sinks, recessed medicine cabinets and ceramic tile on bathroom walls and floors.
And Good Housekeeping said creating bigger outside living areas is a huge trend now. A patio made of clay or concrete is easy to install and costs less than a wooden deck, and you're bound to get your money back. Just stay away from traditional masonry bricks, because they can crumble after a few years. In Denver, the trend is toward surfaces that can withstand weather.
The key is investing a little in the right places can make a big difference in the value of your home.
"Bathrooms and kitchens are usually your best bet," said Wally Konrad, money editor for Good Housekeeping. "You can usually get about 90 percent of what you paid back when you sell you house. But you have to be careful. If you live in a neighborhood where there isn't a lot of fancy renovating going on and you put in granite countertops, you can't expect that a buyer in that neighborhood is going to pay a premium for that."
In today's Real Estate market in Denver, an updated kitchen is one of the most important selling points.
"Anything that makes a kitchen more homey, or useful, or open, that's a homerun," said Konrad.
This includes wood cabinets, solid-surface countertops, and new appliances. You can give your cabinets a quick and inexpensive facelift by replacing the hardware and scrubbing them with a degreaser. This could cost as little as $100.
But you get the biggest bang for your renovation buck by sprucing up your bathroom. New sink faucets can change the look of a bathroom fast.
"Moen, American Standard and Peerless have a lot of styles for really good prices. The price usually ranges from $65 to $160," Konrad said.
And if you only have one bathroom Good Housekeeping strongly suggests adding another.
Lots of older Denver homes have just one bathroom and this is a terrific place to make an improvement. "Most buyers won't even look at a house with less than two bathrooms these days," Konrad said.
If you are renovating your bathroom, some of the projects with the best returns are double sinks, recessed medicine cabinets and ceramic tile on bathroom walls and floors.
And Good Housekeeping said creating bigger outside living areas is a huge trend now. A patio made of clay or concrete is easy to install and costs less than a wooden deck, and you're bound to get your money back. Just stay away from traditional masonry bricks, because they can crumble after a few years. In Denver, the trend is toward surfaces that can withstand weather.
The key is investing a little in the right places can make a big difference in the value of your home.
Monday, November 13, 2006
An Overview of Mortgage Loans & Today's Rates
Starting a search for Real Estate in Denver means first checking into your lending situation. How much you can qualify for, what is the best loan for you and what you can actually afford need to be absolutely clear BEFORE you you start looking for your Denver home.
Major types of mortgage loans available in the Denver Metro area include:
Fixed-rate loans. Because they offer a monthly payment that is known and does not change, fixed-rate mortgage loans remain the most popular type.
Most fixed-rate mortgages are for loan terms of 15 or 30-years. A 30-year loan has lower payments but a slightly higher interest rate. For all of 2002, the average mortgage rate on a 30-year fixed-rate loan was 6.54%, according to data from Freddie Mac. For 15-year mortgages, the average rate was 5.98%.
To pay off a fixed-rate loan sooner, check with your lender to make sure you can make prepayments. You should be allowed to make these anytime and for any amount, and at no penalty.
Adjustable-rate loans. After an initial term, the interest rate on an adjustable-rate mortgage ARM loan is re-set periodically. This is to keep the rate in line with current market interest rates. For example, a 3/1 ARM loan offers a fixed rate for the first three years, adjusting once a year thereafter. A 5/1 ARM loan offers a fixed rate for the first five years, adjusting yearly thereafter. The lender sets the interest rate by adding a margin to an index rateIndexRate. Common indexes include:
Cost of Funds Index. The Eleventh District of the Federal Home Loan Bank Board, which covers California, Nevada and Arizona, publishes the Cost of Funds Index. For more information on the index, visit the Web site of the Federal Home Loan Bank of San Francisco.
Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase each adjustment period and over the term of the loan, respectively.
If you have a payment cap in your loan agreement, you may face negative amortization of your loan. This has the effect of increasing the amount you owe.
Convertible mortgage loans. These are ARM loans that allow you to convert to a fixed-rate loan at or before a specified time. The conversion privilege lets you start off with a low variable rate, then lock in when fixed rates drop low enough.
Balloon mortgage loans. These loans often have interest-only payments. In this case, you don't amortized any loan principal and the entire loan amount is due at the end of the loan term. A balloon mortgage allows you to minimize your monthly payments until you refinance the loan. Another advantage is that a larger share of your payment may be eligible for the mortgage interest tax deduction.
Mortgage Loans
Type Rate +/- Last Week
30 Yr Fixed Mtg 5.80% 5.79%
20 Yr Fixed Mtg 5.75% 5.76%
15 Yr Fixed Mtg 5.52% 5.50%
30 Yr Fixed Jumbo Mtg 6.10% 6.11%
15 Yr Fixed Jumbo Mtg 5.79% 5.78%
3/1 ARM 5.45% 5.41%
3/1 ARM (I/O) 5.55% 5.49%
3/1 Jumbo ARM (I/O) 5.59% 5.57%
5/1 ARM 5.57% 5.54%
5/1 ARM (I/O) 5.69% 5.64%
5/1 Jumbo ARM (I/O) 5.80% 5.78%
7/1 ARM 5.72% 5.69%
7/1 ARM (I/O) 5.72% 5.70%
7/1 Jumbo ARM (I/O) 5.88% 5.84%
30 Yr FHA Mtg 6.45% 6.43%
More
* I/O = Interest Only
Major types of mortgage loans available in the Denver Metro area include:
Fixed-rate loans. Because they offer a monthly payment that is known and does not change, fixed-rate mortgage loans remain the most popular type.
Most fixed-rate mortgages are for loan terms of 15 or 30-years. A 30-year loan has lower payments but a slightly higher interest rate. For all of 2002, the average mortgage rate on a 30-year fixed-rate loan was 6.54%, according to data from Freddie Mac. For 15-year mortgages, the average rate was 5.98%.
To pay off a fixed-rate loan sooner, check with your lender to make sure you can make prepayments. You should be allowed to make these anytime and for any amount, and at no penalty.
Adjustable-rate loans. After an initial term, the interest rate on an adjustable-rate mortgage ARM loan is re-set periodically. This is to keep the rate in line with current market interest rates. For example, a 3/1 ARM loan offers a fixed rate for the first three years, adjusting once a year thereafter. A 5/1 ARM loan offers a fixed rate for the first five years, adjusting yearly thereafter. The lender sets the interest rate by adding a margin to an index rateIndexRate. Common indexes include:
Cost of Funds Index. The Eleventh District of the Federal Home Loan Bank Board, which covers California, Nevada and Arizona, publishes the Cost of Funds Index. For more information on the index, visit the Web site of the Federal Home Loan Bank of San Francisco.
Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase each adjustment period and over the term of the loan, respectively.
If you have a payment cap in your loan agreement, you may face negative amortization of your loan. This has the effect of increasing the amount you owe.
Convertible mortgage loans. These are ARM loans that allow you to convert to a fixed-rate loan at or before a specified time. The conversion privilege lets you start off with a low variable rate, then lock in when fixed rates drop low enough.
Balloon mortgage loans. These loans often have interest-only payments. In this case, you don't amortized any loan principal and the entire loan amount is due at the end of the loan term. A balloon mortgage allows you to minimize your monthly payments until you refinance the loan. Another advantage is that a larger share of your payment may be eligible for the mortgage interest tax deduction.
Mortgage Loans
Type Rate +/- Last Week
30 Yr Fixed Mtg 5.80% 5.79%
20 Yr Fixed Mtg 5.75% 5.76%
15 Yr Fixed Mtg 5.52% 5.50%
30 Yr Fixed Jumbo Mtg 6.10% 6.11%
15 Yr Fixed Jumbo Mtg 5.79% 5.78%
3/1 ARM 5.45% 5.41%
3/1 ARM (I/O) 5.55% 5.49%
3/1 Jumbo ARM (I/O) 5.59% 5.57%
5/1 ARM 5.57% 5.54%
5/1 ARM (I/O) 5.69% 5.64%
5/1 Jumbo ARM (I/O) 5.80% 5.78%
7/1 ARM 5.72% 5.69%
7/1 ARM (I/O) 5.72% 5.70%
7/1 Jumbo ARM (I/O) 5.88% 5.84%
30 Yr FHA Mtg 6.45% 6.43%
More
* I/O = Interest Only
Sunday, November 12, 2006
Denver House-Hunting Tips for Today's Real-Estate Market
Recent Denver real estate studies show that until the last year, new Denver Metro real estate listings sold in a matter of weeks in many areas. Denver home prices escalated at a record pace. Financing a home purchase in the Denver Metro area was rarely a problem -- money was easy and interest rates were low. Few Denver Metro area buyers wanted to miss the opportunity to make fast money in a market that seemed to defy gravity.
What a difference a year makes. Now, the appreciation rate is running at a snail's pace, and declining in some areas. According to the National Association of Realtors, the median home price nationally declined a little over 1 percent in August from a year ago. This trend is expected to continue in the Denver Metro area through the end of 2006. Consequently, many Denver real estate buyers who were anxious to buy last year are standing on the sidelines, waiting to see what happens next.
Remarkably, there are still areas where the demand for new listings still exceeds the supply. In the desirable Highlands, Washington Park and affordably priced homes in Highlands Ranch, for example, offers are made quickly.
Regardless of whether you live in a Denver area where there's plenty for sale or if you are still battling other buyers for too few listings, it's time to return to the basics when considering a home purchase.
HOUSE HUNTING TIP: Until recently, Denver Metro home buyers bought not with an eye to a quick profit but in order to gain control over the place where they lived. As a Denver homeowner, you don't need the landlord's permission to make modifications to the property to suit your needs. You aren't at the mercy of a landlord who might raise the rent or ask you to move. Now there's no guarantee that you'll find a place to rent in a neighborhood where you'd like to put down roots. Also, Denver rents are rising after years of lackluster performance.
Additionally, Denver homeowners tend to take a serious interest in preserving and enhancing the quality of the neighborhoods in which they live. Renters tend to be transient.
The tax benefits of home ownership shouldn't be overlooked. While restrictions do apply, Denver homeowners can claim a deduction for mortgage interest and property taxes from their federal income tax returns. This effectively lowers the cost of home ownership for taxpayers who itemize deductions.
There are several other good reasons why this could be a good time to buy Denver Real Estate. One is that there is, in general, less competition from other buyers than there was a year ago. It's now possible to negotiate with sellers if the list price seems out of line. Another factor in your favor is that interest rates have recently eased and are still at historically low levels.
Of course, a risk of buying now is that Denver home prices could decline from their current level. David Lereah, NAR's chief economist, recently speculated that we will "probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."
So, why not wait to buy until Denver home prices start climbing again? That's certainly an option, if you can find a suitable rental. However, it's impossible to time the market. We'll know that prices have bottomed out for the cycle only after they have resumed their ascent.
What a difference a year makes. Now, the appreciation rate is running at a snail's pace, and declining in some areas. According to the National Association of Realtors, the median home price nationally declined a little over 1 percent in August from a year ago. This trend is expected to continue in the Denver Metro area through the end of 2006. Consequently, many Denver real estate buyers who were anxious to buy last year are standing on the sidelines, waiting to see what happens next.
Remarkably, there are still areas where the demand for new listings still exceeds the supply. In the desirable Highlands, Washington Park and affordably priced homes in Highlands Ranch, for example, offers are made quickly.
Regardless of whether you live in a Denver area where there's plenty for sale or if you are still battling other buyers for too few listings, it's time to return to the basics when considering a home purchase.
HOUSE HUNTING TIP: Until recently, Denver Metro home buyers bought not with an eye to a quick profit but in order to gain control over the place where they lived. As a Denver homeowner, you don't need the landlord's permission to make modifications to the property to suit your needs. You aren't at the mercy of a landlord who might raise the rent or ask you to move. Now there's no guarantee that you'll find a place to rent in a neighborhood where you'd like to put down roots. Also, Denver rents are rising after years of lackluster performance.
Additionally, Denver homeowners tend to take a serious interest in preserving and enhancing the quality of the neighborhoods in which they live. Renters tend to be transient.
The tax benefits of home ownership shouldn't be overlooked. While restrictions do apply, Denver homeowners can claim a deduction for mortgage interest and property taxes from their federal income tax returns. This effectively lowers the cost of home ownership for taxpayers who itemize deductions.
There are several other good reasons why this could be a good time to buy Denver Real Estate. One is that there is, in general, less competition from other buyers than there was a year ago. It's now possible to negotiate with sellers if the list price seems out of line. Another factor in your favor is that interest rates have recently eased and are still at historically low levels.
Of course, a risk of buying now is that Denver home prices could decline from their current level. David Lereah, NAR's chief economist, recently speculated that we will "probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."
So, why not wait to buy until Denver home prices start climbing again? That's certainly an option, if you can find a suitable rental. However, it's impossible to time the market. We'll know that prices have bottomed out for the cycle only after they have resumed their ascent.
Saturday, November 11, 2006
Housing Market Update from Wall Street Journal
Housing Market Trend Update from WSJ
By Kristen Gerencher
The housing market may be in a slump, but the industry's long-term trends look promising as younger generations begin to buy and trade up. That was the consensus among a group of consultants, analysts and developers speaking at the recent annual meeting of the Urban Land Institute in Denver.
Rising affordability concerns in some home and rental markets remain a challenge, but the generations coming up behind the baby boomers are giving home builders a run for their money, experts said. With more immigration and people living alone, demographic shifts are pressing developers to reconsider what's worked in the past.
Generation X, typically defined as those born between 1965 and 1979, comprise a little more than half of the market for newly constructed homes, said James Chung, president of Reach Advisors, a Boston-based marketing strategy and research firm.
But that doesn't mean the homes that lured baby boomers, born between 1946 and 1964, are meeting the needs of the 30-somethings shopping now.
"Generation X is in the heart of their entry-level home-buying years and are just now entering their peak trade-up years," Chung said. "They haven't yet stolen the thunder of the boomers when it comes to trade-up homes. It's a big shift coming up for home builders and developers."
Partly because many Gen-Xers are buying into the market after the run-up in housing prices began about a decade ago, they tend not to be as moved by deluxe kitchens, huge square footage and "prestige addresses" as their older counterparts are, he said.
"It's the trade-off generation. It's no longer sort of the live-large mindset," Chung said. "They're living under different economic realities than their predecessors. They carry 70% more debt than the baby boomers did at that point in their lives because of the cost of housing.... Almost all of that is housing debt."
Many are forgoing master suites and separate wings for kids and adults and instead seeking smaller footprints with space designed for family usage rather than individual usage, Chung said.
The market has yet to catch up with their particular demands, he said. "What we're seeing is a fundamental mismatch between what these buyers are wanting and what the market is offering. They're settling for what's available vs. finding what they really want."
As for Generation Y, also know as the echo boomers who were born after 1980, it's premature to draw conclusions, Gadi Kaufmann, chief executive of Robert Charles Lesser and Co., a real estate advisory firm, said during a ULI panel discussion on what young consumers want.
"Gen Y is going to be in student housing and rentals for the next six years," he said. See how student housing has changed today.
More solo dwellers
Also affecting home builders and developers is the rise of nontraditional households, Kaufmann said.
The portion of people living without a spouse or roommate ballooned 23% since 1980, he said. Only 22% of households were made up of a single person living alone 26 years ago compared with 27% in 2005.
A 57% rise in single-parent households and a 26% decline in the percentage of married couples with kids -- 23% last year compared with 31% in 1980 -- has further changed the housing landscape, Kaufmann said.
There's also more migration from expensive cities to less costly areas, as well as people moving away from their hometowns, he said.
Southern states and those bordering pricey ones, such as Arizona and Nevada, are the beneficiaries of home buyers who can't afford or become disenchanted with higher-priced areas such as California and the Northeast, he said.
So-called second- and third-tier cities with populations of 300,000 to 1 million are attractive to the youth market and poised for growth, Kaufmann told the audience. "Some of the most exciting towns in America are those second-tier cities."
Young people also tend not to mind close living, he said. As more people live alone and wait longer to marry and start families, many in their 20s and 30s are drawn to compact apartment and condo units in urban areas where they can interact with their neighbors.
The growth of the Hispanic population also portends shifts, though what kind remains unclear, Chung said. Latinos currently have a homeownership rate in the high 40% range compared with about 72% for whites. "If they move up in homeownership at a faster rate, that's going to be very positive for the home market."
Love affair continues
Whether the housing market has hit a bottom or not remains controversial.
Last week, the U.S. Commerce Department reported that the nation's economy grew at a preliminary annual rate of 1.6% from July through September, its slowest pace since early 2003 due to cooling in the housing market.
In a survey done in October by Reach Advisors, 41% of 500 consumers looking to buy a house in the last 12 months or planning to look in the next year said their plans to move were affected by market conditions, compared with 27% of consumers who said so in July 2005, Chung told ULI attendees at a panel discussion on the risks and benefits of homeownership.
The portion anticipating a drop in home prices was 32% last month compared with 13% in July of last year, meaning that two-thirds still don't expect price drops, he said. What's more, 93% said owning a home remains a strong or acceptable long-term investment.
Though the housing market may be in the doldrums, Chung said he's confident Americans' love affair with homeownership will endure even after this recent extreme swing in demand. "From 2003 to 2005 it wasn't just a love affair with your primary home. It was a torrid affair with real estate. It was your home plus your home on the side."
Still, a balance of owners and renters is desirable because homeownership isn't for everyone, Ron Terwilliger, chief executive of Trammell Crow Residential, a builder and manager of multifamily housing based in Atlanta, said during the same ULI panel discussion.
"You're better off renting unless you're going to be in a home for at least five years because of the costs of getting in and out," he told attendees.
"The reason this cycle went up so high and flattened so quickly is more speculative buying than I've seen in my 35 years in the business," Terwilliger said. "It's unfortunate so many people bought intending to flip."
It will take time to regain equilibrium, he said. "There's a lot of pain going on in the investment community."
By Kristen Gerencher
The housing market may be in a slump, but the industry's long-term trends look promising as younger generations begin to buy and trade up. That was the consensus among a group of consultants, analysts and developers speaking at the recent annual meeting of the Urban Land Institute in Denver.
Rising affordability concerns in some home and rental markets remain a challenge, but the generations coming up behind the baby boomers are giving home builders a run for their money, experts said. With more immigration and people living alone, demographic shifts are pressing developers to reconsider what's worked in the past.
Generation X, typically defined as those born between 1965 and 1979, comprise a little more than half of the market for newly constructed homes, said James Chung, president of Reach Advisors, a Boston-based marketing strategy and research firm.
But that doesn't mean the homes that lured baby boomers, born between 1946 and 1964, are meeting the needs of the 30-somethings shopping now.
"Generation X is in the heart of their entry-level home-buying years and are just now entering their peak trade-up years," Chung said. "They haven't yet stolen the thunder of the boomers when it comes to trade-up homes. It's a big shift coming up for home builders and developers."
Partly because many Gen-Xers are buying into the market after the run-up in housing prices began about a decade ago, they tend not to be as moved by deluxe kitchens, huge square footage and "prestige addresses" as their older counterparts are, he said.
"It's the trade-off generation. It's no longer sort of the live-large mindset," Chung said. "They're living under different economic realities than their predecessors. They carry 70% more debt than the baby boomers did at that point in their lives because of the cost of housing.... Almost all of that is housing debt."
Many are forgoing master suites and separate wings for kids and adults and instead seeking smaller footprints with space designed for family usage rather than individual usage, Chung said.
The market has yet to catch up with their particular demands, he said. "What we're seeing is a fundamental mismatch between what these buyers are wanting and what the market is offering. They're settling for what's available vs. finding what they really want."
As for Generation Y, also know as the echo boomers who were born after 1980, it's premature to draw conclusions, Gadi Kaufmann, chief executive of Robert Charles Lesser and Co., a real estate advisory firm, said during a ULI panel discussion on what young consumers want.
"Gen Y is going to be in student housing and rentals for the next six years," he said. See how student housing has changed today.
More solo dwellers
Also affecting home builders and developers is the rise of nontraditional households, Kaufmann said.
The portion of people living without a spouse or roommate ballooned 23% since 1980, he said. Only 22% of households were made up of a single person living alone 26 years ago compared with 27% in 2005.
A 57% rise in single-parent households and a 26% decline in the percentage of married couples with kids -- 23% last year compared with 31% in 1980 -- has further changed the housing landscape, Kaufmann said.
There's also more migration from expensive cities to less costly areas, as well as people moving away from their hometowns, he said.
Southern states and those bordering pricey ones, such as Arizona and Nevada, are the beneficiaries of home buyers who can't afford or become disenchanted with higher-priced areas such as California and the Northeast, he said.
So-called second- and third-tier cities with populations of 300,000 to 1 million are attractive to the youth market and poised for growth, Kaufmann told the audience. "Some of the most exciting towns in America are those second-tier cities."
Young people also tend not to mind close living, he said. As more people live alone and wait longer to marry and start families, many in their 20s and 30s are drawn to compact apartment and condo units in urban areas where they can interact with their neighbors.
The growth of the Hispanic population also portends shifts, though what kind remains unclear, Chung said. Latinos currently have a homeownership rate in the high 40% range compared with about 72% for whites. "If they move up in homeownership at a faster rate, that's going to be very positive for the home market."
Love affair continues
Whether the housing market has hit a bottom or not remains controversial.
Last week, the U.S. Commerce Department reported that the nation's economy grew at a preliminary annual rate of 1.6% from July through September, its slowest pace since early 2003 due to cooling in the housing market.
In a survey done in October by Reach Advisors, 41% of 500 consumers looking to buy a house in the last 12 months or planning to look in the next year said their plans to move were affected by market conditions, compared with 27% of consumers who said so in July 2005, Chung told ULI attendees at a panel discussion on the risks and benefits of homeownership.
The portion anticipating a drop in home prices was 32% last month compared with 13% in July of last year, meaning that two-thirds still don't expect price drops, he said. What's more, 93% said owning a home remains a strong or acceptable long-term investment.
Though the housing market may be in the doldrums, Chung said he's confident Americans' love affair with homeownership will endure even after this recent extreme swing in demand. "From 2003 to 2005 it wasn't just a love affair with your primary home. It was a torrid affair with real estate. It was your home plus your home on the side."
Still, a balance of owners and renters is desirable because homeownership isn't for everyone, Ron Terwilliger, chief executive of Trammell Crow Residential, a builder and manager of multifamily housing based in Atlanta, said during the same ULI panel discussion.
"You're better off renting unless you're going to be in a home for at least five years because of the costs of getting in and out," he told attendees.
"The reason this cycle went up so high and flattened so quickly is more speculative buying than I've seen in my 35 years in the business," Terwilliger said. "It's unfortunate so many people bought intending to flip."
It will take time to regain equilibrium, he said. "There's a lot of pain going on in the investment community."
Friday, November 10, 2006
Uh-Oh Zillow!
(From Realty Times, by B. Evans)
On the heels of its announcement that it is allowing free API (Zestimates) on all consumer websites, Zillow was the subject of an FTC complaint filed by the National Community Reinvestment Coalition (NCRC,)
With quick damage control, the online marketing director at Zillow said, "We understand that individuals in the real estate market today, whether it be buying or selling a home, engage with real estate professionals on a local level. While there are a handful of national real estate sites on the Web today, many thousands of local real estate agents and brokerages also have home pages, and many are looking for ways to enhance these with relevant, free information for their customers. By opening up the Zillow Application Programming Interface (API,) we're putting more information in the hands of consumers, in more places."
Zillow's API reportedly has 68 million property records available, which will now be free of charge to third-party consumer websites. "By implementing the API, other websites can recreate Zillow's functionality on their domain, turning member sites into mini real estate portals that include detailed information from Zillow's extensive database on millions of homes."
The company explains that it is offering two different APIs: home valuations and property details. The home valuation API includes Zestimate values, home valuation charts, comparable sales, and market trend charts. The property detail API includes more detailed information about specific homes, including historical sale price and year, tax assessment and the number of bedrooms and bathrooms.
But that's not enough to cool the ire of the National Community Reinvestment Coalition, which has just filed a consumer protection complaint to the Federal Trade Commission (FTC) alleging that "Internet financial services and real estate provider Zillow.com is misleading consumers, real estate professionals and financial service providers in on-line home valuations."
NCRC charges Zillow with falsely representing to the public that its on-line valuations are within ten percent of the home selling price when the company really has "less than a 30 percent accuracy rate when offering the valuations for public consumption." The result for consumers, says John Taylor, NCRC president and CEO, is that "consumers are already at risk of being over extended due to the increased access to non-traditional loans, Zillow's misinformation exacerbates the situation. Practices like theirs undermines the critical importance of valuation protections that benefit consumers and lenders alike, and guide the actions of all valuation professionals."
The complaint specifically alleges that Zillow and its affiliated companies are intentionally misleading consumers and real estate professionals to rely upon the accuracy of its valuation services despite the full knowledge of the company officials that their valuation Automated Valuation Model (AVM) mechanism is highly inaccurate and misleading to consumers, including the general public, as well as to real estate and financial service providers," which could cause substantial injury to consumers.
The complaint goes on to say that the site provides "little or no benefit to consumers or the marketplace due to the high percentage of valuations that are significantly over or under the residential properties' true market value."
Zillow's practices, contends the NCRC, "violate the Federal Trade Commission Act and undermine congressional intent to ensure a healthy, precise, open and robust housing and mortgage market."
Further, notes NCRC, "the general public is unaware that AVMs are exempt from Uniform Standards of Professional Appraisal Practice" (USPAP) in the belief that "he or she is receiving a valuation equivalent to one conducted by a valuation professional."
Zillow's practices, suggests the NCRC, could place members of Fair Housing protected classes in urban and rural areas more at risk for discriminatory and predatory lending practices due to the limitations and inaccuracy of its "black box," a tool homeowners can use to submit information about their homes but which cannot necessarily be verified. Worse, NCRC alleges that over-valuations are prevalent in predominantly white communities, while under-valuations were more frequent in predominantly African-American or Latino communities.
Uh oh.
NCRC says it has "audited" Zillow's accuracy and has found that the site was within 10 percent of actual appraised value of properties less than one third of the time. That's little better than what Zillow spokespersons told BusinessWeek back in February, 2006 when the site launched -- that "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."
Only, it seems Zillow left the "62 percent of the time" off the website. The site, says NCRC, is "allowed to give free value estimates with no liability and no reporting or record-keeping requirements." Appraiser, by contrast, are fully liable with a "huge burden of reporting and record-keeping requirements ... ."
Well, it seems that consumers are getting exactly what they paid for -- free valuations that are allegedly worthless, according to the NCRC. The NCRC would like to see Zillow liable to USPAP regulations "just as an appraiser is."
NCRC requests that the FTC "act in the public interest and permanently enjoin and restrain Zillow.com from violating the FTC ACt in connection with offering its valuation services, and find Zillow jointly and severally liable for redress to all borrowers who were injured as a result of the company's violations of the FTC Act; and ensure that all affiliate sites, including Yahoo Real Estate and the Yahoo search engine, incorporate appropriate injunctive and consumer protection settlement terms as agreed upon by the parties."
Zillow's official responsimate is, "We believe these allegations are groundless. As we say consistently and prominently on our Web site, Zillow is a free research tool for consumers, and Zestimates are designed to be a starting point for consumers who want to learn about the value of homes. We make every effort to explain on our site the role of Zestimates as a research tool, as well as to clearly display our rates of accuracy for every area we cover."
On the heels of its announcement that it is allowing free API (Zestimates) on all consumer websites, Zillow was the subject of an FTC complaint filed by the National Community Reinvestment Coalition (NCRC,)
With quick damage control, the online marketing director at Zillow said, "We understand that individuals in the real estate market today, whether it be buying or selling a home, engage with real estate professionals on a local level. While there are a handful of national real estate sites on the Web today, many thousands of local real estate agents and brokerages also have home pages, and many are looking for ways to enhance these with relevant, free information for their customers. By opening up the Zillow Application Programming Interface (API,) we're putting more information in the hands of consumers, in more places."
Zillow's API reportedly has 68 million property records available, which will now be free of charge to third-party consumer websites. "By implementing the API, other websites can recreate Zillow's functionality on their domain, turning member sites into mini real estate portals that include detailed information from Zillow's extensive database on millions of homes."
The company explains that it is offering two different APIs: home valuations and property details. The home valuation API includes Zestimate values, home valuation charts, comparable sales, and market trend charts. The property detail API includes more detailed information about specific homes, including historical sale price and year, tax assessment and the number of bedrooms and bathrooms.
But that's not enough to cool the ire of the National Community Reinvestment Coalition, which has just filed a consumer protection complaint to the Federal Trade Commission (FTC) alleging that "Internet financial services and real estate provider Zillow.com is misleading consumers, real estate professionals and financial service providers in on-line home valuations."
NCRC charges Zillow with falsely representing to the public that its on-line valuations are within ten percent of the home selling price when the company really has "less than a 30 percent accuracy rate when offering the valuations for public consumption." The result for consumers, says John Taylor, NCRC president and CEO, is that "consumers are already at risk of being over extended due to the increased access to non-traditional loans, Zillow's misinformation exacerbates the situation. Practices like theirs undermines the critical importance of valuation protections that benefit consumers and lenders alike, and guide the actions of all valuation professionals."
The complaint specifically alleges that Zillow and its affiliated companies are intentionally misleading consumers and real estate professionals to rely upon the accuracy of its valuation services despite the full knowledge of the company officials that their valuation Automated Valuation Model (AVM) mechanism is highly inaccurate and misleading to consumers, including the general public, as well as to real estate and financial service providers," which could cause substantial injury to consumers.
The complaint goes on to say that the site provides "little or no benefit to consumers or the marketplace due to the high percentage of valuations that are significantly over or under the residential properties' true market value."
Zillow's practices, contends the NCRC, "violate the Federal Trade Commission Act and undermine congressional intent to ensure a healthy, precise, open and robust housing and mortgage market."
Further, notes NCRC, "the general public is unaware that AVMs are exempt from Uniform Standards of Professional Appraisal Practice" (USPAP) in the belief that "he or she is receiving a valuation equivalent to one conducted by a valuation professional."
Zillow's practices, suggests the NCRC, could place members of Fair Housing protected classes in urban and rural areas more at risk for discriminatory and predatory lending practices due to the limitations and inaccuracy of its "black box," a tool homeowners can use to submit information about their homes but which cannot necessarily be verified. Worse, NCRC alleges that over-valuations are prevalent in predominantly white communities, while under-valuations were more frequent in predominantly African-American or Latino communities.
Uh oh.
NCRC says it has "audited" Zillow's accuracy and has found that the site was within 10 percent of actual appraised value of properties less than one third of the time. That's little better than what Zillow spokespersons told BusinessWeek back in February, 2006 when the site launched -- that "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."
Only, it seems Zillow left the "62 percent of the time" off the website. The site, says NCRC, is "allowed to give free value estimates with no liability and no reporting or record-keeping requirements." Appraiser, by contrast, are fully liable with a "huge burden of reporting and record-keeping requirements ... ."
Well, it seems that consumers are getting exactly what they paid for -- free valuations that are allegedly worthless, according to the NCRC. The NCRC would like to see Zillow liable to USPAP regulations "just as an appraiser is."
NCRC requests that the FTC "act in the public interest and permanently enjoin and restrain Zillow.com from violating the FTC ACt in connection with offering its valuation services, and find Zillow jointly and severally liable for redress to all borrowers who were injured as a result of the company's violations of the FTC Act; and ensure that all affiliate sites, including Yahoo Real Estate and the Yahoo search engine, incorporate appropriate injunctive and consumer protection settlement terms as agreed upon by the parties."
Zillow's official responsimate is, "We believe these allegations are groundless. As we say consistently and prominently on our Web site, Zillow is a free research tool for consumers, and Zestimates are designed to be a starting point for consumers who want to learn about the value of homes. We make every effort to explain on our site the role of Zestimates as a research tool, as well as to clearly display our rates of accuracy for every area we cover."
Wednesday, November 08, 2006
Confessions of an Ex-Mortgage Lender
(This article was written by Douglas MacMillan for Business Week Online.)
Former loan officer Ted Janusz spills the secrets on this calculated practice of ripping borrowers off
By Douglas MacMillan
The Durham (N.C.)-based nonprofit Center for Responsible Lending estimated in July 2001, that predatory mortgage lending is currently costing Americans more than $9.1 billion each year.
Lenders will argue that each one of these dollars represents a legitimate fee stipulated by a legitimate contract, that they are only viewed as predatory by borrowers who overlooked the fine print in their mortgage.
But ask Ted Janusz, who spent an interim period of his career learning the ins and outs of mortgage brokering as a loan officer in Columbus, Ohio, and he'll admit that what is really going on here is a game of subterfuge being played at the expense of borrowers with low credit ratings.
CONFESSION TIME: The strategy of lenders, he learned, is to maintain an uneven playing field with their clients. "The average person only gets a mortgage every seven years. How can you become good at something you do every seven years, especially if you're dealing with somebody who knows all the ins and outs and is doing this several times a day?" he recently told BusinessWeek.com.
After a year of putting up with what he felt was the industry's lack of integrity, Janusz left the business for good. Still, he felt he was privy to information that the public rarely gets to see. He vented his frustrations -- and spilled his guts -- in the 2005 book 'Kickback: Confessions of a Mortgage Salesman (Insight).
The book details the sophisticated traps lenders set for clients they see as suckers. "If somebody came in wearing cowboy boots and ripped-up jeans, those are the people you took to the cleaners on fees. That was the unwritten rule -- we were looking for people we'd see as having less-than-perfect credit."
TUNNEL VISION: Lenders who found a mark would make sure the money was ending up in their pockets mainly through back-end yield spreads, or the so-called Service Release Premium. For example, they would tell the borrowers that they could have a 9 percent interest rate, but when the paperwork cleared, their low credit rating would force them into an 11 percent dollars in each case, fell into the lenders' laps.
In his book, Janusz also highlights an array of common traps lenders use all the time, such as allowing a borrower to see an attractive interest rate offer and letting him think that's the only important consideration in a mortgage negotiation. "You hear companies offer fabulous rates, but what are they paying in closing costs to get them?" Janusz says. "It would be like comparison shopping for cars only looking at the headlights."
(COMING SOON to LOCATION in DENVER: A Reputable Lender describes the processes involved in cleaning up your credit in order to get the best rates available for home loans. Stay Tuned! - Marie de Espinosa, Denver Real Estate Broker)
Former loan officer Ted Janusz spills the secrets on this calculated practice of ripping borrowers off
By Douglas MacMillan
The Durham (N.C.)-based nonprofit Center for Responsible Lending estimated in July 2001, that predatory mortgage lending is currently costing Americans more than $9.1 billion each year.
Lenders will argue that each one of these dollars represents a legitimate fee stipulated by a legitimate contract, that they are only viewed as predatory by borrowers who overlooked the fine print in their mortgage.
But ask Ted Janusz, who spent an interim period of his career learning the ins and outs of mortgage brokering as a loan officer in Columbus, Ohio, and he'll admit that what is really going on here is a game of subterfuge being played at the expense of borrowers with low credit ratings.
CONFESSION TIME: The strategy of lenders, he learned, is to maintain an uneven playing field with their clients. "The average person only gets a mortgage every seven years. How can you become good at something you do every seven years, especially if you're dealing with somebody who knows all the ins and outs and is doing this several times a day?" he recently told BusinessWeek.com.
After a year of putting up with what he felt was the industry's lack of integrity, Janusz left the business for good. Still, he felt he was privy to information that the public rarely gets to see. He vented his frustrations -- and spilled his guts -- in the 2005 book 'Kickback: Confessions of a Mortgage Salesman (Insight).
The book details the sophisticated traps lenders set for clients they see as suckers. "If somebody came in wearing cowboy boots and ripped-up jeans, those are the people you took to the cleaners on fees. That was the unwritten rule -- we were looking for people we'd see as having less-than-perfect credit."
TUNNEL VISION: Lenders who found a mark would make sure the money was ending up in their pockets mainly through back-end yield spreads, or the so-called Service Release Premium. For example, they would tell the borrowers that they could have a 9 percent interest rate, but when the paperwork cleared, their low credit rating would force them into an 11 percent dollars in each case, fell into the lenders' laps.
In his book, Janusz also highlights an array of common traps lenders use all the time, such as allowing a borrower to see an attractive interest rate offer and letting him think that's the only important consideration in a mortgage negotiation. "You hear companies offer fabulous rates, but what are they paying in closing costs to get them?" Janusz says. "It would be like comparison shopping for cars only looking at the headlights."
(COMING SOON to LOCATION in DENVER: A Reputable Lender describes the processes involved in cleaning up your credit in order to get the best rates available for home loans. Stay Tuned! - Marie de Espinosa, Denver Real Estate Broker)
Tuesday, November 07, 2006
Denver Real Estate Investing 101 - A Quick Guide
Like all Denver Real Estate investors, you may be wondering "what type of real estate" should I invest in to jumpstart my real estate career.
First, if you are planning to invest in any type of Denver real estate, short or long-term, make certain that you have created and finalized a business plan and strategy. Now the business plan doesn't need to be a Fortune 500 level plan, but it does need to be in place.
After you have all your preliminary plans in place, then it's time to take a hard look at all the types of investments that exist for any willing and qualified real estate investor in Denver.
The first investment property that seems to appeal to many investors in Denver is a fix-n-flip. The initial excitement and interest comes from stories of big money made in fixing and flipping Denver real estate. For an investor just starting out doing a small fix-n-flip can be a good way to get your feet wet and put some extra cash into your pocket for doing more investing. That being said, the first thing to know about Denver's flip properties is that they require a lot of attention. Attention to small and large details. Typically, these types of properties are found in existing and well-established neighborhoods throughout Denver.
The reason for flipping properties in more mature Denver neighborhoods is that the history of sales in any particular neighborhood will in many ways determine your level of success. Fix-n-flip properties require the following criteria to make the investment experience a positive one.
First, purchase the property for well less than what other properties are selling for in total area. Buying below retail helps you to see the actual margin you may have for fix-ups and resale. Be sure to ask me to explain the age of the data and it's source to you.
Second criteria is what is the current appreciation rates in this Denver neighborhood. For example, if the home is in the area that is appreciating 1 - 2% per month and the location is extremely hot with people who "gotta live there," then you will have to add those percentages on to your anticipating resale of the property.
Last, I will analyze the recent SOLD comparables is also important to your projects overall success. Having a handle on the low, mid and high SOLD sales will help you to see where your property will realistically sell.
Knowing the number of days on the market for any given property will also help you build a strong business and financial plan. Days on market varies wildly between Denver neighborhoods and price points, so let me help you choose one that will sell fast. This data is often critical when you are borrowing money from a bank or mortgage company or when you are considering a private financial partner and need to build a strong business case to support this financial involvement.
Remodeling costs can make you or break you. First of all, evaluate all the areas that must be repaired or updated before ever selling the property. This is one area in particular, when people can lose their shirts from overdoing the fix-ups to running out of money and cutting corners to complete the project. All of these reasons can create a formula for disaster if you aren't careful. There are some great
contractors and companies to work with here in Denver, including great sources for materials and your homework and planning will really pay off.
The one area that new investors underestimate is the cost of lining out vs. doing the fix-up work themselves. While investors with construction trade experience have a leg up on the competition, many new investors are equally talented in other aspects of fixing and flipping properties. The bottom line is you must keep your own limitations before jumping into a fix-up project.
Last, but not least, you must determine your finance and resell costs. The cost of financing your project will impact the final outcome of your project. For example, you may get a great interest rate on your loan but it could cost you 1 - 2% extra points if the property is sold in less than 12 months. Or your loan rate may double if you aren't out of the project within 6 months. Basically, there are thousands of loan programs as there are investors, so before signing on the bottom line, make certain you understand the terms.
The last item to consider for your project is the costs of reselling the property. From realtor commissions to title insurance the fees are typically unavoidable. Go over every line of the net sheet I prepare for you and be aware of the cost of doing this business. To speak about your real estate investing goals; you can email your request to Marie@LocationInDenver.com or call me at (720) 275-3926.
Happy Investing! Marie
First, if you are planning to invest in any type of Denver real estate, short or long-term, make certain that you have created and finalized a business plan and strategy. Now the business plan doesn't need to be a Fortune 500 level plan, but it does need to be in place.
After you have all your preliminary plans in place, then it's time to take a hard look at all the types of investments that exist for any willing and qualified real estate investor in Denver.
The first investment property that seems to appeal to many investors in Denver is a fix-n-flip. The initial excitement and interest comes from stories of big money made in fixing and flipping Denver real estate. For an investor just starting out doing a small fix-n-flip can be a good way to get your feet wet and put some extra cash into your pocket for doing more investing. That being said, the first thing to know about Denver's flip properties is that they require a lot of attention. Attention to small and large details. Typically, these types of properties are found in existing and well-established neighborhoods throughout Denver.
The reason for flipping properties in more mature Denver neighborhoods is that the history of sales in any particular neighborhood will in many ways determine your level of success. Fix-n-flip properties require the following criteria to make the investment experience a positive one.
First, purchase the property for well less than what other properties are selling for in total area. Buying below retail helps you to see the actual margin you may have for fix-ups and resale. Be sure to ask me to explain the age of the data and it's source to you.
Second criteria is what is the current appreciation rates in this Denver neighborhood. For example, if the home is in the area that is appreciating 1 - 2% per month and the location is extremely hot with people who "gotta live there," then you will have to add those percentages on to your anticipating resale of the property.
Last, I will analyze the recent SOLD comparables is also important to your projects overall success. Having a handle on the low, mid and high SOLD sales will help you to see where your property will realistically sell.
Knowing the number of days on the market for any given property will also help you build a strong business and financial plan. Days on market varies wildly between Denver neighborhoods and price points, so let me help you choose one that will sell fast. This data is often critical when you are borrowing money from a bank or mortgage company or when you are considering a private financial partner and need to build a strong business case to support this financial involvement.
Remodeling costs can make you or break you. First of all, evaluate all the areas that must be repaired or updated before ever selling the property. This is one area in particular, when people can lose their shirts from overdoing the fix-ups to running out of money and cutting corners to complete the project. All of these reasons can create a formula for disaster if you aren't careful. There are some great
contractors and companies to work with here in Denver, including great sources for materials and your homework and planning will really pay off.
The one area that new investors underestimate is the cost of lining out vs. doing the fix-up work themselves. While investors with construction trade experience have a leg up on the competition, many new investors are equally talented in other aspects of fixing and flipping properties. The bottom line is you must keep your own limitations before jumping into a fix-up project.
Last, but not least, you must determine your finance and resell costs. The cost of financing your project will impact the final outcome of your project. For example, you may get a great interest rate on your loan but it could cost you 1 - 2% extra points if the property is sold in less than 12 months. Or your loan rate may double if you aren't out of the project within 6 months. Basically, there are thousands of loan programs as there are investors, so before signing on the bottom line, make certain you understand the terms.
The last item to consider for your project is the costs of reselling the property. From realtor commissions to title insurance the fees are typically unavoidable. Go over every line of the net sheet I prepare for you and be aware of the cost of doing this business. To speak about your real estate investing goals; you can email your request to Marie@LocationInDenver.com or call me at (720) 275-3926.
Happy Investing! Marie
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