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CDon

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Registered Mar 08, 2012

CDon's most recent comments:

  • On Tue, 14 Apr 2015, 10:31am PDT in TARP: Saved the economy and earned a profit while doing so, CDon said:

    mell says

    No matter what you want it to be, you are wrong here. A house delivers a certain expected value to the buyer, and of course things like location and climate etc. and trends are subjective and can make the price fluctuate quite a bit. However if you sell a house that has some known defects (not up to code or faulty plumbing, electric wiring etc.) that you know will cause problems down the road or even render it uninhabitable until fixed, and you don't disclose it and there's proof (you boasting about selling the faulty unit), then you committed clear cut fraud, exactly what the TBTFs did when they boasted selling that "crap" in emails and indicating that it will blow up. That's clear cut fraud, no wiggle room whatsoever.

    Sorry but this is absolutely and emphatically wrong. The entire principle known even amongst lay people as "Caveat Emptor" or Buyer Beware came about due to these situations. The general rule is that a buyer cannot recover against a seller for some material defect that renders some property uninhabitable, be it known or unknown. The only exception in common law was where the seller took steps to conceal the defect (i.e. painting over a rotten moldy section of drywall) such that the buyer could not know - AKA Fraudulent Concealment.

    Granted, in some states, there may be some consumer protection statute that modifies the common law, and I believe there is an implied warranty of fitness (primarily in new home sales) - but that applies to residential real estate as the legislature deemed this to be a matter of public policy. But again, the common law which was the case for nearly 1,000 years, and still is in most situations is,if you dont due your own due diligence prior to purchase, thats your problem, not the sellers. IOW, buyer beware.

    In my state, I could sell my house that I knew had serious mold issues, and not say a word to the buyer about it. Then, post sale, I could knock on the door, point and laugh in his face saying "I knew it and didn't tell you" and there is not a single legal remedy in the world available to him - this I promise you. However, had I first painted over the mold issue such that he could not find out until the sale was over, and then I laughed and pointed at him saying "I painted over it", I would lose bigtime as I now had the necessary scienter to be subject to a claim of fraud.

  • On Tue, 14 Apr 2015, 9:03am PDT in TARP: Saved the economy and earned a profit while doing so, CDon said:

    mell says

    That's where you go wrong - it is immaterial what the agencies said, if you deem your product inferior/broken/a lemon it is fraud. If they hadn't found those emails, then prosecution would have been difficult if not impossible. But they did.

    The word "fraud" is one of those emotionally charged words (similar to "greed" or perhaps "crony capitalism") that people like to throw about, but unlike the latter it has a very specific legal definition that is (for good reason) very difficult to meet. This is especially so in 10b5 or similar securities cases where scienter is a critical element of fraud. http://en.wikipedia.org/wiki/Scienter

    If an email where one person boasted of how they dumped some toxic investment on another was tatamount to fraud, half of Patnet would be guilty when in 2006 they sold their shacks to some fool/knifecatcher because the "knew" that the market was overvalued and destined for a huge plunge. Contrast this with an email say from Jeff Skilling when he specifically instructed Enron's accountants to set up SPV for no reason other than to get certain transactions off the books - GAAP be damned. The point being, even if you are proven wrong or don't know what the hell you are doing when you sell something, that is not the same thing as (a) knowing what the problem is and (b) then taking specific, calculated actions to make sure that the counterparty cannot find out about it

    No matter how much people want it to be, a difference of opinion or any asymmetry of information does not constitute "fraud". In 2008 a landowner boasts about selling his Texas ranch land to "some idiot oilman who significantly overpaid". The seller neglects to tell them that 10 years earlier oil geologists came through and found the deposits unrecoverable/worthless - so he laughs and laughs about how he screwed those oil guys. Meanwhile, the buyer neglects to mention he is going to utilize hydraulic fracturing to attempt recover the previously believed "unrecoverable" oil. It works and in so doing, raises the value of all adjacent landlowners by 100X. Here, whether negligently or even intentionally, both parties withheld/failed to reveal material information from the other, yet under no set of circumstances did either party have the necessary indication of scienter in order to constitute actionable fraud.

  • On Wed, 1 Apr 2015, 4:28pm PDT in Total Disaster Lists for $799K, Sells for $1.21M in Outer Sunset, CDon said:

    That house is a perfect example of how Patrick's price to rent calculator was so horrendously flawed. That place is such a shithole, the "rental analysis" suggests it is worth 300K or less. Thus he would use that value to say that the place was terribly overvalued at 800K and due to crash. Yet, anyone not beholden to an ill fitting calculator would see that the value is 100% in the land and thus in no way due for a price crash. If anything that place would be more valuable if it were just a bare strip of waterview (i.e. rent value $0) with no house on it whatsoever - thereby saving the buyer the 10K cost of demolishing it & hauling it away.

    In any event, I am glad he eventually woke up and god rid of that well intentioned but so flawed calculator that caused far more harm than good for all those who didn't understand why it would never work in areas like the peninsula.

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