patrick.net

That violates the first law of common sense: if it were true then everyone would be doing it.

Second law of common sense: the first law is true only if everyone has common sense. :)

Knowing that debt != wealth isn't common sense. People have misunderstood personal finances for hundreds of years. Overcoming that ignorance requires education and/or government nannyship.

But people are surprisingly reactive to things that yield ca$h. If something pops up which appears to be making someone quick money with little effort and little to no (perceived) personal risk, then everyone quickly copies that. How do you think bubbles get started in the first place? All a bubble really is is a meme.

When you find something that seems to be an undiscovered/unknown way to make money just evaluate what barriers and risks exist. If the answer is none, then either you're the first person to ever have discovered it, so enjoy, and write a book. Or, more likely, you don't have all the necessary information.

Patrick,

the forum link on this page http://patrick.net/wp/ is broken.

Randy H Says:
April 27th, 2008 at 7:28 am
"There have to be some barriers, or else every single renter would fire off an email on their way out the door for the last time hoping to get a little payola. In reality no only does the infraction have to be large enough to pass muster, but you have to have some real evidence. Not just “he made me pay the water bill in his name” or “he bragged to me that he was a cheating sonofabitch”, but something tangible the IRS can use to start after him with high confidence they aren’t just playing bitter-renter-tool."

Well, you would have to know for sure. You can't accuse someone of a crime and hope that it is true. That in itself would be a crime.

On a different note, I'm pretty sure the picture is a Tumbleweed tiny house. Has anyone ever looked at their web site? The houses are fascinatingly tiny, but they also appear to be $400/sq.ft. and up. That's a pretty heft price when you're not including land.

Therein lies the problem. It would be a very rare case that a renter would know *for sure* that his landlord is cheating on taxes. I'm 99% sure mine is, but I have no hard evidence. Even the circumstantial evidence isn't all that deep if I look at it objectively.

The whole IRS bounty thing is really meant to entice whistleblowers to come forward with substantial transgressions. If the landlord manages 150 units and is using someone in his office to facilitate dodging taxes, then that person could go to the IRS with a few photocopies of documents and makes some $. If one of his tenants knows the same basic thing (because maybe the landlord is an idiot and blurted it out drunk one night at a BBQ in the apt. complex), and he goes to the IRS, he ain't getting bunkus for reward even if the guy gets taken down.

heft -> hefty

How about no plan at all and let the market sort itself out?

Just today I saw a priced to sell repo close at 60% off peak:

http://www.sdlookup.com/MLS-086024191-1341_Fern_St_San_Diego_CA_92102

People that can't afford houses should default so that those of us that *can* will be able to buy them. Banks that lend to people that can't afford to pay them back need to go out of business.

Dulce Maya is worried that she won't be able to squeeze by much longer. The 27-year-old restaurant manager bought a three-bedroom, two-bath house in Fontana for $350,000 two years ago with a $5,000 down payment and an adjustable-rate mortgage.

This year, her $2,300 monthly payment will probably rise to $3,300 and her work hours were recently cut because business is slow. Maya has asked her bank to lower her payments so she can keep her house, which is now valued at $200,000, and expects to hear back in the next few weeks. If it doesn't agree, she says, she may have no choice but to hand the bank the keys.

"I don't know what happens next," Maya said. "I may try and rent an apartment for around what I'm paying, but rents are going up too."

Kelly McAuliffe of Los Angeles can't believe how quickly she has gone from rushing to back-to-back business meetings to passing her days watching the Game Show Network and reruns of "Law & Order."

Since getting laid off from an online advertising company in February, the 34-year-old former sales director has stopped meeting friends for drinks and has pared her grocery list (less Whole Foods, more sales at Ralphs). She's scaling back her cellphone calls and where she drives because of rising gas prices.

To get by, she recently did the unthinkable: She borrowed money from her mother.

"It's hard to say it, but it's demeaning," said McAuliffe, who has had a handful of job interviews in the last month. "You work so long to make your parents proud, and this is the last thing you expect to be doing at my age."

Jason Liebrecht used to write about his motorcycle adventures on his blog. But since early this month, the 36-year-old San Diego computer software engineer's daily musings have been about a less thrilling new experience: unemployment.

"Do I find a job, or do I head to Central and South America on the motorcycle?" he wrote on Day 4. By Day 7, he had become more realistic: "So far in the last week I've made $1,245 off of EBay sales. Mostly stuff I wasn't using, or don't need much. Nice way to clean the house up!"

After selling some stock and applying for unemployment, Liebrecht figures he can pay his $2,300-a-month mortgage and other bills for just two months. When his company health insurance runs out in a few weeks, he'll go uncovered because he can't afford the premiums.

"You have to just hope you land on your feet," Liebrecht said in an interview.

Fannie warns homeowners who walk away
Kenneth Harney
Sunday, April 13, 2008

(04-13) 04:00 PDT Washington -- The country's two largest sources of mortgage money have a blunt warning for anyone thinking about joining the growing "walkaway" trend, where homeowners stop making payments and months later send the house keys back to their lender: You will feel the pain.

On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition is for three years.

Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680.

Freddie Mac, Fannie's rival, counts foreclosures as major credit blots for seven years, and a senior official said the company is now aggressively pursuing some walkaway borrowers "to preserve our deficiency rights" where permitted under state law.

The walkaway trend is particularly noteworthy in former housing boom markets - including California, Florida and Nevada - where many homeowners find themselves upside down on their loans, owing tens of thousands more than the current market value of their houses. If they invested little or nothing in down payments, some owners reason, continuing to make payments - even if they can afford to - may be throwing good money after bad.

Home is where the heartache lies

TO AMERICAN home owners there are two lines on the graph that represents the biggest investment of their life: one heading north, the other on its way south.

The former represents the monthly mortgage payment, rising and rising, thanks to the terms of the adjustable rate mortgage that looked so enticing with its low initial interest rate when it was signed three or five years ago. Now the rate is indeed adjusting.

The other line is the value of the property. It can be either the family home or an investment property. Its price is falling. The point where those lines intersect and then head in opposite directions is known as negative equity, when a mortgage has a higher value than the house it helped pay for. If a graphic history of early 21st century America could be drawn, this place would be the graveyard.

Depending on where you are in California, say, or Florida, or even Kansas City, that fall can look like a plunge. In mega-rich Santa Barbara county, just north of Los Angeles, housing prices fell 46 per cent last year. Discounts of $US200,000 to $US400,000 ($216,800 to $433,700) can now be had on former million-dollar houses in Kansas City.

These numbers are dire, but only the beginning.

Has anyone been reading the CNN Money series on America's Money: In their own words? Some of these folks have unfortunate tales, but there are so many where I just wonder what the hell people were thinking.

Sherry Kostenko: Starting over at 40
Stay-at-home mom, 40, Apopka, Fla.

We bought a home in Orlando, Fla., in February 2005, the height of the boom here. At the time, we could afford the home, the taxes and the insurance. It would be tight but we kept planning on "the bonus" or "the raise."

We got all caught up in the "square footage" of the home. Well, what we didn't realize was that with our BIG HOUSE comes BIG EVERYTHING! Big taxes, big insurance, big water bills, big electric bills. The anxiety at the end of the month caused health problems for both my husband, Victor, and I.

Last summer, we realized that we could not live like this any longer. We could not afford our home, we were prisoners of our mortgage. We couldn't enjoy life outside the house. We were literally trapped.

We decided to "downsize" our life, our lifestyle and our home. It was a lot of soul searching but we both realized that it's not all about "square footage" or bedrooms or full baths. It's about being able to afford a mortgage (and all the add-ons) and still have money at the end of the month.

Now, our timing could not be worse of course, for putting the big house on the market. We built a much smaller house, ranch style and I love it! My first electric bill was a third of what it used to be. Yes, we still have the big house, but we were able to rent it out and cover expenses.

We are not making a dime on the rental, and when the market comes back, we will put it back up to sell. We wiped out Victor's 401(k) to pay off debt and put a down payment on the new house. We have established a savings account and there is actually money left over at the end of the month....whew!

Yeah, the Kostenkos made me want to stick knitting needles in my eyes. So they're basically hosed on the first house, so they empty the 401(k) to put a downpayment on a second house?!? Oh, but it's smaller!

Maybe they could have rented the huge house, and then rented a smaller house themselves? How hard could it be to find in Florida, of all places?

Randy, do you think your landlord is making money? It seemed that you had negotiated a pretty sweet deal when we were talking about it a while back. Are you still in the same place?

PermaRenter, we were talking about that same article a couple of threads back. Funny as hell. The take away was that basically the sternest warning the government can give is that if you stick it to your bank now you will be subject to normal and reasonable lending standards in five years. You know, when it is all going to repeat itself again. LOL
What a world what a world.

malcolm

Yes, he's making money. He has a low cost basis. He built the house himself on an undeveloped lot in the early 90s.

My only worry is whether he's loaded it up with funny money mortgage since. But if he got foreclosed I'd consider it a blessing so I could be forced to find a nicer place to live. I really hate this frickin McCrapsion. Worst designed house ever.

I'm learning secondhand how foreclosures affect renters. We know a couple going through it right now. It turns out, at least in California that banks have to do certain things when there is a lease involved. As I find out more details I'm going to pass them along. I find it pretty interesting since we've talked about it and tried to research it. I may have mentioned it before, but didn't expect to find out that the bank has to give them this much notice, or do this or that.

So you suspect he is having some financial problems. From what you are saying that would be a real waste. It is unbelievable how people that far ahead in the game manage to screw themselves up. There's just no reason, unless something tragic happened. Companies are still advertising mortgages to go on a vacation.

Are you looking to rent somewhere else or are you going to wait for the first notice to be nailed to the door before you start?

We're looking to buy soon. We've been actively writing lowball offers again after along lull. Unlike a year ago, this time we're getting serious counter offers. None good enough to consider yet. But getting closer.

We're also going to try doing a couple short sales and/or auction bids. We had to break down and bring on an agent to access the whole "private market" in Marin. There is a huge inventory of "off market", "pocket listing" and "private deals". Only an insider agent gets you access. But this guy is good and he's very positive on REO, short sales, and auctions. So we're actively involved in all that.

It's a real pain in the ass because it eats up so much time. Unfortunately, renting has been a serious burden given our circumstances the past 3 years. I had to move mom back east with other relatives as her situation degenerated so she can't climb stairs any longer (but like most of her generation would rather sit stranded on the stairwell half a day than admit she needs help).

So now we're stuck trying to lead the market pricing mechanism by getting involved in the more aggressive side of potential deals. Currently, my best bragging point is an offer we wrote for $550K less than the previous owners paid in 2005, during a feeding frenzy overbid which they "won" by overbidding $200K. They countered ... at $300K less than they paid! But I need that other quarter mil or else they can choke on their mortgage.

Good luck with your offers.
I know it's tough watching parents age. My mom has been drinking 'Mone Ve'sp? which my sister sells, and it seems to have really helped her out. I think there may be something to some of these natural remedies.