patrick.net

This whole thing was a great lesson in psycology more than finance.

The market is 99.5% psychology and 0.5% data-entry error.

Not investment advice

Friends don’t like friends making them feel like fools.

It is possible to exaggerate without being apparent. For instance, you can come up investment ideas that will never work. The idea is to program them subconsciously.

George,

In short it looks to me like the RE community is getting very creative in an effort to unload alot of this inventory before it becomes too obvious. Have you seen or looked into any "rent to own" or "lease with option" programs in your area? It seems to me as though the people that run these are often not even realtors and are more trying to cash in on the sellers desperation than the buyers desperation. I'm sure their pitch to Mr. Specuvestor goes something like this; "Look, houses just aren't moving right now". "This ensures that you are going to have a renter paying some or most of your monthly costs without you winding up with a foreclosure on your credit report". "Hopefully by then the bubble will have re-inflated and you'll be able to break even or who knows, maybe even make a profit, but you don't want a foreclosure on your credit or your specuvestor days are over". "We'll handle the credit report and rent collection so sign here".

The "overvaled" blog put it best;

I'm considering two investment opportunities and can't decide which!

1. A 1.6 mil. property that generates about 1/3 of my monthly obligation or;

2. This e-mail I rec'd from a guy in Nigeria that needs me to send him money so he can "unlock" his deposed father's considerable wealth.

Along those lines?

I’m considering two investment opportunities and can’t decide which!

I think donating 1.6M to a great cause would be a better investment. At least you would get good karma.

SF Dean,

When first introduced these had "premium" payments that as near as I can figure were the amount the "owner" was behind on HIS payments. You can weed those guys out fairly quickly. It didn't work. Now the "premiums" are gone and there are some that offer "zero down, zero deposit" so you would just have to come up with 1 months rent. So, cheaper than renting and w/option and I empasize option to buy. I stumbled on them while checking out Las Vegas for a friend but now I'm seeing them up here in Portland and of course they portray this as a win/win situation. If the "owner" goes belly up then fine, you would deal w/the lender directly without having to compete with all of the bottom feeders.

Friends ? Oh friends. Once they get married, they want you to be married too. Once they buy houses, they want you to buy a house too.

I have been an outcast - non-conformist, who has refused to buy, no matter how much brain-washing is forced on me. I knew long ago, that taking even a slightly negative position would not be productive. So I have been using "I cannot afford it" line for ages now. I have not tried to convert anyone. It's their money.

BTW, psychology is changing. Slowly, and definitely. Now when I say, "I can wait, the prices are unlikely to go up", only half the time I get "What a fool" look.

So I have been using “I cannot afford it” line for ages now. I have not tried to convert anyone. It’s their money.

If you say "I cannot afford it", you friend may be able find a way for you to "afford" it.

I found that the best response is: I do not know what I want. :)

George,

Like I say, when I first started to notice these "programs" sprout up like mushrooms I had to call these guys just so I could laugh in their face! Oh, wait a minute, let me see here? You have a specuvestor that's on the verge of going under so you want ME to come up with 10-12K to cover his arrears and then pay a PREMIUM on top of that? Well, maybe this isn't for you! Fast forward 5-6 months and my how things have changed! The promoters have realized (I believe) that there is no helping the guys that are ALREADY behind on payments so now they have tweaked the business model to appeal to more solvent investors that have the resources to ride out a down turn in the market. The guys that were offering the homes w/downs and premiums probably now represent the lenders.

I went to the IndianMexiArab place last night. The curry-taboulli-burrito was amazing. I was a bit concerned that the server was missing his right hand though.

Peter P said :
If you say “I cannot afford it”, you friend may be able find a way for you to “afford” it.

That does happen from time to time. The bring in "how much a month" formula. Then I say, "I don't know, I am just scared of such a big commitment". And I am not lying ! (I mean for this kind of debt, I was very fast to commit myself to a nice girl long time ago, and very happy about it)

Once, I did slip it through. "It's not how much I pay a month, but what my total liability is". Only once. Well, I am just a human being.

guys, gold on the move again, let's see if it can break the resistance level to advance beyond 580 this time.

If gold breaks 850, the historical high not adjusted for CPI, yet still a very important psychological barrier, the sky is the limit.

SF Dean,

I'm not stumping for the guys that offer these types of programs and like George I probably trust them as far as I could throw them. However, it is they that are driven by desperation, not me! Take the contract to an attorney or realtor that you've known for years. Have them go over it with a fine tooth comb! Do the research in your area as this thing seems to be "morphing" at different rates in different places. When I first noticed them in Las Vegas the promoters (which is what they are) came off as real arrogant but I showed them that their model was defective. Most people that come come up with 10-12K in cash, short notice don't have credit problems. As with everything in life, it's negotiable so talk to these guys and work em' hard.

So now that we want to get back to discuss housing, let me try to raise my question again, which presumably was drowned in racist rants.

Why is the mortgage rate tied - somehow - to US trasury bond ? In terms of risk an MBS is as far away from US Treasury as stock of GE to GOOG. So a buyer would demand completely different risk premiums on both. Just because US Trasury seem more safe on a given day, does not mean that writing a new mortgage is safer.

So even if the yield on 10 year treasure does not move, the mortgage rate can increase substantially.

(This may be a good time for the more informed folks to suggest a free web based primer on bonds)

George,

but that woman is stupid after all, she has to bear the burden of owner financing. You get a good number on paper, but can you collect it?? What if the buyer breaks down financially and cannot keep up the payment going foward? She thinks the buyer is going to keep paying her come hell or high water? Plus USD is a depreciating currency, why do I want to get locked up in a 30-year annuity in USD? I would rather take a smaller amount today, and exchange the USD into something else to diversify. I don't know about 3 years down the road, I know for sure 20 years down the road whatever 1000 USD monthly payment I am going to receive from this buyer is worth nothing.

This woman is what I call too smart by a half, losing sight of the big picture but focusing on irrelevant gains in the ultra-short term.

SF Dean,

I believe that one of the most pivotal aspects of this arrangement is to get them to agree to an average of three appraisals at the END of the lease. NOT today's price. That is ridiculous b/c even the original purchaser and lender had no guarantee as to where the price would be 12-24-36 months down the road. If the are looking for guaranteed prices into the future they need to buy something government backed!

SFWoman,

here is a good website for your debt question
http://mwhodges.home.att.net/debt.htm

Not updated through 2006 yet, so the picture is a lot nicer than it actually is today.

George,

I have to agree for the most part, but we don't know the "landlords" resolve until we test it! If the terms aren't to your liking keep looking, but we won't know their level of desperation until we test it. How many times over the last several months have we read stories where sellers were insulted by offers and after months of getting NO offers asked the realtor to contact the very people that placed those oh so insulting offers!

For example, are women buying because they want to prove they can do it themselves, or are they more susceptible to the emotional pressure to buy? I think it’s a bit of both.

Are they buying one or multiple homes?

George,

I can appreciate that you may not have the same liberties that non-licensed people enjoy. I guess the way I would spin that is to just say, "Look, I'm just abiding by the terms of the contract and at the end of X number of months into the lease we do an appraisal and this is the numbers that THEY came up with". Beyond that I can't see how they can pin the crash on you! Unless that is if they already have your number!

I know a guy here who is half Indian ( father ) mother was white gal from Iowa. He is a really cool guy. He is an American, like me. He’s not here to scam my people and bring back a boatload of money to his home country. I don’t fucking care what his skin color is or how slanty his eyes are.

Shmend, I don't really want to get into another debate about this --that's kind of the point here. Regardless of what you may have originally meant (possibly in jest), some of your comments (and most of Sunnyvale_renter's) could easily be construed as anti-ethnic vs. anti-nationalist. If you didn't mean that, then fine, it's noted and let's move on.

I think it's also important to recognize that none of our ancestors started out as Americans (unless you're Native American), so everyone had to come from somewhere. I'm ok with immigration as long as new immigrants:

(a) abide by our laws / get in line with everyone else,
(b) work for a living & pay taxes (vs. gaming our welfare system), and
(c) show a willingness to respect and assimilate into American culture (vs. expecting Americans to adapt to their old culture)

show a willingness to respect and assimilate into American culture (vs. expecting Americans to adapt to their old culture)

Except food.

Peter P Said

show a willingness to respect and assimilate into American culture (vs. expecting Americans to adapt to their old culture)

Except food.

Both American Culture and Food is widely accepted by the neuvo-rich Indians in India. "Use and throw" sexual partnerships are increasing - shocking the conservative society, and McDonald's and Pizza Hut is popular beyond belief.

(Guys, I am being sarcastic in pointing this out, although what I say is true. Couldn't resist this cheap shot after the previous thread).

Fewlesh,

I'm pretty sure the lease will be honored (not tampered with) by the court, even in a bankruptcy judgement. What the court will do is change the Assignee. Residential leases come under contract law with some special treatments. These can vary widely by state and even county and city. Some cities will give lease holders quite a bit of protection.

What a court wouldn't be inclined to do is force a valid lease holder into a situation whereby they are facing eviction due to no fault of their own. Especially since evictions are a criminal thing, and stay on your record as such.

(in original legalese):

--

LANDLORD/TENANT; ASSIGNMENTS AND SUBLEASES; ASSUMING ASSIGNEE: Assignee that unequivocally assumes obligations of lease that is subject to leasehold mortgage remains liable on theory of privity of contract even when leasehold mortgage forecloses and transfers leasehold to others. Vallely Investments, L.P. v.

BancAmcerica Commercial Corporation, 106 Cal.Rptr.2d 689 (Cal. App. 2001)

I’m pretty sure the lease will be honored (not tampered with) by the court, even in a bankruptcy judgement.

Randy, are you sure this is true even if the mortgage agreement predates the lease agreement?

George,

Thanks, and I have thought about it. I'm no expert but my lay understanding of RE Law is that the contract is everything. What do I care if Mr. Specuvestor is up to his eyeballs and over leveraged? That is between him and his lender. Since you would be going through a 3rd. party to arrange the agreement I shouldn't be concerned about his having to write a check for 40K or 200K for that matter. The short sale would wind up on his credit report not mine.

I have a question regarding real estate listings. A unit in my building was on the market for quite a while. They pulled the listing yesterday and relisted it as a "hot new listing." There were no changes (price is the same, same agent). Are agents allowed to do this? Isn't it misleading to list a unit as new when in fact it has been on the market for over a month or so? I saw this sort of thing a lot last year as well. What's the deal?

Randy, are you sure this is true even if the mortgage agreement predates the lease agreement?

IANAL, so I can't be sure. But putting on my legal-channeling helmet (this thing sure hurts):

I would be extremely surprised if courts moved to shift a hardship to a party which could not have reasonably taken action to prevent their position in the situation. Courts are all about creating equity of justice. There would pretty clearly be no justice in punishing renters for the sins of speculative owners. I imagine this would be true so long as the renter did not in any way participate in or encourage the speculation. Perhaps leases with a purchase option would change the outcome.

I'd love to hear an actual lawyer's opinion. (Did I just say that? But seriously, this is exactly why we have lawyers). My direct advice to anyone caught in this situation would be DO NOT BE CHEAP, HIRE A GOOD LAWYER. I am pretty sure a decent lawyer would keep you from ending up on the street.

What’s the deal?

DEniAL.

There would pretty clearly be no justice in punishing renters for the sins of speculative owners.

How about the "sin" of being a jealous bitter renter? :)

George,

So long as the owner at the time had standing to enter into the lease agreement (this is probably what clever lawyers would argue about), the contract would be binding and survive foreclosure and bankruptcy. The court would just assign the lease contract to the new legal owner. The risks that the lender undertook were the obligation of the lender to understand, so long as no coercion or fraud took place. Even if the speculator/owner committed fraud, so long as they entered into a legal lease contract that contract would pass with the title.*

(No more pretending I'm a lawyer for the rest of the day.)

*I could be entirely wrong, but I'm sure enough I wouldn't lose any sleep over it.

Lunarpark,
I'm seeing stranger things then that. There is a house near my place that has been for sale since August. Sort of ugly, 60's bradybunch looking thing with a gravel garden out front for 675k. So far, it has been for sale 3 times, with three diffrent realtor companies. Each and every time, they put "coming soon!" on the sign( now century 21) and then it gets listed at the same price. The funny thing is that I met the couple that own it accidentally at my yard sale. They pull up in an old black Thuderbird( I own an old car too so I know em') anyhow, they were youngish early 30-something, as in too young to have had it that long, and probably just long enough to cash out. People are doing all sorts of tricks to make the false appearance of homes being sold like no tommorow. Open up the paper, they're ALL SOLD, or PENDING!, yet interestingly enough, half of the homes that were sold are actually from West Oakland..NOT Alameda. In small text on the real estate section, it shows that 6 homes sold.. a paltry amount, yet by seeing the screaming ads, you'd think all the houses in Alameda must be selling like hotcakes. I actually wrote to the paper about it, at which point they kindly published the letter, and told me they were working on it. We'll see.

“coming soon!” - yeah I saw a few of these while I was driving around last weekend. Oh how exciting, coming soon! Oh I can't wait!

I'm actually surprised the unit my building hasn't sold. It's priced to move and it's a remodel. I thought it would sell in a couple of weeks. Maybe we are finally running out of greater fools.

newsfreak,

Pure genius.

Someone wrote:

> I noticed lots of contributors describing the pressure they were
> under from their wifes to buy a nest for them.

Then SQT wrote:

> I read something recently that said the single largest demographic
> that bought homes in the last year were single women.
> But it brings up some interesting questions. For example,
> are women buying because they want to prove they can do
> it themselves, or are they more susceptible to the emotional
> pressure to buy? I think it’s a bit of both.

There is a growing number of women in America that bought in to the feminist "you can have it all" line. Millions of women over the past 20 years didn't "just want to be a wife" so they worked hard went to good schools, worked for a couple years while filling their free time with resume padding volunteer work to get in to good grad schools then hit the ground running in their careers trying to prove that they were as good as men. By the time that they were in their mid 30's they decided that they wanted kids and started looking for the perfect husband a tall good looking professional who is even more successful than they are. No one told these "have it all" gals that tall good looking successful guys in their late 30's that want to get married are not interested in hard working professionals their own age when they have their pick of the many hot looking former sorority girls in their late 20's that hang out at the Bay Club and Marina Cow Hollow bars. I know many of these gals (since married friends are always trying to det me up with them) who have decided to buy since they want to own "something" as they grow old alone with their cats...

Sure, in a standard lease. In a Lease-Purchase though (which DinOR and I were discussing), it becomes a different matter entirely, at least, I think it does.

Well, if the final exercise price is below the loan principal it is going to be a short-sale for the seller anyway, even if he does not default. In that case, you can simply walk away without exercising the option.

I would be extremely careful with any lease-purchase deal. It is full of traps for both sides. Consult a real estate lawyer.

George,

I stand corrected. I was getting confused by Fewlesh's question and yours and DinOR's conversation. A purchase option may well complicate things for the lease holder quite a bit.

What would be interesting is if the landlord insisted upon purchase options, and gave no non-option alternative to the lessee. Then, the court might still rule that the contract survives, and sever the option portion.

I am PC - who would want to buy a Mac these days???

Unless a lease with an option to purchase is recorded on title "superior" (aka before) the lender's note and dead of trust (or mortgage) it will be gone after a foreclosure (unless the new owner of the property decided to reaffirm it).

Anyone (other than a stupid mom & pop lender) will require any tenant with a lease recorded on title to execute a subordination letter before they make a loan.

I thnk women are buying at the peak of a bubble because of the 'panic' effect - they want to buy before the prices go up even more, and they are not inclined to be cool-headed and wait things out, due tot he real estate propaganda effect - and another study suggests women are more concerned about getting a home of their own than men. So this is the other recognised feeder into inflation, other than rampant speculation and exploitation - legitimate concerns to put a roof over your head with some social security... your fear feeds their greed feeds your fear feeds their greed... until the credit runs out...