Friday Links
Flushing Avenue. Photo by dannythefox. United Homes Suckers Bed Stuy Mom [NY Daily News] Fire Guts House at 663 Rugby Road [WNBC] Richard Rogers Wins Pritzker [Gothamist] Karl Fischer Row is Coming Along…Slowly [Curbed] How To Stain Wood [Charles & Hudson] How to Free Pocket Shutters [Forum]

Flushing Avenue. Photo by dannythefox.
United Homes Suckers Bed Stuy Mom [NY Daily News]
Fire Guts House at 663 Rugby Road [WNBC]
Richard Rogers Wins Pritzker [Gothamist]
Karl Fischer Row is Coming Along…Slowly [Curbed]
How To Stain Wood [Charles & Hudson]
How to Free Pocket Shutters [Forum]
brktwo, it really happens that way…I couldn’t bring myself to attempt to describe that particular scenario because I didn’t think that anyone would understand…also it runs the risk of being labelled a conspiracy theorist or a weeping, wailing, hapless victim…but what else is new…we who live in the ghetto are far too familiar with the practices of these shady developers…and suddenly, in walks mr. cynical who spends an entire essay arguing that the victims are all village idiots and he is even generous enough to dispense a line or two quietly rebuking the con artists.
Anon 4:23 PM, they did buy with a ‘price’ in mind. The verbal terms ran along the lines of a $1400/mth mortgage payment. That, is a price. The remaining terms of the contract can be easily obfuscated when you have an in-house lawyer attending to the deal (“why bother your pretty little head, let us do all the work and all the worrying for you; these are all minor details, what you should care about is the fact that I’m getting you into this beautiful new home for only $1400/mth”).
Mr. cynical, I agree, the buyers should have gotten their own lawyers. But when you’re facing a big decision and you’re overwhelmed (not to mention gullible and trusting), it’s often easier to go with what’s presented before you on the table.
I even faced a difficult time finding a lawyer for the last property that I closed on (who can I find that is competent? who can I find that is knowledgeable? who can I find that can represent my best interest in this purchase?). Unless you’re given a glowing referral to a real estate lawyer, the prospect of picking out a good one from the yellow pages can be very harrowing.
Thanks for that very vivid description of what goes on brktwo.
Well JEEZ.
They didn’t mention ANY of that in the article. Like I said, they really are quite the gold standard of news organizations, that NY Post, aren’t they?
Maybe if the NY Post were reporting on scams like the one you’re describing, they would get more sympathy.
You’re obviously doing a better job than the Post at making us aware of the shady practices of these scam artists!
It still doesn’t change the fact that the buyer in the article (AKA Jack, in your example) is an idiot for buying the house in the first place.
And going backwards up your progression, Laura is also an idiot for the exact same reasons – not reading the fine print in a $700K transaction is just stupid. Nobody is MAKING her sign the contract. She is doing that of her own volition.
Not to mention, as shady as their practices are, if Bob were headed for foreclosure in the first place, he would have lost the house regardless and would have been in the same scenario and they could have still bought it for $100K on the auction block.
The tenant I REALLY have no sympathy for… he’s the reason for Bob’s troubles in the first place. That bastard.
Poor Bob.
I’m not saying it’s not illegal or unethical. I’m saying that Jack (and Laura? didn’t say if she knew the sale price) are total idiots for buying a place without knowing how much they’re spending.
And I’m also saying if Jack can find a lawyer to sue the developer now (and Fannie Mae… and Credit Suisse Boston… and everyone under the sun… as long as they have a LOT of money) – when he’s in foreclosure as well and has got no money left — how come he couldn’t find a lawyer when he bought the house in the first place?
So they found a uninformed desperate owner, lets call him Bob with a house worth $500K headed to foreclosure. Bob only has $100K mortgage left but for whatever reason he can’t make the payments. Most often I find this happens to elderly people who have a bad (really awful) non- paying tenants.
They promise Bob $300K cash with a quick close. They set Bob up with their “in house†attorney who of course allows Bob to enter into a ruthless contract.
As if ripping Bob off for the $200K wasn’t enough… no it is not enough.
The contract that Bob signs contains an assignment clause that includes the right of entry and no provision regarding an actual time frame to close.
So they don’t actually close in the 30 days they promised, rather they simply tie Bob up in a contract while the property gets closer and closer to foreclosure.
While they hold the contract they try to flip it to some unwitting buyer for $500K. If they fail to find this buyer they simply let the property go to the auction table and then buy it for $100K…. Guess who got nothing! Bob.
So Bob’s homeless and penniless and they now bought the $500K house for a mere $100K.
They have another house they swindled down the road and they decide to extract money from it. That house, House B is worth $350K… But they call in their in house appraiser (probably the same one who produced an official looking report for Bob explaining how his house was worth $300K instead of $500K)… and so presto.. the $350K house is actually appraised for $550K. They pull $200K un-backed fraud dollars out of house B.
They put $175K of the $200K into their personal bank account as profit and spend the other $25K “renovated†(that’s just enough money to hide all the un-renovated things.. like plumbing, electric etc..).
Oh- and they will have to get rid of that pesky tenant (who really is a slime ball.. so in some ways it is hard to sympathize but it is illegal nonetheless…). Some of the “creative†ways I have seen this handled is brute force and intimidation, trades for drugs, threats, cuts to utilities… which really are already almost not working anyway.. and pittance pay offs.
So they have thrown out the tenant and patched up Bob’s house with $25K. And now Bob’s $500K house is officially on the market for $700K… A fully renovated “dream homeâ€. And you the buyer.. lets say Laura can use their appraiser, their lawyer, their engineer to close the deal. Actually… to get such an amazing dream home you MUST use their wonderful “in house†team.
You know Laura.. this is such a good deal just $5 a month.. she really needs to move on it and sign a 30 day “time is of essence contractâ€
But you know.. their very special wonderful “in house†mortgage broker… can’t actually close the deal in 30 days.. so Laura looses her $70K deposit.
So they still own this $500K house dressed up as a $700K house that’s still on the market. And they find a new buyer, Jack.. and maybe Jackson manages to close in 30 days.. or eventually someone does.
And this is actually the starting point of this news story… they convinced Jack he would only have to pay $1000/month… but of course on a flex rate and very quickly the interest is 15% and the monthly payment is $8000. That interest goes of course to their “in house†mortgage bank (uhm.. their personal bank accounts). Jack also thought he bought a totally renovated house only to find that it is a rat infested shit hole with brand new sheets rock.
Who could argue that this gang ring is not illegal?
I have to side with the first poster on this one. Educated or not, only a moron would buy a home without even knowing what the price of it is. There’s a reason why con men will always have plenty of work in this world.
Here’s the difference; if you lose your car you can get a $2 metro card and still get where you need to go. If you lose your house it is not likely that you have an extra $2,000 to $3,000 lying around to get into a rental or if you can now be accepted as a renter after having your credit decimated by a foreclosure. Homelessness is a real possibility and that doesn’t just affect the person losing their home it affects everyone in the community.
Actually, that’s why I mentioned a Hummer H2. So it’s more like tangerines and oranges than apples and oranges. On paper, the biggest difference between a $395,000 house and a $100,000 automobile is that the former has the potential to increase in value, while the latter generally is a losing battle in the value department. Either one can bankrupt a person living on the edge financially and by point of reference, there are a LOT of brand new hummers in neighborhoods like BedStuy, Bushwick and East New York.
And you’re acknowledging my whole point – it’s the same principle but for some reason, nobody views the car thing as “predatory” despite the collusion between dealers, lenders, their marketing departments and the media as a whole (there’s a reason why Pimp My Ride has so much more cultural resonance than MTV Cribs).
People turn their nose up at conspicuous consumption when it’s something like a car but when it’s a house, it’s never the buyer’s fault, rather they are a victim???
Give me a break. Sure there are deceptive practices in the real estate industry, but there’s a reason the phrase “caeat emptor” is so often repeated on this blog.
I think what distinguishes United Homes from other one-stop real estate companies (e.g., Toll Brothers) is the fact that they use sub-prime loans as a way to aggressively market their properties to people who can’t afford them. And there’s very little disclosure until it’s too late in the game.
Yeah, the car leasing game is also a little suspect. But you’re comparing a $30,000 vehicle to a $650,000 house. The principles are the same (i.e., hiding the real costs) but it’s a bit like comparing apples to oranges.
they tend to market to people who have bad/poor credit rating and low income who wouldn’t have an opportunity to get into a home otherwise. these are some of the signs of predatory lending.
I agree and already acknowledged that the United Homes people violated some laws and certainly the trust of the buyer, but my point is that the buyer was ignorant (which isn’t neccessarily their fault) and got themself in over their head (is their fault).
First thing I said was that United Homes is “shady”, but the world is full of shady business deals. Car companies do the same thing – offer you the keys to a new Hummer with the promise that you too can drive one for only $399 a month. Never mind that it’s a lease. And never mind that if you DO buy the H2, it looses 50% of it’s value the second it leaves the lot. No car dealer will offer this information, even though it’s would be very much in the buyer’s interest.
United Homes was the seller in the transaction and was not in any way representing the buyer. They don’t have any obligation to represent the buyer’s interests, other than in whatever ways the law dictates. If they had a responsibilty to the buyers to represent their best interest, they would offer the house for free, as that’s surely more in any buyer’s interest than paying hundreds of thousands of dollars. But that ain’t the case.
Now, whether the lawyer “representing” the buyer was at fault is another issue. However, the buyer agreed to let this person represent them. Did the lawyer force her at gunpoint to sign a power of attorney? How did she think the new lawyer got her info? Maybe Santa Claus or the Tooth Fairy gave it to him. Right.
Again, I point out that although she couldn’t find a lawyer to represent her in the biggest purchase of her life, she sure was able to find one to sue them (and Fannie Mae).
The buyer in ANY transaction has a responsibility to understand what they’re getting themself into. It behooves them especially when the transaction is for something many times their net worth.
Real estate is an extremely confusing, blindingly fast business – I mirror the comment above about the confusion of what goes on at closing – but there’s mild ignorance (we can’t all be real estate lawyers or we wouldn’t have to hire them) and then there’s GROSS IG-NOR-ANCE and we’re talking about the latter here.
Kudos to you for not getting drawn in by their sales pitch. Too bad this buyer didn’t use some common sense.