Question: I saw an investment opportunity with a "properties" company and looked into it. They said I could get $5,000 per transaction and I was skeptical, but I pursued with it. Basically I would buy four properties and then land-contract it back to them. They would give me the $5,000 for using my credit to purchase the homes. They said they would be selling the properties in eight months to a year. I signed the loan applications on the four properties and when we were at the first closing, law enforcement came in and broke up the transaction.
They showed me some documents that had my signature but with false amounts of income, and said I owned rental properties. The law enforcement basically just questioned me and sent me on my way. They said I was in no trouble but was very close if we were to close on the properties ... . Looking back, I realize I was ignorant in my thinking.
My question is: With the loans not closing, are the loan applications still illegal or do they just destroy them? The police said to give them all the information I can and unless I was lying to them, I am okay. Is this true?
Answer: Judging from your letter, the loan applications will be retained as evidence by the police. As to whether you will be prosecuted, that will depend on a variety of facts and circumstances. You are best served by immediately sitting down with a qualified attorney to review the matter.
Consider some of the issues raised by your letter: If the investors are so successful, why do they need your credit? Was the lender told of the $5,000 payments you were to receive? Why would a lender finance properties that are to be quickly sold with land contracts, etc.?
No real estate deal is worth fighting off a SWAT team at closing. If something seems odd, questionable or too good to be true you can pretty much bet that something is unknown, unclear, somewhat wrong, largely wrong or totally wrong. In such situations before signing anything it makes sense to have your attorney review the entire transaction. If you're told there's no time, that a legal review is unnecessary or that your "partners" have a lawyer who can advise you, then it's time to say "no thanks" and leave.
Question: I have a nice home for sale for just under $500,000. It's been on the market for seven weeks. My broker says not to worry; that a typical broker might not come across a $500k buyer but about once or twice per year. What is a reasonable time for a home to be on the market?
Answer: Are you saying that most homes in your community have a substantially lower price? If yes, that's a concern because the usual "rule" is the buyers seek the least expensive home in the most expensive neighborhood they can afford.
How was the listing price developed for the property? If there are like properties that have sold in the $500,000 price range, how were they marketed? At this point it would be good to sit down with the broker, review the marketing plan and see if changes are needed.
As to what is "reasonable," that depends on the local market, interest rates, the time of year in some markets, the availability of competitive properties, etc.
Question: What are the advantages, if any, to buying the home I currently rent. I have checked the comps in the neighborhood and the asking price is in line with those similarly situated on my street and in the neighborhood.
While the owner has stated that he can refer me to an attorney, mortgage broker and a title company, I am concerned that these people may not have my best interests at heart as the buyer. I am definitely interested in buying the home as I have lived here for the past year. What are the advantages and pitfalls?
Answer: Buying a rental you now occupy is a huge advantage because you are entirely familiar with the home, the location, the neighbors -- and you don't have any cost to move.
The owner has offered to introduce you to an attorney, lender and title company. In the best circumstances, the owner may be honestly trying to help you acquire the home with professionals he knows and trusts.
Alternatively, buyers and sellers have an inherently adversarial relationship. A mistake can haunt you for many years. For this reason, you are best served by at least having your own attorney review all paperwork before signing. As to the lender and title company, let them compete for your business. If they offer the best deals, great. If not, go elsewhere -- but at least shop around.
Question: I have a lease that was signed in September 2002 with a monthly rent of $400. A hand-written article (17-b) says that as of September 30, 2003, the rent will be increased to $425 thereafter. I interpret this as meaning the rent will remain at $425 for an indefinite amount of time. My landlord now has sent me notice that my rent will increase to $450 as of September. Am I right?
Answer: No. What you have is a lease which does not continue eternally. The lender is saying that the lease can be renewed at a higher rental or that it will end.
You have been given several month's notice to stay or vacate. That is more than fair. Check around, see if something better is available -- otherwise $450 might be a good deal.
Question: Many consumers may feel wealthy because of rising home prices. Do you expect home prices to continue rising and is there any reason people should feel well-off due to the raising prices?
Answer: Owners frequently have good reason to feel wealthy because rising real estate values represent real wealth. U.S. homes, according to the Federal Reserve , have equity worth more than $11 trillion after all mortgages are paid off. That's a huge amount of money and those who have owned for a number of years typically have a good piece of that wealth. So yes, they should feel well-off.
As to where prices will go in the future, that's unknowable. What is known is this: People have to live somewhere, the population is expanding in many metro areas and construction is often depressed by excess regulation. Such realities suggest that many local markets -- but not all -- will see increasing values in the future. Alternatively, local employment downturns, rising interest rates, continuing federal deficits and massive trade imbalances suggest tough times ahead for parts of the housing market.
Question: I basically know nothing about real estate, but want to make a career out of this. Can you tell me how to start and where to start from.
Answer: Sure. Everyone starts at the beginning with little knowledge or experience. As a first step, speak with local brokers and take the basic pre-licensing course required in your state. Once you pass you will then qualify to take the sales license test. Get a license and you can start to work with a broker -- pick one who provides mentoring, consider working as an assistant to a successful salesperson and keep reading and taking classes.
Question: I have rental properties out of state which I manage myself. A neighbor near one rental complains all the time, mostly over-exaggerating. However, she is now telling me that she and other neighbors are pretty confident that my tenants are dealing in drugs. Her story is very compelling. The tenants have a one-year lease which is up in a few months.
My main concern is the safety of the neighbors, let alone mine. If this story is true I will most likely have to evict the tenants and sell the house. What can I do?
Answer: I'm not certain that either an eviction or sale will be necessary. For all anyone knows, the tenants may hate the place and would move next Tuesday if they could.
Accusations of drug dealing suggest serious legal issues -- see what property manager Clifford A. Hockley says about tenants and drugs .
However, if the accusations are wrong you could be unfairly denying the tenants an opportunity to continue the lease and the neighbor could be engaged in slander.
Have the tenants damaged the property in any way? Missed a payment? Threatened anyone? Have the neighbors called the police? Is that not the obvious choice if they believe their own reports?
It's difficult being a long-distance owner. In this situation, the best approach is to hire an experienced local manager for this particular property and require careful monitoring.
Have a real estate question? Send your inquiry to Ask RealtyTimes. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here .
This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.
