December 18, 2005

A good scam - another classic sign of a bubble top: Neighbors suspect scam in home sales


Ah, you just can't beat some good corruption and scams when it comes to identifying the top of a bubble period. Classic.

Enron, Worldcom, Tyco followed by Mortgage Fraud, Toll Brothers insider selling and now this little story of a classic pump and dump (with loans going unpaid) scam


Alan Baugh's curiosity was piqued when the one-story, four-bedroom, three-bath home down the street sold quickly for far more than he thought it was worth.

The county taxed it at a value of $260,000, and the owners originally asked for $319,000, but it sold for $390,000 within a month of going on the market and remained vacant for months.

At least four other homes on a three-block stretch of Mr. Baugh's street in Prestonwood Estates have similar stories. The area has become either one of the hottest zones for eager investors or ground zero for a well-oiled mortgage fraud scheme.

Which one it is depends on whom you ask.

"In my mind, this is organized crime – with buyers, sellers and real estate professionals all cooperating with each other," said Mr. Baugh, a mortgage banker.

10 comments:

000000000000000000000000000000000000 said...

There is a condo development across the street from me that sold out 6 units at 1.2M each. I understand that 2 units were bought by the same man as an investment. Another unit was owner occupied then abandon with no for sale sign. A friend of the families in-law bought another, lived in it, hated it, and moved out and moved his mother in. No one lives in this place and I wouldn’t live there for the property taxes. This would sure put a crimp in my disposable.

keith said...

how much would such a condo rent for (the $1.2m place)?

000000000000000000000000000000000000 said...

Under $1700

keith said...

Payment on $1.2 million $7,165 at 6%. Add say $600 a month in taxes and insurance, and $600 in condo fees. That's $9,300 a month.

And you're thinking say $2,000 on the high side in monthly rent? Ok, go nuts, say $3,000 in rent. We're still not in the ballpark.

Houston, we have a problem.

Is the whole world smoking crack? Has everyone lost their freaking mind? Are there no sane people left?

Amazing.

I see examples like this all over the place too.

000000000000000000000000000000000000 said...

Keith...
$600 in condo fees, yes.
Taxes in Pasadena are California 1.1% $1100 a month.
I have a friend in a better unit up the street at $1700. There are units in the neighborhood for $3000 but they are gorgeous historic Spanish courtyard townhouses packed with wrought iron and tile.

Thanks for mentioning crack. The entire high desert and central California valley are the methamphetamine manufacturing and abuse centers of the nation. Many investors have bought second homes or moved to these areas without understanding what they are getting into. These outlying areas will be hardest hit if income shrinks and jobs get scarce. People will move closer to the city for work. There are just no jobs to support the new prices out in the country.
This is based on my experience. In the past I have spent based on future expectations. I have not saved, dined at fine restauraunts, bought flashy cars,etc. This was a big part of my downfall in the last crash. I remember looking back and wishing I had some of the money I wasted.

keith said...

oh, think of the money the american consumer will wish they could have back (that they took out of the housing atm)

Those h2 hummers, the tiffany necklaces, heck, even the trash from china at wal-mart

in 2007, they'll wish they could return it all and get the cash back

and they'll miss the wealth effect of bragging to the neighbors about the $500,000 gain on their house, as it's back to where they started

it's soooooooooo 2001 all over again

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