So, Have You Been Pitched To Invest In Detroit Real Estate Lately?

Unfortunately, my client from Ohio was so pitched and sadly did decide to invest.

A very sophisticated pitch, promising how to go about using your IRA funds to invest in Detroit area real estate to get a better return than the market.

Targeted at seniors with money - hence using funds from their IRAs to do the investments, and of course directed to those not from Michigan.

A very slick marketing pitch and glossy materials, a promise of a first place mortgage for their investment funds on property the pitcher will be rehabbing and flipping and a promise of a minimum 7% return.

The Bat Rastards knew their con well.

Any bets where this is going?

Yep, you guessed it, my clients got a mortgage all right - along with a lot of other investors on the same property.

The same property already being secured by an actual mortgage the scammers already got from a real financial institution which they and their shell company promptly defaulted on, taking their victim's money with them and leaving all of their victims with nothing but low-priority mortgages about to be wiped out by the bona-fide first place unpaid mortgage who was also ripped off by the scammers but at least have a first place mortgage on the home to try and recover on their loan.

Yep, these Bat Rastards are ripping off seniors' retirement savings.

Now to add insult to injury, my clients are pulled into a lawsuit by the actual mortgage co seeking to foreclose on the property for their not being paid on the real mortgage and to wipe out their lower priority mortgages.

This is not going to be pretty, and it's highly unlikely my clients will see any of their money back.

We will be getting law enforcement involved as its pretty clear fraud, but often times that unfortunately won't amount to much or law enforcement can't be bothered with somewhat complex financial scams.

So, if you're getting pitched to invest in real estate, especially in flipping houses outside of your immediate area (and even inside it for that matter), be very careful. If it sounds too good to be true, especially if it guarantees an income stream, then it most likely is too good to be true and you better go over it very carefully before deciding to invest even a penny.

Before You Build That Dream Home, Do Check Your Local Restrictions

Or this can happen:

The Detroit Free Press: Courts order demolition of $1.1 million Macomb County mansion built too close to property line

The Michigan Court of Appeals has told a couple they have to tear down all or part of their $1.1 million mansion because they built it too close to their property lines.

The order came in a lawsuit a neighboring couple filed in 2004 against Simon and Saca Palushaj over their 9,000-square-foot house in Macomb County’s Washington Township, 25 miles north of Detroit.

Tuesday’s unanimous ruling acknowledged the extreme nature of the resolution and encouraged a compromise, according to The Macomb Daily of Mount Clemens.

The Palushajs messed this one up quite nicely. Not only did they thumb their nose at the restriction, but they began building after the lawsuit seeking to prevent the house from being built in violation of the restrictions was filed against them.

It's rather hard to have a lot of sympathy when they were clearly on notice that they were in violation of the deed restriction before they proceeded with construction. Had their neighbor waited until after it was built to file or complaint there might be a bit more sympathy for them, but not with this chronology.

Now it looks like their house is going to undergo some radical restructuring or they're going to have to buy off their neighbor with some considerable compensation in order to keep the house as-is.

Livonia's great new revenue idea - Let's have a tax to pay for collecting a tax!

Really, Livonia's city government proposes to levy a tax to pay for the costs of collecting a tax.
The Detroit Free Press: Livonia mulling 1% fee on taxes

Livonia might charge its residents a 1% administrative fee to collect their property taxes, beginning with the December tax bill.

The city is considering the fee as part of efforts to deal with a substantial drop in revenue expected in its proposed $48.4-million budget for the next fiscal year. The council is holding a public hearing tonight, and is expected to vote on the proposed budget, which includes the fee, Oct. 20.

If the council chooses to charge its residents to collect, process and distribute their taxes -- an option permitted by state law -- Livonia would not be alone. Terry Stanton, spokesman for the Michigan Treasury Department, said more than three-quarters of the 1,800 tax-collecting units in the state charge the administrative fee.

Of course there are many new-speak proponents of the idea:

Anthony Minghine, associate executive director and chief operating officer of the Michigan Municipal League, said charging residents for tax collection makes sense because the fee pays for a service.

"I wouldn't characterize them as taxes, and I wouldn't characterize them as inappropriate," he said.

So the fee is for a service according to Minghine.

It is quite an interesting definition of service considering it doesn't benefit the residents who are being dubiously charged for and receiving this "service". The residents are having more money taken away from them in return for the service of having money being taken away from them. To a proponent of ever-expanding government, this does make perfect sense and is considered a service in bureaucrat-speak. Heck, he probably honestly believes that the 1% surtax is a wonderful service that is being offered to the grateful peasants.

But the residents of Livonia will likely consider themselves ill-served by this new "service".

Nice Scam You Got There Nigerian.

You know of the typical Nigerian Internet Fraud scams right? The emails promising you money, saying you won an international lottery, or claims there's a wire transfer or package just waiting for you to accept, etc.

Well there's a new one making the rounds.

The fraudsters are copying ads of homes for rent from Realcomp.com, then posting them on craigslist at a ridiculously below market price for rent. Then of course the sucker responds to the advertisement by email, gets sent an "application" which asks for you social security number and other info and is told to wire the money and they'll be mailed a key. You know how that's going to end right?

The problem is among the houses they're playing with, they're trying to pull this using my house. Amazingly, people ARE falling for it.

I've had multiple people come by the house based on this ad. Given that the rental amount in the ad is more in line for a studio apartment around here rather than a 3 bedroom house that should have set off some alarm bells - not to mention the international area code for the phone number the fraudster gives, and his Nigerian accent. He even tells people he's in Nigeria! And they still go with it!

I just managed to stop one poor yet nice sap from sending this scammer money that she would have never seen again - she came to see the house and I pointed out they were being scammed.

They gave me the phone number the guy had provided, and the ad, which I have since gotten craigslist to pull - and craigslist was pretty quick to take the ad down once it was pointed out that it was a scam - its down at least for now until this scumbag tries to put it up again. I've also reported it to the local police department, but obviously there's some limits on what they can do about an international fraud scheme.

So if you want to mess with this guy and try and sucker him to come to the USA and get arrested for scamming lots o' people (I doubt mine is the only house he's pulling this trick with - apparently this is a new endemic fraud tactic) here's his info:

pbishop2183@yahoo.com
phone 1-234-808-974-2766 - The 234 is the Area code for Nigeria.

It is amazing that people fall for this stuff - if it looks too good to be true - and $500 a month below what any other comparable house for rent in the area is going for is too good to be true. Then it really is too good to be true. Don't be a sucker.

The international area code should also have been a tip off. Nigeria should raise a huge red flag on any internet transaction - and sending personal info and money to Nigeria in return for a promise of a key in the mail should unquestionably have people running, not walking, away from the scam.

But, as P.T. Barnum said, there's a sucker born every minute, and the Nigerian fraudsters are trying to fleece every darn one of 'em they can.

Bailout deal apparently reached

You know how the Democrats are the evil party and the Republicans are the stupid party? How when they come together and do something both evil and stupid its called bipartisanship?

Here goes: Deal reached on financial markets bailout From the Detroit News:

Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.

House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper.

"We've still got more to do to finalize it, but I think we're there," said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.

The report is very short on details and hopefully we'll find more about what we've just had done to us shortly (likely too late to do anything about it), but for now hang on its going to be an interesting ride.

Housing crunch causes and bailout follies

Speaking of crashing like the housing market, here's a decent video as to one of the causes of the current mess.



The cause outlined in the video -- the Democrats revamping of the CRA and pushing banks to lend to those who could not really afford home loans in the first place is not the only reason, but it does seem to be the spark that began the fire. Once the CRA and government led housing boom started, then coupled with the irrational belief that houses would always go up dramatically in value encouraging both quick flips and people buying homes they couldn't afford hoping the increase in value would let them refinance and have massive equity growth, we got to where we are today.

Once this irrational belief was fixed Fannie Mae and Freddie Mac encouraged ARMs and 100% loans to get more people owning houses causing values to rise as demand went up. Investment bankers went along, coupling this with quick sales of loans and then repackaging them into securities that were sold to others and it got worse from there as they then leveraged these securities beyond any rational limit.

In short, the government and high-finance wizards played with our money, got rich on bonuses (or campaign contributions and sweetheart loans in the case of the politicians), and we're left to clean up the mess. Sorry but the bailout is ridiculous in its current form, and even more ridiculous that Frank and Senator Dodd (both recipients of Fannie Mae / Freddie Mac largess and proponents of the policies that caused this mess)are inserting into the bill that 20% of the returns from the bailout does not go back to the taxpayers (or even the government) but to housing advocates such as ACORN - you know the people who helped start this mess in the first place. Nice.

Fun looking back on finances

Its always interesting to look at the financial prognostications of yesteryear in light of the present.

Take Start Late Finish Rich for example. Itsa a good book and I'm reading it now. Written in 2004 it was a darn good book for the time, full of good advice in lots of ways some of which still hold true, such as not being wasteful in your spending, money management, general targets in terms of how much to save, the importance of tax sheltered retirement accounts, but wow, some of the info:

Such as: the investment return projections are based on 10% annual returns from the stock market - good luck with that. We haven't seen that kind of return in a long time. He also fails to point out that when you have a 50% loss in the market for example, you need a 100% growth to just get back to where you started from.

The real estate advice was great pre-crash but he sure didn't anticipate this mess. His book is full of 0 down mortgages, buying houses for flippage etc. Ie buy it and watch the ridiculous amount of appreciation make you wealthy. The problem is that kind appreciation was anomalous - great if you were doing it then and got out, but otherwise once the music stops you're in trouble. Combine this with banks and mortgagees all doing the same approach on this belief of unsustainable returns as normal, couple it with a little regulatory capture from Freddie Mac and Fannie May and you get the mess we're in now.

Its a good read but the current state of the market and real estate fracas just made large chunks of the book historical curiosities.