REAL ESTATE

Beware

As discussed in Chapter 7 of our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology, and our previous Real Estate blogs, the purchase of a home may be one of the biggest decisions to make in one’s lifetime. It has never been more difficult for first time buyers, which are usually in their late 20’s to early 30’s, to purchase a home, and the process can be very harrowing and nerve-wracking. Investment properties have now become very challenging as well, with potential “rent freezes” and new system regulations, and increases in insurance and property taxes.

      As noted in recent blogs, inflationary conditions have highly affected the “affordability” of purchasing a home, as home prices have reached historical highs and outpaced wage increases by 5 to 1. Extra homeowner expenses including home maintenance, insurance, and property taxes have also increased heavily, putting further strain on loan acceptance and timely payments. Add in historically high credit card debt among consumers (which negatively effects credit scores and debt-to-value ratios), rising rents, car maintenance, food, and energy costs, the average individual is having difficulty making ends meet.

      Last month we also discussed the deceptive and fraudulent and/or incompetent activities on the part of Central Appraisal Districts (CADs), who are under heavy scrutiny for over-valuing properties, and subsequently raising property taxes, in many locations in the U.S. As noted, many CAD’s are “broke” due to mismanagement and other immoral issues.

      Recently, there has been an increase in activity with U-Tubers pushing their “tax-lien” sale and “distressed property” programs, promising to make the consumer rich, mainly by taking advantage of others misfortune. Although there are ways to “help” defaulting owners for a small fee, the true objective is to ultimately own these properties for pennies on the dollar. If you are a homeowner in distress, be extremely careful that you understand the proposal. It is advisable to confer with an attorney prior to signing any agreements. There have been recent lawsuits filed against investors, including real estate brokers, who scheme to “steal” your home with confusing language and false promises, so BEWARE!

      Here is how it basically works:

      When a property owner falls behind with their mortgage payments, it doesn’t take very long for the lender/financial institution to begin what is known as “foreclosure proceedings.” This process usually begins when the homeowner/mortgagee falls behind in payments by 3 months. The lender will generally allow the borrower a short time redemption period to pay up to date, or may even allow a mortgage modification. However, if the borrower is unable to meet required standards, or qualify for a new loan (which is unlikely since they are in default in the first place), the lender will quickly follow through with the forced sale of the home.

      Tax Lien Sales are a bit different, but equally as damaging to the homeowner if payment is not satisfied. Tax liens are placed on a property by the county/city/town where the property is located, when the owner fails to pay the property taxes due in a timely manner. Some property taxes are bundled with a mortgage, when the lender keeps a portion of the monthly payment in escrow, and appropriately distributes the funds to the tax collector’s office each quarter. Sometimes, however, property taxes are paid separately from the mortgage. In either case, if the taxes are not paid by a required date, the authority will place the property on a list that allows investors to pay the taxing entity the balance due at a periodic “auction.” The owner then has a redemption period (usually about 1 year) to satisfy the debt, though it now comes with “interest,” upwards of 10-12% to pay the investor. Should the owner fail to “redeem” the property, the investor is then granted the rights to the home and become the new owner.

      Both scenarios are a nightmare for the property owner. Either way, they have only a specified time to “catch up” with their payments or risk losing their home/business to the lender, the taxing authority, or even an investor. If one finds themselves at risk, it is advisable to begin searching for resolutions sooner rather than later. Inevitably, the owner will begin being approached by investor’s, rich with cash, who offer a plethora of varying options to sell them your home for cheap, co-own your home with them, or even rent or lease back to them. Although there may be some honest individuals, be highly suspect of the language in the contract. The objective is to make money at your expense, and it should only be considered if it is your last option.

      Regarding those selling “how to” programs, as explained in our publication, these “tutorials” are generally just another money-making scheme, filled with promising information, but unrealistic goals. In the “real” world, the investing side is very competitive and difficult, and the inevitable “upselling” for software and property lists (some of which are outdated) is very high. The fact that there has again been an uptick in the popularity of selling these programs indicates there has unfortunately been an increase in the number of defaulted properties based on the difficult economic environment.

      Once again, consider every option, including family assistance, before agreeing to anyone attempting to earn a share of your property.    

      Please visit the website www.augustassociatesllc.com for home values, listings, and professional assistance.