Saturday, June 16, 2007

How to Buy a Dream Home in San Diego

So you want to buy a house and have no money just a good credit rating, we can fix you right up. Here is "The Dummy’s Guide to Home Finance."

You look at a house for sale and see a range on the price from $589,900 to $549,000. What you are looking at is the kickback for no money down financing. The buyer goes to the owner’s agent and says I need financing. I’ll go 589k if the owner will sell for 549K and pass the rest to me under the table. There is a million ways to run the deal, but the easiest is to get a relative of the buyer to front the money to be rebated after the sale. Plus the spread is negotiable (in case you are having a blond moment).

So let’s run through one. The buyer lines up the cash down payment from Dad for $40k. Now when we go to escrow, the seller will designate a bill to be paid, by the escrow agent of 40k upon sale of the house, to your father’s sister for “home improvements” (the relative you pick should have a different last name to avoid being too obvious).

It’s not like this is something new, but the way its advertised, shows that the seller is ready to be approached on that level. To the real estate agents, this is a zero sum game. The buyer and seller get what they want; the seller unloads the house, the buyer gets a no money down purchase, the agents get their commissions and everyone is happy. The bank financing the deal, is none the wiser. Nobody ever seems to go to jail on this sort of arrangement. That could change.

This also makes property values appear normal and of course the new couple has their dream home that they always wanted.

Sigh, to be young again, I guess you start to perceive reality and gain wisdom with age.


Anonymous said...

This is dishonest. All parties require all the facts in the transaction. One of the reasons we are in this real estate mess is advice like this. If you're going to give this advice, prepare for a lawsuit later.

Jim in San Marcos said...

Hi Anon

I quite agree it is fraud. I was just showing what seems to be happening under the table. It's hard to catch this sort of fraud, I was just showing what could be happening without pointing any fingers.

Anonymous said...

Reading blogs like this (fyi BMIT is sort of the hub, that's how I found yours jim) I'm wondering what ever happened to delayed gratification?

There is satisfaction in working to achieve something.

Even small, intangible things.

A house? It's a kind of manifestation of achievement... for people who think simply 'buying' (as if) is an act of achievement in itself.

What's so great about a house anyway?

Ignoring the first law of flipping (one makes their profit at the time of purchase), and OVER paying because the rising tide skewed the variables so even incompetent flippers succeeded (where a belief that the market could only go up took hold), isn't something to make one feel good about one's self.

Grifting one's way into a house thru 'slick' means (liars loans, et al) might make one feel smarter than the next dude (for a fleeting moment), but when (not if) it comes crashing down, one puts all that you have worked for (if one, erm, works) as well as the well-being of the family in jeopardy.

All this for a house?

We gotsa bunch of Big Lebowski's out there.

Apologies about the mixing of the pronouns.

Anonymous said...



My next visit was Housing Panic, and damn if they didn't have a fine link to the very same point I was trying (poorly) to make.

Jim in San Marcos said...

Hi Numpty

We think a lot alike.

The bit about achievement set me thinking about a husband and wife buying a house.

The wife wants a home (nesting instinct???) The husband wants to please the wife or stifle the nagging, so he buys the damn house. Notice how logic and common sense don't even enter into the discussion.

I'm poking fun here a bit, but both the husband and wife would consider the purchase as an achievement, but each for entirely different reasons.

I didn't quite follow your link on the Housing Panic Blog, was there a title on the one you referenced?

One thing to remember about posting on this blog, it will probably get read. I often click on Ben's Bubble Blog and am amazed at how many comments follow just one post. I can't imagine reading 150 comments and then posting your own. Who has time to read all of that?

Thanks for your comments Numpty

Anonymous said...

I should have been more precise:

The link is above the the question, What would make you happy?

To your point about placating a spouse just to get on with it: we've all been there, done that.

I dunno if there have been any couple studies, but it wouldn't be too far-fetched to extrapolate from "personal experience" that many minor decisions, say, where to have lunch, can be debated endlessly. But a major event purchase, say, a house, can be on a whim.

And from there, the decision to "invest" in "property" might be considered an incremental step. Esp. when one of the parties sees "$$$" and deliberately tunes out any mention of the down-side (not enough people ask "what's the catch?").

...and the other spouse is pleased that their S.O. is (for the time being) placated.

MARRIAGE: gateway to the poor house.


Jim in San Marcos said...

Hi Numpty

I think we have hit upon the the holy grail of House purchasing: it's the disconnect between husband and wife that made this mess.

Wife: nest, raise kids

Husband: buy house or you are a failure.

Maybe too simple but it does explain how you got there.

Anonymous said...

As a life-long renter, I have to chime in a bit on this notion that there is zero value to home ownership and that it's only about wives nagging and husbands relenting.

Renting has its downfalls. Sharing walls with noisy neighbors, no remodeling, no pets, and almost zero chance of being able to stay in the same place for more than 15 years (ownership changes, re-zoning, apathetic landlords who never keep up the place, the list goes on...) If you're not forced out of a rental, you'll be driven out by your lack of autonomy and authority over your own domain.

While home ownership has its risks and downfalls as well, the differences are not as profound as you imply. You act as if you're getting one over on the "system" by renting.

Well, where do you think your rent money goes? It goes to a landowner - the very people you claim to be such idiots around here. I can assure you that most landlords aren't in the business of losing money on their property. If you're not enriching a mortgage company with interest payments, you're enriching a landlord through rent payments. I fail to see the difference between the two.

If you're content with noise and all manner of restrictions on the place where you live, then go ahead & rent. But once I find a worthwhile place, at a price I want, landlords will kiss my ass.

Jim in San Marcos said...

Hi Anon 10:44

What we were really mulling over was how people could be so stupid to buy houses that are so over priced in Southern California.

I have been a renter for 30 years and at the same time a landlord for 21 years. The rental is all paid off now so I can kick back somewhat.

I agree renting can be a pain. I had to move out of a rental right at Christmas time one year, because the owner wanted to sell it.

I'll be ready to buy a house when this housing bubble flattens out and prices become more realistic.

I'm tempted to fly out to Colorado and pick up another home or two, the cash flow on a $100,000 home is 1,000 per month. The down payment for an investor is 20%.

If you do find a house, make sure that it doesn't have CC&R's. Its the pits out here when the homeowners association tells you what color drapes to buy or why you can't work on your car in the driveway, let alone park it in the driveway.

Thanks for chiming in