First some background on the buyers investment group. Two of the properties where purchased through trusts. From the testimonial page from the Fast Track investment club -
Before aspiring to be a real estate investor I never knew what a trust was. After joining GSREIA and attending a trust workshop hosted by Tony Reaves, I learned just how important a tool a trust can be for asset planning. When I decided to take title to properties in Trust, Tony held my hand through this process, making sure that I had all the necessary documentation. I was faced with major opposition by my lender's attorney. Who after several conference calls with Tony, finally allowed me to take a title to the property in trust. Tony's guidance was tremendously helpful.It sounds like the lender's attorney questioned some of the actions taken and was strong armed into accepting a questionable deal. The use of trusts were one of the ways the properties that will be profiled below were obtained.
Garth Naar, Mablewood, NJ.
And another testimonial is from the owner of the site We Buy Houses All Cash and Any Condition! The tag line states "Don't let the Banks steal your home!!" Is the reading between the lines that this group will steal your home instead? Or "buy" it for $10 through a trust? Don't know, just asking.
Now, back to the the case of the Roxbury foreclosure. These cases profiled are limited to Morris County due to database access. There appear to be 4 main actors involved in with the property purchases and trades. They are noted by their initials: LC, JC, and JA or on the purchases and trades, in addition a Mrs. JA is listed on several of the Lis Pendens. So here is the findings with each listing group is a separate property.
Property 1 - Roxbury, NJ
- The Property was purchased by LC Trust for $10 - Nov. 13, 2003
- LC sold the property to JC for $350,000 March 9, 2005
- JC took an ARM mortgage for $280,000 on March 9, 2005 with Argent Mortgage
- JC sold the property to 3rd Party for $349,000 on Oct 26, 2005. JC also claimed owner occupied for sale on State of New Jersey Affidavit for Exemption.
Property 2 - Chatham, NJ
- JC purchased the property for $830,000 in May 2005
- JC took a mortgage for $664,000 also in May 2005 with World Savings Bank
- JC sold the property to JA for $1,100,000 on August 25, 2006
- JA took a mortgage for $110,000 in Aug 2006 with American Brokers Conduit
- JA took an ARM mortgage for $880,000 also in Aug. 2006 with American Home Mortgage - Lis Pendens filed March 13, 2007
Property 3 - Roxbury, NJ
- The property was purchased by LC using a Trust for $10
- LC sold the property to JA for $250,000 in June 27, 2006
- JA took a mortgage for $200,000 in June 2006 - Ivy Mortgage - Lis Pendens filed March
Property 4 - Wharton, NJ,
- JC purchased the property for $230,000 on Sept 14 2006
- JC took an ARM mortgage for $207,000 in Sept 2006 with People's Choice
- JC refinanced for another ARM mortgage for $314,500 the following March 2007 with Option One Mortgage - Lis Pendens filed November 16, 2007
Property 5 - Dover, NJ, 2007
- JA AKA JC - actually states AKA on deed - purchased the property for $180,000 on June 1, 2007
- JC took an ARM mortgage for $170,000 also on June 1, 2007 with Option One Mortgage
Net profit for all the above deals $554,480
The interesting part of the above Dover sale is that someone marked on the deed that JA is Also Known As JC. If it is the same two people just changing the paperwork back and forth the deals seem even more questionable.
These following cases are too complex to be sure what happened with the available data. Please chime in if you have any insight.
Property 6 - Wharton, NJ
- JA Purchased the property for $121,000 in Aug 1997
- JA Received $5,500 Grant from Morris County Division of Community Development Oct. 2001
- Trustee for JA from JA filed Chapter 7 Deed for $33,462 in Aug 2002
- JA took an ARM mortgage for $165,000 also in Aug 2002 - Wells Fargo
- The property was deeded from LC Trust to JA Trust for $10 in Jan. 2004
- LC sold the property to JA for $320,000 in Jan 2004
- LC obtained an ARM mortgage for $288,000 in Jan 2004 with Argent Mortgage - Lis Pendens filed Oct. 2007
Property 7 Dover, NJ
- JA sold to 3rd Party for $125,000 in July 14, 1999
- JC purchased from same 3rd Party for $340,000 on June 22, 2004
- JC took an ARM mortgage for $306,000 also June 2004 with Argent Mortgage - Lis Pendens was filed December 4, 2007
This Dover case is the first time a different one of the four names was listed on multiple transactions.
Upon final analysis, perhaps the goal was to gain the properties through trusts, sell the properties from the trust to one of the group members, and then eventually re-sell the property. Is that to muddy the water for the final purchaser or just to legally gain the property? The group has one successful case, but another case of complete failure (the foreclosure case). Are the ones that do not get resold going to fall into foreclosure? It looks like it. Is this a real estate investment group on the up and up just buying too many houses? During the peak of the bubble they only had a few properties but since the bust they have acquired more.
In the meantime the homes are resold to each other for higher values and funded through subsequent mortgages. These four (maybe only two) investors have cleared over a half million dollars through these methods. If everything is legit that is a great second income for just pushing paperwork around. These activities may be legal or not, but either way the methods are questionable.
All comments on the findings welcome!
7 comments:
Nice job! Looks like you dug up a lot of info.
This is what I THINK was happening.
They find someone having a hard time paying off their home either when the foreclosure process starts or before it. The offer to buy the home from the current owner through a trust.
Why they do it through a trust I'm not sure but it's probably because they may claim or actually include the current owner as part of the trust. A trust might also give them other legal protections. The deed probably transfers via a "quick claim deed" deal.
The current owner may not have sufficient credit or income to qualify for refinancing but the trust does? The trust has a lot of equity in the home and gets a mortgage or heloc out and pays the origial owner, hopefully. Probably enough to cover their debt and some extra cash.
Then the trust sells the house to a known party above what they owe on the house. This in turn raises the market value. Then they try and sell it again for even more.
At least that's what it seems like.
One thing I read about stuff like this is that people that do this tell the homeowner they are going to save his house but they really just sell it out from under them after getting it for a steal.
Have you forwarded this information along to anyone yet?
oh, and thanks! I just noticed you added me to your links.
One more note.
Quick claim dead deals aren't always scams. Some are because the mislead the homeowner. In fact something similar was featured in a recent episode of law & order.
They claim they are going to save the person's house and then sell it without their knowledge.
They probably sold the homes to someone they knew hoping to be able to justify the sale to a third party at a higher rate.
With all the lis pendens filed it looks like they tried their house flipping scheme too late in the game and got stuck with properties they can't sell for the prices they need.
My guess is that during the boom years, the instructor made a lot of money doing this. Maybe legally or illegally. Then when it looked like the market was going to go south, started selling his training instead. Unfortunately for the people that signed up for the classes, the market started to turn and they got stuck holding some properties they can't sell.
I wonder the same thing. Did they just get in the game too late? It just seems strange that they exchange the properties back and forth and take out bigger mortgages with each exchange. It looks like they did the profit taking before unloading the property.
I wish I knew more about this but this seems to be the way these things go.
Find homeowner in need.
Have homeowner sign over the house for a nominal fee.
Now that you have the home, you take out a loan against it and then pay the original owner to pay off any debt owed on the house. Probably keeping some money for yourself.
Sell the house to a friend for a larger amount, maybe after coaxing an appraiser to raise the price.
You pay off the first loan you took on the house.
Now list it through a realtor who looks up the price in MLS and sees that you bought it for $340,000 so it's at least worth that much and if you're listing it for less it's a steal and they'll tell their clients that.
Or you take out $280,000 on the house, you sell to your friend for $340,000 making 60k. Your friend isn't a real person and you let the house go into foreclosure.
Tom,
Why sell the house to a friend? Is it to make it look like the house just sold for an inflated price? This probably worked wonders during the bubble.
My guess is this group will not be doing it anymore. The houses are in their names, not trusts to LLC, so their credit is going to take a beating. Also if the lenders figure out these are not owner occupied I believe there are recourse laws that will apply.
Either way it is a very interesting approach to real estate investing.
"Why sell the house to a friend? Is it to make it look like the house just sold for an inflated price?"
Yes. That's what I think at least.
I did some googling and it seems using a trust, you don't need a quick claim deed. Not sure though, the power outtage has me playing catch up with some things so I'll look deeper later.
You're right, they're going to get screwed. They really should have set up some sort of business entity.
You should try and call some of the original owners and ask them what happened and post the replies.
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