The 70% Solution

Posted August 15th, 2007 by Joe Kaiser

I'll save you the trouble of looking . . . there is no such law.

Dear Rob,

I can’t believe Cheryl’s audacity.

Does she really believe it’s appropriate for your office to demand I pay at least “70% of assessed value” for any properties I buy?

kringle-presentation-14.jpg

Do you not see at least, I don’t know, a million things wrong with that?


Show me the law

Are AAG’s from your office allowed to make up demands and create their own set of “feel-good” rules, absent of all legal authority?

Shouldn’t the Revised Code of Washington come into play at some point?

Or maybe even the U.S. Constitution?

I’d like to see the law, Rob, that requires real estate investors in this state to pay at least “70% of assessed value” for their real estate purchases.

Show me the law or, seriously, don’t go there.


Just for me?

Here’s the demand Cheryl deems appropriate . . .

Not to negotiate to purchase any interest directly from a property owner for less than 70% of assessed value. — Cheryl Kringle, former AAG
5/9/2007 Settlement Proposal

I’ll save you the trouble of looking . . . there is no such law.

Nor can there be such a law. Buyers and sellers have the right to freely contract and attempting to fix your issues with my investment strategies by mucking up fundamental property rights is a dumb approach.

Were I to agree to your settlement demands, (don’t hold your breath), I’d be the only investor in this state (to my knowledge) held to that standard.

You don’t see a problem with that?


Assessed values

Cheryl wouldn’t know, we get that, but you should. Assessed values are basically meaningless in terms of what a property is actually worth.

Using assessed value as a measure of worth isn’t something anyone other than an out-of-control AAG with no real estate understanding would suggest.


My recent purchase

I’ve mentioned earlier, I bought a property in the upcoming tax sale recently for $200. That’s two hundred dollars. That’s $100 + $100 = $200. Not $2,000 or $200,000, but exactly $200.

What’s it assessed for?

I just checked, $111,000.

According to Cheryl, I should be required to pay no less than $78,000.

Psssst . . . it’s not worth $78,000.

It may not even be worth the $200 I paid (I won’t know until it goes through the tax sale process).


Disservice to the Seller

But for argument’s sake, lets say it’s worth a solid $50,000, and as an investor forced under threat of financial ruin to settle with your office, I’m required to pay 70 percent of the assessed value.

So, I agree to your settlement terms (again, don’t hold your breath), find this particular deal, only to realize the seller and I can’t do this deal because your office demands I pay no less than $78,000.


Ham-handed fixes

And what about that seller?

If I’m his last hope, that property gets sold at auction and that $50,000 I would have been happy to pay him is gone.

Sure, there may be overage at the sale that bails him out, or there may be zero. And if there’s no one at the sale interested (it takes at least two, actually, to create a bidding war), he walks away with zero.

Don’t look now but your office has just cost him $50,000.

That’s what happens when you mess around with these kinds of things. You don’t see the innumerable flip sides and in doing so, you create more and bigger problems than the one you’re attempting to fix.

Ham-handed fixes that trample my fundamental rights is what your office demands I submit to, Rob. I expect you to protect my rights (as you promised under oath), not brutalize them beyond all recognition.


Good grief, Rob

Demanding I waive my constitutional rights in order to settle with your office is evidence of out-of-control AAG’s gone wild.

Are you okay with blatantly infringing upon my rights?

I suspect so, because that is exactly what you’re demanding here.

Respectfully,

Joe Kaiser


12 Responses to: “The 70% Solution”

  1. Davido responds:
    Posted: August 15th, 2007 at 1:26 pm

    Well Said.

  2. spyboy responds:
    Posted: August 15th, 2007 at 1:26 pm

    Greetings,

    And no mention of what the defination of “assessed value” actually is, in this context;
    Tax Accessors imposed value ?
    Fair Market appraised value ?
    Liquidation Type appraised value ( aka; distressed sale appraisal value ) ?

    Actually, in Illinois they recently passed a ” we’ll protect you against those foreclosure scam artists ” statute, which stated that offers/purchases less than 82 % “fair market value” were void as against “public policy”. My understanding is that law has been declared unforcable. I’m not sure about that, but I did hear something. Nevertheless, that section of that statute will be litigated if enforced, and likely will be declared unconstitutional.

    This WA. A.G. action is public policy based, administrative law enforcement agency enforced, 4th branch of government power mongering.

    To them, generally, constitutional principals will not be deemed worthy of interfering with their own agenda. Hopefully, in this case, the judicial branch will determine otherwise. Of course, in an out of control, revenue chasing and power obsessed system, there are no guarantees that right, justice, facts, or truth will prevail.

    Thank You.
    SpyBoy

  3. DaveD responds:
    Posted: August 15th, 2007 at 1:38 pm

    This is a remarkable example of ameteurish thinking… being it doesn’t take into consideration the effect of how value diminishes as the sand runs out of the hourglass. What a ham-handed fix indeed.

    The 70% solution is just as goofy and meaningless with non-real stuff as well. If the seller has a brand new refrigerator, it might be worth 70% the next day for a quick sale. Do you think the owner will be holding out for 70% on the same fridge if the sheriff is moving it out to the curb tomorrow? Again, something like pennies on the dollar come to mind.

    Folks in foreclosure don’t expect their offers to get better as the clock ticks down. Only a naive lawyer would believe otherwise.

  4. David Alexander responds:
    Posted: August 15th, 2007 at 6:04 pm

    So, now they not only want you stop the overage plays but, stop buying the real deals that are out there….

    Are they going to impliment the same set of standards on the hundreds of other investors in washington….

    Guess… if they could that…. then washington would end end up with a lot of vacant unwanted property….

    Cracks me up, when I see things trying to be changed for the good… when the powers at be haven’t thought it through….

    If they kill incentive for investors to buy… (which creates a natural order) who will clean up the messes…

    Not to mention again… that whole Free enterprise thing…

    Guess… they think they can stand in the way of every contract negotiated…

    Good grief…

  5. anemonehead responds:
    Posted: August 15th, 2007 at 7:26 pm

    Joe, I’m not a big believer in the black helicopters and the great government conspiracy but this stuff is getting scarey!

  6. Redline responds:
    Posted: August 16th, 2007 at 9:54 pm

    Hey Joe … you know this is exactly what some states (NY and FL) are doing with their new “foreclosure rescue scam” legislation. NJ is considering it’s own as I type this.

    It dictates that when buying a home in foreclosure, you must pay atleast 78% of FMV. No lie.

    Anyone with any knowledge of the business (i.e. nobody in the legislature) knows all the law will do is make sure EVERYONE behind on their loan is foreclosed on with no options.

    Requiring buyers to pay a certain % of FMV …

    Welcome to the new communism. God bless America.

  7. Gray responds:
    Posted: August 17th, 2007 at 4:24 am

    Joe, you’re right, this is getting out of control. The AAG’s office has two rightful interests in this issue: To make sure the County gets its taxes and to prevent property owners from fraud. OK. But the way they try to deal with this is ridiculous. It’s not their job to invent new laws, that’s only the lawmakers’ authority. What’s needed here are bills preventing property owners from deliberately refusing to pay taxes in order to get their real estate into the auction (for instance by seizing liquid assets first before foreclosing estates), and new regulations to assure that sellers are fully informed about their side of a real estate deal (assessment value, if outstanding taxes will be paid by the buyer, and what wil happen to any overage profits etc.).

    The administration can’t and shouldn’t make deals for the citizen, and the lawmakers would be totally misguided in giving them this authority. Instead, the legislative should make it obligatory by law that all relevant informations have to be on the table, and then it’s up to the seller and buyer to make the decision on the price. And this includes the liberty to make mistakes, sure. But would anybody be better off without liberty?

  8. Joe Kaiser responds:
    Posted: August 17th, 2007 at 5:00 am

    Gray,

    When your purchase a piece of real estate, you don’t sign a promissory note that says you promise to pay the property taxes.

    It’s not an obligation . . . it’s simply a good idea if keeping the property is your objective.

    The state cannot force you to pay what you’re not obligated to pay. The law is quite clear and the office of the attorney general has previously issued an “opinion” stating property taxes are not personal liabilities.

    The reason?

    In part, at least, if you were personally liable, you could bankrupt those property taxes away (and no one wants to see that).

    The current system is just fine. The property owes the taxes and if you don’t pay, you don’t keep your property. Nothing could be more simple or effective.

    It’s actually just fine.

    Joe Kaiser

  9. Gray responds:
    Posted: August 17th, 2007 at 6:37 am

    Joe, thx for answering, and I understand your position. Well, I think to say that the owner of a property has no obligation to pay taxes goes a bit too far, but what do I know about tax law… However, this is a political question, and in many other countries, property taxes are personal. Both sides have pros and cons (uh, no pun intended).

    But is the current system really “just fine”? Well, imho, and I think I’m not totally out of the mainstream on this point, it shouldn’t be the job of the administration to sell real estate. That’s what markets are for. And property owners shouldn’t be able to force the administration into doing the auctioning for them by deliberately refusing to pay taxes. This system isn’t just fine, it has a large legal loophole, and this should be closed asap. Even you admit you’re exploiting it. And you wouldn’t do it this way and face all this opposition if it wouldn’t bring higher profits (on overage, of course) than the ‘normal’ way (pay taxes, put estate on market), right?

    I understand the administration’s side, too. They are trying to prevent their tax collection system from being exploited in this way. Ok. After all, the taxpayer has to pay for the costs of these auctions. But the hard nosed methods they use in dealing with this go way to far. This reminds me of a farmer who is annoyed about a cow grazing in his corn field. He refuses to repair the fence and shoots the cow instead. Well, it’s a solution, but is it the best one? Is it at least reasonable? :-/

  10. Gray responds:
    Posted: August 17th, 2007 at 6:41 am

    (on overage, of course)? Oops! Pls read ‘on average’! Sry.

  11. Joe Kaiser responds:
    Posted: August 17th, 2007 at 7:09 am

    Gray,

    The tax sale foreclosure system of this state is a cash cow. It’s designed to create funds that ultimately escheat to the counties.

    All the properties sold at tax sale auctions have the counties’ foreclosure costs included, making them whole.

    In a free society such as ours, we’re allowed to contract for the purchase and sale of property, among our many rights. And we’re also allowed, if we so choose, to do nothing with our property (including not paying property taxes if we so choose).

    Choosing to do nothing is NOT a loophole by any stretch of the imagination. It’s a right guaranteed us.

    Joe

  12. Gray responds:
    Posted: August 17th, 2007 at 8:49 am

    “All the properties sold at tax sale auctions have the counties’ foreclosure costs included, making them whole.”

    That’s an important point. Thx for clarifying this, Joe, much appreciated!


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