82 Percent? Good Question?

Posted July 18th, 2008 by Joe Kaiser

It's working so we figured we ought to do it that way.

Dear Rob,

As you know (though appear to be confused about), the new law requires investors to pay 82% of market value to any homeowner who either stays or has a continuing interest after selling.

You’ve complicated it further by requiring the investor provide the seller a check the very moment he decides to vacate.

sugarman.png

We just took it . . .— AAG James Sugarman
Consumer Protection Division

Additionally, the 82% requirement remains in perpetuity, so if the seller is still in the property 10 years later, he’s entitled to 82% of the future market value as well.

And that makes sense to you?


No sense to me

I’ve got to tell you, it doesn’t make a lot of sense to me or anyone I’ve spoken with. And certainly, it makes no sense to the sellers I’ve talked to about it.

Apparently, you’re unaware of the dynamic that makes sale leasebacks unfair, but I’ll save that for a later date (or for the court).

What’s important today is to understand how the 82% figure was arrived at.


Of critical importance

When you create laws that have tremendous impact and effect the outcome of home ownership, it’s incumbent on you to do your homework so you’re certain you’re not causing more harm than good.

If your intention is to deny the owner his right to freely contract and by doing so put him in the position of not being able to save his home because you don’t think anything less than 82% is fair, you’d better have the facts to back it up.


Uhhh . . .

So, Rob, how did your office arrive at the 82% figure and why is it the number that’s so critically important it’s effectively barred investors from doing deals with people who want to stay in their homes?

I’ll let AAG Jim Sugarman explain it for all of us . . .

Get the Flash Player to see this content.

Brilliant.

Just brilliant, Rob.


Minnesota 2.Doooooooh

Rob, wouldn’t you agree it’s time Jim Sugarman gets his facts straight and stops lying about this foreclosure business?

Virtually everyone agrees the 2004 Minnesota foreclosure laws were a disaster. Not only were they ineffective, foreclosures sky-rocketed immediately after the laws went into effect.

And how did Jim characterize for the Legislature?

“It’s working so we figured we ought to do it that way . . .”


No clue

It is now obvious, Rob, that your office has no clue why the 82% figure even exists. None.

You’ve demanded that owners and investors use that percentage, stripping them of their rights and preventing them from saving their homes . . . yet you have NO IDEA WHETHER OR NOT IT EVEN MAKES SENSE.

To impose a law this extreme, and to have no idea why 82% matters (or not), is proof your office is incompetent and out-of-control.


Bend over

You have the audacity to deny sellers the opportunity to save their own homes in the manner they see fit and you make staying an impossibility, yet you cannot tell us where the number comes from?

Good freakin’ grief.

“We just took it?”

Yes, Rob, we did . . . right up the you know what.

In the arena,

Joe Kaiser


6 Responses to: “82 Percent? Good Question?”

  1. DaveD responds:
    Posted: July 18th, 2008 at 7:19 pm

    Trifel

    That’s a word you used some time ago… as in folk’s Constitutional rights aren’t something to be trifeled with.

    You are now seeing how guys like Jim create these Frankenstein laws by cutting, pasting and stitching together because “we figured we ought to be doing it that way.” No wonder they created a monster.

    I’ve heard the legislative process is not unlike sausage making,,, you don’t really want to look that closely as to what goes into it… but I think that comparison is unfair to sausage makers.

  2. Jason responds:
    Posted: July 18th, 2008 at 8:33 pm

    Are there measures to protect the “legit” investors who decide to come in at the 82% the law states?

    Example (simple math for you to understand)
    Investor pays $82K for a $100K home. Party stays on a lease back agreement for three years.
    Now the market falls 25% at which point the leasor decides they want out.

    Do they now cut us investors a check (for loss) as per Washington’s new law or are they entitled to their cut as in a good market?

    Jason

  3. Joe Kaiser responds:
    Posted: July 19th, 2008 at 5:45 pm

    Jason,

    In your example the house is worth $75k after three years, obligating the investor to pay the former seller his share, $61,500 ($75k x .82).

    That means if the seller owed more than $61,500 when the deal was originally put together, the investor won’t break even.

    Having confirmed the AG’s office has no idea why 82% matters and made no effort to understand, it’s unlikely they’re they’ve done anything in terms of thinking through the possible outcomes.

    The result?

    Families lose their homes for no good reason, and the AG’s office is 100% to blame.

    Joe

  4. Loya responds:
    Posted: July 21st, 2008 at 9:01 am

    *82———-means unblock. How ironic, the AG is blocking the buyer as well as the seller!

  5. Chris responds:
    Posted: July 25th, 2008 at 4:05 pm

    OT: I’m been seriously considering selling my home – cashing out and renting for the next few years, because I suspect that home prices will be collapsing as credit dries up.

    In the short term, it looks like Fannie and Freddie are going to get bailed out, as Bush has said he won’t veto the housing bill and it appears to be sailing through congress. So we’ll take a trillion dollar hit to the national debt and print money for another year. This removes market incentive to avoid risk in the near term, and keeps prices artificially high for a little while longer.

    But this will have to collapse on its own weight as the debt is monetized and inflation makes everything more expensive.
    At some point we will have to return to reasonable lending standards (20% down, verified income / debt ratios), wont we? And at that point, in a nation of few savers, who will be able to buy? Prices will have to collapse for people to be able to buy again.

    I don’t know how you make money in real estate in a market that is due to collapse, besides selling your real estate assets while you still can.

    I mention all of this because I just saw a precient 2006 Peter Schiff video (part 4 of 8 below) (Parts 4-7 are relevent to this post)

    http://www.youtube.com/watch?v=xNKs8lBnd2U&feature=related

    that makes all of these points. It has really focused my resolve to sell.

    Sorry to ramble OT to the blog, Joe. I just wanted your thoughts.

  6. Chris responds:
    Posted: July 26th, 2008 at 3:49 pm

    FYI, noticed this Seattle Weekly column from 7/23:

    McKenna Distressed Over One of “His” Bills:

    http://www.seattleweekly.com/2008-07-23/news/mckenna-distressed-over-one-of-his-bills/

    Excerpt:

    “The video features McKenna. In it, he says the foreclosure bill that passed “was far different than what I originally proposed. The state Senate added in a lot of language that we never intended and that we actively opposed with our friends in the realtor community.”

    Sen. Brian Weinstein (D-Mercer Island) disputes that. He claims neither the attorney general nor the realtors ever opposed the bill when it came through the Consumer Protection and Housing Committee, which he chairs.

    The bill, known as the “distressed property law,” is intended to help prevent cases in which a homeowner seeking help in staving off foreclosure loses their home to the supposed rescuer. Realtors are upset because under the bill someone who approaches a homeowner who’s struggling with their mortgage payments in order to discuss ways of getting out of the predicament is considered a “distressed home consultant.” The bill says that any such consultant has a fiduciary responsibility to the homeowner, and has to act in their best interest. This, says Bill Riley, Vice President of Government Affairs for the WAR, could open realtors up to extra liability.

    That, says Weinstein, is not a mistake. “Subjecting realtors to possible liability was not an unintended consequence,” he says. “We intended for realtors to be subject to liability because consumer advocates noted that sometimes these foreclosure rescue scammers are also licensed real-estate agents.” (See “Sold Out,” April 2, for one alleged example.)”


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