I thought I’d go through the Northwest Justice Project’s Foreclosure White Paper and provide a critical analysis.

Except that, it never occurred to me I’d get stuck on the very first page.

Oh well, it’s time someone who knows a thing or two about foreclosures steps up and takes a long, hard look at it because it’s got its share of problems, beginning with page 1, paragraph 1.

Equity

First paragraph:

The first key to understanding Foreclosure Rescue Scams is the concept of “home equity.” Home equity is simply the difference between the market value of a home and the sum total of liabilities (i.e. debt) on the property. For instance, a home that is worth $250,000, but is subject to a $100,000 mortgage, will have $150,000 of home equity (assuming there are no other liens or debts against the property). — The Foreclosure White Paper
Page 1, Paragraph 1

Well, at least its author, attorney Eric Dunn, by attempting to explain the concept of equity (though why he calls it “home equity,” I don’t know), understands it exists. That’s a significant improvement over what we’ve previously seen from your office.

Except that, Eric, it turns out, has it all wrong.

Vacuum

What Eric is describing is the concept of equity in a perfect world, on a perfect day, in a vacuum. And, if that’s the sort of equity we’re talking about, then Eric’s explanation is certainly fine.

However . . . the white paper is addressing the issue of properties in foreclosure.

In doing so, he cannot honestly talk about the concept of equity without mentioning the very real effect of foreclosure on equity. To do so is, to use Eric’s word (or was it Ignacia’s?), is disingenuous.

Situation #1

It’s a perfect day, in a perfect world, and John and Mary owe $100k on their $250k house, per Eric’s example above. Not only that, it’s a sellers’ market where properties are fetching top dollar (sweet!).

How much equity do John and Mary have?

Although Eric would argue $150k, that’s a bit of a stretch, but close enough, I guess.

And if John and Mary decide they want to cash out by selling, what can they expect to walk away with?

Closing costs in my area are 10% or so to the seller. With a full price offer, John and Mary walk out of closing with a check for $125k. Again, close enough.

Situation #2

It’s a less than perfect day, in a less than perfect world. John and Mary still owe $100k on their $250k house, but the market has shifted. Now, homes aren’t selling nearly as fast as they used to, and full price offers are few and far between.

Even worse, property values are beginning to tumble.

Sound familiar?

How much equity do John and Mary have today?

Not $150k, and not $125k.

More than likely, if they want to sell, they’ll have to take a discount. And if they really want to sell, like anytime soon, they’ll probably have to take a considerable discount to guarantee offers comes in.

So, when their agent calls after months of inactivity and says they’ll need to come down to $235k, they agree instantly. And a month later, when no offers have come in and the market continues to weaken, they reduce it once more, this time to $220k, crossing their fingers all the while.

Thankfully, that does the trick because a couple offers finally show up and John and Mary accept the better of the two, $210k. It’s less than what they’d hoped for, but they’re glad just the same.

How much do they net at closing?

The same 10% closing costs are in effect, so they’re already down to just $89k.

Only this time around, the buyer also asked for a 3% contribution from the seller, to be used toward the buyer’s closing costs. And, though John and Mary didn’t want to take an additional 3% discount, they were sufficiently motivated to do so.

That’s another $6,300, and now we’re down to $82,400, which turns out to be the amount of their settlement check.

They took a big hit, but at least it’s over and they can move on, which was their goal all along.

Situation #3

It’s a terrible day, and John and Mary’s home is scheduled to be foreclosed in just a couple days. They owe the same $100k, including all the back payments and foreclosure fees, and their house is said to be worth $250k, but no one can really say for sure.

A ton of equity?

Well, not really.

They risk losing everything at the foreclosure auction and are looking at offers from local investors. The last few days have been crazy with no less than four guys knocking on their door and making offers to buy their home.

One offered “U-Haul money,” $2,500, to walk away. John told him to get lost and threw him off the porch.

Another said he’d go $30k if John had a title report showing he and Mary actually owned the place and there were no other liens against it. Unfortunately, John hadn’t thought to order a title report because he assumed he’d be able to come up with the money to stop foreclosure on his own. With no title report, the guy said, “thanks, but no thanks, I’ll just buy it at the sale for what you owe.”

One investor said he’d buy it for what they owe, too, only he’d allow them to stay and rent it, giving them an option to buy it back within 3 years. But John was too smart for that. He’d read all about foreclosure rescue scams and didn’t want to be screwed out of his equity.

The last offer was from a guy who worked for Bobo, the world’s only real estate buying chimp. He’d pay $25k, in cash, and give them 10 days to vacate. He’d give them $5k upon signing over the property, and the balance once they were gone, with a $250 a day penalty for every day they were still in the property beyond 10.

He also suggested they might do better by letting the property go to the foreclosure sale and hope a bidding war ensues, but they decided that was far too risky and didn’t want to ruin their credit, so they rejected that route.

And so, with fewer options than they’d have preferred, they took the chimp’s offer of $25k, the best of the bunch (no pun intended).

Circumstances matter

Three situations, all influenced by circumstance, resulting in vastly different values.

And, because the circumstances go from one extreme to the other, John and Mary’s equity is worth either $125k or $25k, or somewhere in between.

What it’s not is . . .

. . . simply the difference between the market value of a home and the sum total of liabilities . . .

Not hardly.

Can you imagine, Rob, what consumer advocate attorneys will say when they learn John and Mary were paid $25k for the $150k equity?

I’m guessing, “scam!”

When, in fact, John and Mary weighed their options and, in light of their circumstances, accepted what they considered the best offer available.

Was $25k a really bad offer, and were they somehow ripped off or tricked out of their hard-earned equity?

On a perfect day, in a perfect world, in a vaccum, probably yes.

But on a terrible day, with foreclosure looming, absolutely not.

Certainty

That $25k represents a lot more than some people not about to lose their homes imagine. With foreclosure just around the corner, $25k is nothing less than salvation.

It’s a guarantee foreclosure never happens, nor does eviction. It means money to move, to pay first and last rent, to make deposits for phones and utilities, and to be able to start all over without a lot of pain and suffering.

It means no attorneys, lawsuits, process servers or life-long foreclosure scars.

It means no more worrying about how things turn out. That $25k in hand is almost priceless and because of it, they’re certain to come out okay.

No, it’s not the perfect solution (see perfect day, perfect world, above, for perfect solution), but it’s not disaster either, and at the moment, avoiding a total disaster is Job #1. $25k does exactly that.

And frankly, Rob, unless and until the Office of the Washington State Attorney General can guarantee they’ll net more than $25k at the foreclosure auction (it can’t), it’s indisputably fair.

Certainty

Equity in a vacuum, as described in the Foreclosure White Paper, never happens except on shows like “Flip This House,” or whenever consumer protection attorneys want to scream “my client is a victim.”

More likely, that client of theirs received 100% of what was reasonable at the time, considering the circumstances.

Attorney Eric Dunn, as the ample-breasted latina Ignacia Rameriz, once commented, “If you just pay John & Mary a fair price for the house with no strings attached, then you have nothing to worry about.”

What’s fair?

I know you probably hate this idea, Rob, but I suggest we let John and Mary decide.

They determined fair to be $25k (though Eric, no doubt, would argue otherwise). And no, they’re not poor, sick, elderly, delusional, depressed or any of those other things you like to claim.

What they are, Rob, is hours away from losing their home.

You see, it’s circumstances that determine equity and what it’s worth in terms of real dollars, not simply market value less debt. And circumstances like, I don’t know, FORECLOSURE, must be factored into the equity equation.

You folks never seem to remember that. Instead, you talk about equity as if foreclosure wasn’t just hours away from stripping it all, and that’s a lie of omission if there ever was one.

The Key?

The first key to understanding Foreclosure Rescue Scams is the concept of “home equity.” — Attorney Eric Dunn

Translation?

I really don’t think Eric understands foreclosure rescue scams.

In the arena,

Joe Kaiser

P. S. I just looked at page 1, paragraph 2. It’s going to be a very long night. Thanks for nothing, Ignacia!

Bobo and I did a deal yesterday with Jim, a nice fellow from Tacoma (and long-time real estate investor).

Heads up . . .

When your investigator Rene contacts him to let him know he’s been scammed (I’m guessing he’ll now been added to your list of people I’ve cheated), he’s the kind of fellow who will tell her she’s nuts.

click to play

I’d called to talk with Jim about a property he’s got in the upcoming Pierce County tax sale, and we came to an agreement right there on the phone . . .

Here’s how that call went . . .

So, later that day, he stopped by the office to complete the transaction and pick up his money.

We’d already been to the bank and had his $10,000.00 cashier’s check ready to go. And, we’d prepared a deed to convey 100% ownership of the property.

Ten minutes later, Jim was out the door with 10 grand in his pocket.

And us?

Bobo and I are the proud new owners of a unbuildable lot on the Stuck river in Sumner.

It’s a done deal.

100% done.

Bought and paid for done.

100%.

Done. Done. Done.

Did I mention, done?

property rights

I’m not an attorney, but even I know that as the owner of this property, certain rights are now mine.

Among other things, I have the right to use it, to mortgage it, and the right to profit from it.

Equally important, I also have the right (subject to zoning and what not, of course) to decide what to do with it from here on out.

That’s my call.

100%.

Mine.

What about Jim?

And Jim’s rights?

He has no rights to this property. None. Zero.

Any rights he had he sold to me.

When he accepted my check and deeded me “all interest in and to” the property, his interest forever ended and any rights or claims he had to the property became mine.

All.

100%.

Mine.

Overturning Magna Carta

But, apparently, not according to you.

Your office believes that if I let this property (MY property) go to the upcoming tax sale (one of My rights) and a profit is created there (MY profit), that money belongs not to me, but, (and I kid you not) to Jim?

Huh?

That belief is an absurdity and a position difficult for thinking people to understand.

That belief is NOT what the applicable statute says.

And that belief has no basis in law (again, not an attorney but not stupid, either) and will become the first part of your lawsuit a thinking judge tosses out.

Magical thinking

And this investigation?

It and your multi-million dollar lawsuit is based on the fundamentally flawed and constitutionally unsupportable claim that Jim and others like him, having previously sold their property rights to me, have those rights magically restored by virtue of the Washington State tax sale statutes.

And that’s nonsense.

Respectfully,

Joe Kaiser

Thought you might like to know . . . Bobo got the big “let’s do it” today.

That’s deal #1 in the books for the little fellow and he’s off to a very good start.

Nice!

On Monday we’ll overnight the paperwork to an out-of-state fellow and shortly thereafter Bobo Buys Real Estate, LLC, will have its very first property in hand.

verbal offer accepted

The seller is in foreclosure and looking for a quick solution to his problem. He’s accepted, at least verbally, our offer of 1/3 the assessed value.

It’s not a $200 deed kind of deal, but it’s not too bad a deal, either.

Still lots of unknowns and before sending the dough, we’ll do some checking to confirm we’re buying what we think we’re buying.

Please call

Bobo would like to hear from your office on this deal. Please have your people call his people and let’s put it to the test.

Bobo and I would like to know if your office considers buying property for 33 cents on the dollar from people in foreclosure a “scam.”

And if so, why that is.

We’d like to know if your office is going to come after Bobo and me for having done this deal, or claim we’ve taken advantage of the seller at some point down the road.

We’d also like to know if your office thinks we should have “carefully explained” all the available options to him (iinluding letting it go to sale) so he’d be able to make the very best decisions possible.

Finally, we’d like to know if your office considers Bobo a fiduciary in this matter having responsibilities that extend beyond what would normally be considered a buyer’s responsibilities.

Again, please contact our attorney ASAP and advise.

how this deal went down

And just so we’re clear . . .

Bobo didn’t agree to pay the fellow’s property taxes, or stop the foreclosure or save his credit or anything like that.

He simply agreed to write a check.

The seller agreed it was a fair price for his equity and an all around fair deal, so now we’ll move forward and just get it done.

And on Monday morning the appropriate paperwork will be FEDEX’d to the seller.

Just like that.

disclosure

And Bobo’s future plans for the property?

Bobo believes what he does or does not intend to do with the property is nobody’s business but his own and so he did not tell the seller of his intentions for the property.

He believes he is under no obligation, legal, moral or ethical, to disclose to anyone, including the Office of the Attorney General of the State of Washington, his plans.

what’s next?

I just got off the phone with Bobo and he’s asked me to go ahead and immediately list it. If we snag a buyer that nets us at least twice what we’ve paid, he’s asked me to go ahead and take it.

And if not?

I’d love to tell you, but it’s nobody’s business but Bobo’s.

Respectfully,

Joe Kaiser

I thought today would be a good time to discuss a real estate concept your office is unfamiliar with, EV.

EV is short for “Expected Value” and is most easily understood as your hourly rate.

Don’t worry, it’s so easy to figure out even a chimp could pull it off.

Smart investors determine in advance where their hourly rate is greatest and focus all their energies on that strategy, to the exclusion of all others.

So, when we determine strategy X is worth $20 per hour, and strategy Y is worth $100, we forget all about X and become an expert on Y.

taking dead aim

And when we stumble on to strategy Z, which we determine is worth upwards of $300 per hour, we no longer care about X or Y and instead we take dead aim at Z.

Z is where the money is. It’s where our EV is off the charts and our hourly rate is second to none.

That’s where we spend our day-to-day activities and how well we avoid distractions that take us away from working strategy Z is key to success.

the WSOP

Last week I decided to take part in the World Series of Poker main event, a $10,000 buy-in, No Limit Texas Hold ‘em tournament taking place this week in Las Vegas.

I was all set to head out a few days ago and take my shot at the estimated eight million dollar grand prize.

But then I got to thinking about my chances (not good) and the effort required (a week of 14 hour days), and the guys I’d be up against (the best players in the world).

What’s my EV?

Pretty much zero.

Certainly, the expectation is negative and the odds of me returning with a profit, much less my $10,000.00, are off the charts not good.

I decided to rethink this WSOP thing.

No gamble in me

And I decided I won’t be heading to Vegas anytime soon.

I’m just not willing to gamble at the moment and $10k is $10k and not coincidently, my attorney bills on this matter just from last month were $10k.

That means I need to make the very best of decisions and risking $10k on a speculative opportunity doesn’t seem like a good plan.

However . . .

I have cleared the decks for the week, thinking I’d be out of town playing a poker tournament, and that means I’ve got a free week.

A distraction-free week.

A chimp and a chair

What to do?

Rather than spend 14 hour days playing with chips all week long, I’ve decided to spend it playing with a chimp.

So, for an entire week, Bobo will be getting to work, attempting to put together one “real steal deal” after another, focused solely on strategies where his EV is off the charts.

And he’ll be doing it “jungle style.”

We’re teaming up, and you and everyone else interested in seeing what an investor on a mission with a chimp for a side-kick can do in a distraction-free week can come along for the adventure.

real time blogging

My goal is a dozen deals this week. That’s a dozen real deals, with profits built-in, 10x returns and certainty in the house.

No, it won’t be easy and yes, Bobo can be a pain in the you-know-what sometimes (and when things don’t go well he tends to throw poop), but we’re getting to work just the same.

Jungle Rules apply

Beginning Wednesday at noon (Pacific time) and continuing for an entire week, Bobo and I will be making deals and blogging in real-time every step of the way.

That means you can follow along, learning what we’re up to, seeing our hits and misses, and with any luck, watching us snag a monster profit deal along the way.

I’d normally price something like this at $397, and if you’re in any way associated with the office of the AG, you can sign up for exactly that by clicking here.

But, for readers of this blog, I’m knocking it down to just $97. You can sign up by clicking here.

Better yet, if you’ve made a comment or two, (you can enter your own comments at the bottom of any post) as my way of saying “thanks,” your price is $19.97.

And you can sign up by clicking here.

EV is where it’s at

Playing poker at the Rio will just have to wait until next year.

Until then (for this week at least), Bobo and I will be taking dead aim at at our highest and best EV: foreclosure real estate.

That’s where our EV is off the charts.

You’re welcome to follow along, but I’ve got to warn you . . . jungle rules so apply.

Respectfully,

Joe Kaiser

Just wanted to give you a heads-up about Bobo.

He’s got a guy ready to deed him a vacant lot for a couple hundred bucks, and believe me, this looks like another “real steal deal” in the making.

And that’s the problem.

Since your office is incapable of appreciating the elegance of a $200 deed deal, Bobo thinks you’ll come down on him for putting this thing together.

You may recall I mentioned in an earlier post about Bobo, he’s not looking for trouble from your office.

That’s just not how the little fella swings.

unfounded concerns? Not hardly

But you’ve got to wonder what’s got him so concerned.

He’s just out doing deals like every other investor in town. He’s contacting people in foreclosure, talking about what they’d like to do and offering solutions to their problems.

Most aren’t interested, but of the few who are, he gets them signed up, paid, and becomes the proud new owner of their properties. And everyone is delighted.

So where’s Bobo’s problem?

David Huey of your staff, in his April 16th, 2007 interview with the Morning News Tribune entitled “He’s Got Your Back,” expresses his opinion of real estate investors, saying:

We’ve sort of shifted our focus to foreclosure rescue fraud, because that’s where con artists can make a living. They don’t have the inflated values anymore. So now if you’re looking to make your fortune in real estate, you have to find new ways to exploit people, and we’re seeing that in foreclosure rescue scams. — David Huey, Assistant Attorney General

did he really say that?

Yes, he did say that.

” . . . if you’re looking to make your fortune in real estate, you have to find new ways to exploit people.”

It’s got to be the most asinine statement I’ve read in a very long time, and therein is the problem, Rob. Your office assumes real estate investors are scam artists.

That’s ridiculous.

It’s also entirely inappropriate to have someone with such an obviously distorted view of investors in charge of this case. Someone so clearly predisposed to inferring scam is, without question, incapable of conducting a fair investigation.

Can you really trust his judgment after making a statement like that?

victims?

Yes, we investors are looking to make our fortunes in real estate. No, we’re not interested in finding “new ways to exploit people,” as Huey believes.

We create profits by providing solutions to people with real estate problems. That’s the job of a real estate investor. It’s what we do.

But not according to David Huey.

With him running the show, is it any wonder your office says (presumably, with a straight face) that Steve, Hector and Ruth, Dan, John, Nora, and Butch the Biker are “victims?”

Do you have any idea how extraordinarily foolish that makes your office appear?

Not hardly

And do you really want to go into court and say these are people I victimized?

• Steve, who’s still in his home all these years later (and who as yet has never paid us nickel one).
• Hector and Ruth, in their home as well (although your office almost killed that deal).
• Dan, whose properties weren’t stolen by that shady investor after we got the guardian involved, putting $120k into his ex-wife’s pocket for unpaid child support.
• John, where we sued the county and won, unwinding the bogus foreclosure, getting the property sold, splitting the profits with him (and the state collecting $50k it otherwise would not have seen).
• Nora, who is recovering from cancer surgery she probably would never have received had we not helped.
• And Butch the Biker, whose nieces now have $60k in the bank to pay for their college educations, thanks to us working together with their uncle.

Again, victims?

Good grief, Rob, give a chimp a break.

Respectfully,

Joe Kaiser

My friend Bobo is the world’s only real estate buying chimp, and I teamed up with him as a direct result of your office’s involvement in my foreclosure business.

(Click here to see Bobo’s website).

I wanted to experience that moment of someday looking directly into the eyes of your AAG’s grilling me at some deposition and be able to say, “does your office have jurisdiction over chimps?”

And I did, passing former AAG Cheryl Kringle a copy of Bobo’s marketing postcards when presenting my discovery materials.

The look on her face?

Priceless.

It was fun watching her squirm and reluctantly conclude that, no, you probably do not have jurisdiction over chimps, marauding or otherwise.

She kinda mumbled there so I’m not really sure. Please confirm as to whether or not your office does indeed have jurisdiction because the last thing I want to see happen is my friend Bobo get sucked into this investigation.

That’s not how he hangs.

don’t do the crime if you can’t swing the vine

Bobo, with my help, sent out 1,244 postcards last month. And we’ll be doing deals this summer with anyone who doesn’t mind selling to a chimp.

Funny thing, though, is this whole matter of duress, and I’m wondering if a chimp can really exert the sort of pressure that rises to the level of “under duress.” I doubt it.

And that brings me to the point of this post, Rob.

it ain’t about the stress of foreclosure

Your office mistakenly believes the people that do $300 deals with us do so because they are somehow under the stress and pressure (and dare I say, duress) of foreclosure.

Your office thinks this, again mistakenly, because the AAG’s involved in this investigation have no idea what we do. AAG David Huey, in particular, continues to harp on this claim.

Bobo get’s it though, so I’ll let him explain. Just check out his Quick Cash program and you can see exactly who ends up doing our kind of deal.

It’s not the desperate seller you imagine. And it’s not the guy or gal stressed-out about a pending foreclosure. It’s the “walk-away” owner Bobo targets and that person is almost never concerned about foreclosure.

That’s a guy who says, “screw this, the county can have it.”

He’s not only unconcerned with foreclosure; he could not care less. Or even better, he may be delighted to have the property out of his life.

it’s a nuance thing

If you don’t have many many years of foreclosure experience, you’re not likely to recognize the many nuances that come into play in the foreclosure arena. The realization of the existence of the walk-away owner is one such nuance.

Thinking all foreclosures lead to distressed sellers is a beginner’s level appreciation for how people facing foreclosure deal with solving the problem. There’s much more to it than that.

I’ve moved beyond beginner level thinking.

As a savvy investor with decades of “in the trenches” foreclosure experience, I look for tiny insights that allow me to make the kinds of deals beginning investors would never recognize, much less understand.

The AAG’s involved in this investigation have beginner level thinking. It’s not their fault and no one is to blame for it; it’s simply the reality of the situation we find ourselves in and is, in large part, the reason this investigation has gone on for so long.

Your investigators, Rob, are in situations they don’t recognize, much less understand.

And nuance?

Not a chance.

please get Huey up to speed

People don’t sell Bobo their junk lots or unbuildable wetlands because they’re desperate for a few hundred bucks. They sell because they’ve already decided to walk away and the $300, at that point, is found money.

Rob, please make your investigators understand this has nothing to do with taking advantage of desperate people.

Bobo is simply giving a few bucks to people who, by and large, have long-since decided they’re not paying the county a plug-nickel more in property taxes and instead are choosing to walk away.

Bobo’s figured this out already.

Is it too much to ask that AAG David Huey do the same and stop spouting the “desperate seller” silliness as it relates to the junk lots we pick up for next to nothing?

It only shows he really has no clue what he’s talking about.

Or should I have Bobo give him a call to explain?

Need to sue Bobo, too?

You can contact him here:

Bobo, the world’s only real estate buying chimp

Respectfully,

Joe Kaiser