"Impossibilities are merely things which we have not yet learned"
- Charles W. Chesnutt

Google to the rescue! Pulls Mortgage Scammers AdWords.

November 21st, 2011

Really, Mortgage scammers use AdWords?  In an article by MSN Money, the special inspector general asked for Google’s help in pulling Mortgage Scammer’s ad’s off Google’s adWords ad’s.  This goes to show how powerful Google’s become.  In any case, I’m glad to see that they were willing to pull these ad’s off the displays of the world.  But for Consumer Watchdog, pulling the ad’s aren’t enough.  The want all the money generated by these scammers ad’s to be donated to non-profit groups that help people with credit problems. A little too much?  maybe.

In case you find yourself in a situation where you need a home modification, here is a warning.  DO NOT LET ANYONE OR ANY COMPANY HELP YOU WITH A HOME MODIFICATION OR PRINCIPLE REDUCTION IF THEY ASK FOR MONEY UPFRONT. ALSO, DO NOT SIGN YOUR DEED OVER TO THEM AS WELL.

Let me know what you think down below:

Posted in Foreclosure Info | No Comments »

Are principal reductions good for the economy?

November 11th, 2011

Well, that all depends on who you ask.  As we all know, there are 2 sides to every coin. If someone is winning, then someone else is loosing.  Have you ever thought about principal reductions and the effect it could have on the economy as a whole?  I’m not talking about the homeowners economy, I’m talking about the US economy maybe even sovereign economies.

Question: What happens to loans that are sold to Fannie and Freddie by your local bank?

Answer: They normally get bundled up and sold to investors, insurance companies, pension funds, etc.

Question: When the principal is reduced, who ends up taking the loss?

Answer: The one that holds the investment. The banks just service your loan, they don’t actually own it unless they portfolio’d it and kept it for themselves. So in most cases, it’s the investor that’s holding the principal.

Question: What happens when you put your money in a normally safe investment and you loose your principal investment?

Answer: For me, I say… Geez, I won’t do that again. For you…. you have to answer that question yourself.

I wonder if all this outcry for principal reduction on mortgages is a bit short sighted.  Yes, it’ll probably help the homeowner to avoid foreclosure, but will it help the economy as a whole?

Some politicians that are running for office or are up for re-election are pressuring the FHFA (overseers of Fannie and Freddie) to homeowners principal reduction.  Great platform for election, but will it back fire in the long run?

Let me know what you think… Feel free to comment on this post.

Posted in General Articles | 1 Comment »

Home underwater, but no mortgage payments missed

November 5th, 2011

Last week, someone called wanting to know more information about how this whole selling a house to an investor goes. After speaking with him for a bit, I find out that he hasn’t missed a payment yet, but he is underwater. He’s feeling trapped in his home because if he does sell his home at market rate, not only does he loose whatever down he put into the house during the purchase, he also will need to fork over the difference of what he sold his house for and the amount borrowed. In addition to all of his real estate troubles, he’s faced with one of the 3 D’s of why people must sell their real estate. Death, Divorce, and Debt. He hasn’t faced Divorce yet and I truly hope that him and his wife work things out.


Unfortunately, his location is a bit too far for me to offer to purchase his home.  However, I did offer this advice.

1) If someone does negotiate a short sale with the mortgage holder, make sure that the mortgage holder is not going to seek a deficiency judgement on you.  Deficiency judgments are legal in some states and illegal in others, so check with your attorney to find out if your state allows for deficiency judgement. The negotiator will be able to obtain a letter signed by the mortgage company stating that they will not seek a deficiency judgement on you.

    2)If you feel like an real estate agent can help you, then you want one that is honest and will look out for your best interest. As you probably are aware, there are many types of people out in the world.  Some more honest than others.  Most more interested in their own bottom line than anyone else’s.  I’m not saying there are no honest and dedicated agents out there, there are some.  Do your research on the agent and talk to past clients.

      3)Sometimes an investor will come in and do their best to negotiate a short sale at the same time look for an end buyer in the process. If the investor can find an end buyer, everything is great.  The investor can perform a back to back closing where he closes on the buy of the property and in the next hour close on the sell of the property.  For these type of “investors”, this type of situation will be ideal.  The homeowner gets out of their situation, the end-buyer gets a house, and the “investor” gets paid. Win Win Win for everyone.  But, what if the investor can’t find an end-buyer? Most of the time, they will back out of the buy of the house and leave the seller to finish the deal themselves.  Some sellers want a guarantee that the house will get sold. If an investor can provide this guarantee, then that might be the optimal solution for a homeowner. Personally I don’t do the whole looking for a buyer at the same time.  If I’m negotiating a short sale, it’s because I’m the one that wants to buy it.

        4)If someone tells you that you need to pay them to do a Short sales negotiation and/or loan modifications and that person is not an attorney, be wary.  I’ve heard of laws put into place that forbid people and companies to be paid to perform these services.  These fraudulent companies take a lot of deposits and fees from distressed homeowners only to close the business and take all the money.  At least an attorney has his license to loose if he/she is corrupt.  I’m not an attorney so check up on the laws yourself if you are approached by someone.

          I wish the best for this person that is in this situation and hope everything works out for him. Unfortunately, the only thing I could do for him is give him some pointers.

          Posted in Foreclosure Info | 5 Comments »

          End of 2 Giants – Fannie and Freddie

          February 17th, 2011

          The Obama Administration is on record saying that Fannie Mae and Freddie Mac should go out of business.  The US Treasury’s report to Congress, The Administration will “ultimately…wind down both institutions”.

          Over the next few days, we will see the mortgage amount limits that Fannie and Freddie can buy be lowered from as high as $729,750 to $625,500.  This will reduce the amount of conforming loans and push those in the higher price range of housing into a Jumbo Loan program.

          What kind of effect can this have?  Let’s think about it…

          -Basically the government is guaranteeing the mortgages brought by Fannie and Freddie, which have the lowest mortgage rates out there.  When you see rates posted, it’s usually for a conforming Fannie/Freddie loan.

          -Without the government’s guarantee, the bankers and investors will view buying these securities as  higher risk.

          -When the banks see higher risk they will undoubtedly increase the rate.

          -Now that we all know that home prices don’t always go up and the banks view risk at a different angle now, it’s pretty safe to assume that they will probably reduce the number of loans they write.

          What do you think?  Do you think that the removal of Fannie and Freddie as we know it will increase mortgage rates and decrease the number of loans out there?  What will Obama’s plan of being a re-insurer of mortgages instead of a insurer of mortgages do?

          Posted in General Articles | 1 Comment »

          New IRS Rules for Rental Property Owners

          February 8th, 2011

          In 2010 when the federal government enacted the Small Business Jobs Act of 2010 (H.R. 5297), it expanded the 1099 reporting requirement to all property owners no matter how small.  This means that if you rent, you’ll need to give your independent contractors or freelance workers a 1099 starting in the 2011 tax season and if the total amount is at least $600.  These include plumbers, electricians, painters, cleaning services, gardeners, landscapers, accountants, and handymen.  Basically any service provider to the rental property who don’t receive a W-2 form from you and who provided at least $600  in services.  I’m not an CPA, so you should check with your CPA on this.

          Posted in General Articles | No Comments »

          Max Contribution Amounts for Coverdell Education Savings Accounts is Extended.

          January 22nd, 2011

          Since my introduction of the Coverdell Education Savings Account (CESA), I have thought it was a beautiful thing.  For those of you that don’t know, it’s like a self-directed IRA but for education and not retirement.  This means I can put money into account, grow it via different asset classes not just paper, and qualified withdraws is tax-free.  When I talk to people about it, they say “Oh, it’s like a 529 plan”.  I say “It’s like a 529 on steroids”.

          One of the few bad things about the Coverdell was the contribution amounts.  Before 2010, the max contribution amount was a messily $500/year/child.  Starting in 2010, the lawmakers up’d the ante to $2,000/year/child.  This new contribution amount has been extended through 2011.  Hopefully, they can make it permanent or even up the ante.

          Posted in General Articles | Comments Off

          Tax Lien Investing in New Jersey by Conway

          November 28th, 2010
          After speaking with friends and family about what it is exactly that I do for a living, I can see that there are many people that do not know what Tax Liens are.  This article is intended to explain what Tax Liens are and the process of acquiring tax liens.  Any example or idea in this article is based on New Jersey laws and practices.  Each state is different; I have chosen to focus on New Jersey since I am a resident and New Jersey municipalities have tax sales throughout the year.  If you decide to invest outside of New Jersey, you will need to find out what the procedures are in your state, county, and/or town.  I am not a lawyer; I am not offering legal advice.  Nor am I an accountant offering tax advice.  Before you invest in Tax Liens or Tax Deeds, make sure to consult with your Real Estate Attorney and/or CPA.

          Tax Liens are basically a loan to a property owner that does not pay for the property tax, water bill, and/or sewer bills so that the municipality can go on with providing its services to its residents.  This type of loan has a very high priority lien position and has a max interest rate of 18%.  They are sold and brought at auctions that are held throughout the year depending on the municipality.  At the auction, the interest rates are bid down starting from 18%.  If the bid goes to 0 and there are still investors that want to bid, they start to bid what is known as a premium.  Premiums usually start at $100, and go up in $100 increments.  They are added to the defaulted tax amount and do not accumulate interest. For example, if the unpaid taxes are $2,000 and there is a $500 premium, the winning bidder owes the town $2,500 and there is 0% interest rate for the first year.  You won’t loose the $500 premium if the owner pays the tax lien–which is knows as redemption.  However, you will need to figure this number in when calculating Return on Investment (ROI).

          Tax Liens may sound like absurd and inefficient investments; however, there are benefits that come into play that will make this a pretty good deal.  One of these benefits is that you, as a prior tax lien holder, have the ability to pay next quarter’s taxes if they are previously unpaid.  When a property owner is unwilling or unable to pay a tax bill, and ten days have passed since the payment’s due date, you, the investor, are able to pay for the subsequent taxes and receive 18% interest without having to bid.  You also get to maintain your lien position.  In this case, you are betting that the property owner will not pay subsequent taxes and are looking for a melded interest rate of 9% after year two is over (Year 1: 0% + Year 2: 18% = melded 2 year 9%).  As more time goes by and you pay the subsequent taxes, the better the melded interest rate will be.  Another reason why you may bid a premium is because some municipalities charge a 6% penalty to the owner automatically.  Even if you bid a premium, which will normally yield 0%, some municipalities tack on an additional 6% interest penalty.

          Tax liens have a great lien position.  Some people think that the lender always has first position in the lien priority scheme.  This is not true.  IRS Liens have a higher priority than 1st position.  Tax liens and/or municipality liens have even higher position.  The highest lien position there is, is a environmental lien.  By being so high up in the food chain, your money is pretty safe.

          If the property owner does not pay you in 2 years, you are able to legally foreclose on the property.  This 2 year period is called a “redemption period”.  This foreclosure process is different than if a lender forecloses in that it does not go through a sheriff sale on the countycourt steps.  The only time it will go through a sheriff sale is if there is an IRS lien on the property as well.  This is why it is good to have an attorney that specializes in tax liens on your team.  If the property is abandoned, you may start the foreclosure proceedings in 6 months.

          Lets talk about an example to drive in the point.  Dan has a property in XYZ town worth $200,000 and has a yearly property tax bill of $5,000.   He lost his job and can no longer afford to pay his real estate taxes.  A year goes by and the town needs his $5,000 to pay for the snow plowing overtime.  The tax collector in XYZ puts the $5,000 tax lien on auction.  Tim is a tax lien investor and goes to the XYZ tax lien auction.  He sees this $5,000 tax lien and bids 18%.  Other investors start to bid down the interest rate as well and Tim is the winning bidder at 5%.  He pays the $5,000 to the tax collector at the end of the auction and he gets a tax lien certificate.  Tim drives to the county court house to file the tax lien certificate.  He then waits.  Year 1 goes by and the 1st quarter taxes are due for XYZ town.  10 days after XYZ’s taxes are due, he calls the tax collectors office to find out if Dan paid his tax.  The tax collector says that he did not pay and asks if Tim wants to pay the subsequent tax.  Tim agrees and wires $1,250 to the tax collector.  At this point Tim will be collecting 18% on the $1,250.  Quarter 2,3, and 4 pass and the same thing.  Dan didn’t pay and Tim ended up paying each of the $1,250 tax that is due.  At the end of Year 2, Dan owes Tim $5,250 ($5000 * 5%) for the 1st year and $5,900 ($5,000 * 18%) for the 2nd year for a grand total of $11,150.  Your Total amount into this is $10,000 and you receive $1,150 in profit which yields a 12% ROI.  If Dan finds a job and decides to pay off the tax lien (aka redeem the tax lien), then Tim will receive $11,150 from the tax collector.  If there is a 6% penalty imposed by the municipality, then you Tim receive an additional $600 from Dan which gives Tim a total ROI of 18% ($1,150 + $600).  Lets say now that Dan does not pay and Tim wants to force redemption.  Tim starts the foreclosure process and does this by contacting his tax lien specialized attorney.  At the time of final judgement, Tim does not get the $1,150 in interest due him.  He doesn’t even get the $10,000 back.  He does however gets clean title to the property, unless there was any other municipality liens and/or environmental liens on the property.  Even if there was a $75,000 mortgage and the lender did not come forward to pay the taxes, the $75,000 lien will be wiped out.  This means Tim obtains the $200,000 property for $11,500 plus any fees it took to foreclose.  This is a 94% ROI for 2 years of waiting.

          You now may be wondering what are the chances of getting the property?  I’ve read that as much as 95% of the time, the tax lien is redeemed by the owner or the lender.  The other times, it’s either the lender messed up and forgot, or no one wants the property anyway.  In any case, the foreclosure scenario is a rare one.  However, there are ways to increase the chances of having a final judgement on the foreclosure.  Some of these ways is by obtaining liens on property that is abandoned, absentee owner, or building up the balance of the unpaid taxes by paying subsequent taxes past year 2.  Whatever the case, Tax Liens are a great way to diversify your portfolio in a safe manor while earning a great ROI.

          Here are a few Pros and Cons to tax lien investing:
          Pros:
          ●High priority lien position
          ●Can acquire property at Penny’s on the dollar
          ●Don’t have to speak with the owner at all. Tax Collector will gets the money for you. ● High interest rate
          ●A great way to increase your self-directed IRA funds.

          Cons:
          ●Long term holding of your money. Can’t just sell the lien like you can stock.
          ○Investing in a self directed IRA can combat this problem
          ●If you bid a 0% interest rate or a premium, can be 0% ROI if lien is redeemed within the first year.
          ●Need to keep track of the taxes that are paid in case you want to pay
          subsequent taxes.
          ● Need to research on the property before you bid.
          ●Sometimes the properties that you want to bid on has been stricken off because the owner paid the taxes before the auction.

          Of course, the information and sample provided to you above is over simplified.  There are many scenarios, laws, and rules that come into play.  If you are interested in investing into tax liens and want to do it yourself, its not rocket science.  The math is simple.  You can easily become educated on the subject and visit auctions to get a feel for it.  There is no fee to attend auctions and a lot of times there are people in the room that just observe.  If you are interested in investing into tax liens but want to do the leg work, then look no further.  I will be willing to do the research, go to the auctions, and do the follow-up on the taxes.  All you need to do is front the cash. Feel free to give me a call to discuss partnerships.

          Posted in Tax Liens | Comments Off

          Grow your kids education account and withdraw it tax free by Conway Wong

          November 26th, 2010

          Yesterday at the family Thanksgiving dinner, I was discussing with a few friends and family members what I was finding out about a IRS program which allows you to grow your kid’s education account and withdraw it tax free for qualified education expenses.  It’s called a Coverdell Education Savings Account, http://www.irs.gov/newsroom/article/0,,id=107636,00.html.  Before I go on any further, I’d like to stress the fact that I am not a CPA or a Lawyer.  I’m not pretending to be one either.  Before doing anything, you should consult your CPA and/or lawyer.

          Basically my understanding is this… it’s a savings account in which you can contribute after tax dollars, like a Roth IRA.  You can grow that money at an unlimited pace via stocks, bonds, mutual funds, REAL ESTATE, notes, options, mobile homes, partnerships, business ventures, and more.  Money that is withdrawn for qualified education is TAX FREE!  Qualified education doesn’t just mean college.  It also applies to grade school, college, and masters programs.  Talk to your educated CPA for a full list.  Now lets say your kid gets a lot of scholarships and does not need the money.  You can transfer that interest to someone else like your nephew  or niece.  If you do withdraw it for non-education related expenses, then it is taxed as normal and I believe there is a 10% penalty on top of that.

          If you would like to discuss this more, feel free to contact me and I’ll be happy to discuss what I know about this.

          Posted in General Articles | Comments Off

          Deficiency Judgement – What you need to know b/f someone helps you out of foreclosure. by Conway

          March 26th, 2010

          In our great State of New Jersey, the law makers allow something called a deficiency judgment. According to the website law.com dictionary (http://dictionary.law.com/Default.aspx?selected=468), this is defined as “a judgment for an amount not covered by the value of security put up for a loan or installment payments.”

          Read the rest of this entry »

          Posted in Foreclosure Info | Comments Off

          Foreclosure – The 5 Stages, by Conway

          March 26th, 2010

          Foreclosure. The dreaded word in so many of us have gotten use to in the news. This word has so many different meanings to so many different people. As a NJ Real Estate Agent and a member of the Board of Realtors, people ask me all the time “Do you have any foreclosures?”. I ask them, what do they mean by that? I always get a weird look as if I was from a different planet. I then have to explain to them that Foreclosure is a process and you can buy real estate at any time during that process. So, I am here today to write the 5 (yes I said 5) stages of Foreclosures.

          Read the rest of this entry »

          Posted in Foreclosure Info | Comments Off

          « Older Entries