equity stripping using sub2?

[8yearflip]

First of all i would like to thank everyone on this board for sharing their valuable/invaluable info and/or experience. I would also like
to take this opportunity to introduce myself my name is wes and i'm
currently in the middle or better yet the end of a long term live in flip.

Now to my question regarding the post subject. I was just curious how is buying a home sub2 from a person in default or foreclosure
and profiting from the owners equity any worse than when the bank repos the property and kicks the owners out. From what i've read so far when investors buy a property sub2 the owners atleast get something out of it vs. nothing from the bank. I just wanted to post this and a few other questions regarding sub2 after reading a post that linked to the report from the national consumer law center that painted this practice as fraudulent. I guess it's ok for banks, government agencies, and mortgage lenders to strip equity just not investors. I wanted to get into this type of investing  but after reading that article with all the investigations and law suits I am not sure. I also wanted to ask if you guys think that a large percentage of these lawsuits are made by people who knew exactly what they were doing when signing over their property and then later claiming ignorance. To me it sounds alot like the tobacco industry lawsuits where people claimed they didn't know smoking was bad for their health while holding their hand out. One last question is where do you think the pressure for new legislation regarding this subject is coming from? financial lobbyist? realtors?
Sorry for the long post but i'm a little upset after reading the article mentioned above. It seems like another road to wealth via RE investing is being shut down, one i was very interested in. Why not just write articles stating that RE investing is evil and eveyone involved is just just taking advantage of someones misfortune. All of which are elderly women or ignorant immigrants as indicated by the national consumer law report. None of the people mentioned happen to be people who were careless with their credit or spending or just had to have a certain house in a certain area they couldn't afford.
thanks in advance for responses,  wes

[mtnwizard]

Hi Wes,

I understand your frustration.  Laws throughout the nation are being written to minimize the potential profits of small investors.  We now have over 1 million realtors in the U.S., and the number of FSBO's each year are increasing substantially.  I understand that now about 25% of homes are sold without a realtor.

Why are subject 2's and lease options under attack?  They are methods used by small investors to do creative deals without the use of a realtor.  In my opinion, it's the realtor lobby which is very powerful, that is behind many of the anti-investor laws that have recently been passed in Texas and Illinois, and that are pending in North Carolina and other states.  For instance, the pending law in North Carolina makes it ILLEGAL to do a subject 2, UNLESS you have your real estate license.  To me, that's a giveaway as to who is behind this anti-investor mania.

The report to which you refer was sensationalized and much of it was researched and written by a law student seeking to make a name for himself.  It is replete with inaccuracies and directed at "foreclosure consultants".  

Just be careful when doing your deals to structure them properly, and make sure that all your bases are covered.

Da Wiz

[reigal]

Leave it to the lobbyist to suck everything dry. In MD, there are now laws against contacting people in foreclosure. They are using the same logic.   Poor homeowners being preyed upon by RE investors instead of allowing them to turn over their homes to a realtor to sell at market value.  

All these homeowners are adults. If you were smart enough to buy a house, you are smart enough to know when you are being swindled.

No one is twisting arms here...homeowners can choose a realtor, go fsbo or structure deals such as Sub2.  If I was in trouble with my home and someone approached me, I would know that I can just as well put the house on the market.  It's no secret. I don't underestand where the protection comes in.

I may choose a SUB2 because its faster and I get out of my situation faster.

[REOman123]

Yeah, who does the government think they are trying to protect innocent unknowing homeowners from predatory investors willing to destroy their lives for a small profit?   Not that this is always the case, but come on.   I have some idiots in this area that are borderline demonic, and need to be shut down.   But i'm sure you are one of the good guys :

[reigal]

So you think these people were smart enough to buy a home but not smart enough to tell when someone wants to steal their home.  

While we are at it do you want the government to protect people from smoking, drinking, etc. Because we all know its bad for them. It's called choice.

People can choose.

I would rather see the gov't protect people from the likes of companies such as Enron who distroyed thousands of lives by bleeding thieir retirement accounts dry.

Are there statistics that this sort of behavior by investors is rampid?  I would like to know.

[mtnwizard]

There are fear tactics being employed by an industry that feels threatened by small investors -- the realtors.  I know now some realtor will chip in with some great tale of working for the people, but the realtor lobby is very strong -- there are over 1 million of them.  

Last year over 25% of homes were sold FSBO.  Many of those deals were ours -- the small investor.  More realtors than ever combined with fewer homes listed means a smaller piece of the pie.

I'm sure there are scams, especially with foreclosures, but with this baloney in North Carolina, I don't believe they had hundreds of "subject to" defaults as they claim.  However, when the law passes later this year, it is ILLEGAL to do a "subject to" unless you are a licensed realtor or unless you use a land trust which is exempted.  Now whom do you suppose is behind that one?  Realtors.

And, what about banks and the DOSC?  When times get rough and mortgages are tight and far between, what's a good way for banks to raise money and make their stock and their portfolio as salable as possible? Merely call in as many low-return and non-perfoming notes as possible and get them off their books. How many fraudulent transfers could you find in any bank's overall portfolio these days? And what abut when property values are falling and interest rates and loan parameters are climbing?

This is not a prediction of doom. It is only a proffered caution. Is the sky falling? No. Could it fall?

Da Wiz

[REOman123]

I'm slightly jaded because most of my days are filled with weeping homeowners who thought they had saved themselves only to head into foreclosure a year later (when the tenants the investor had in the home default and had trashed the place).   I think that there are some very legitimate investors and the same with Realtors.   Both have their place in the real estate industry, neither would survive alone.   And at least Realtors have a cap (6-7%)on how much they can screw out of a homeowner.   The "smart enough to buy a home but..."  theory is crap.   Foreclosure sends people into a state of depression and or mental instability, i've seen it first hand enough to know.  Some of these people need help from the bad guys.   I'm not siding with some of the lobbying we're talking about, just that there may be a way to weed out the morally corrupt.

[reigal]

Depression does not equal stupidity. Believe what you will but as the Wiz mentioned there seems to be reasons for why this sector has been selected as an area that needs protecting.  Case closed.

[Erv]

Thes new Anto-preditor laws are structured to take away options for families who want to save teir homes from foreclosure. Its almost like the legislator has ignored all but the lobbyists.

[mtnwizard]

Erv,

It was the same way with the DOSC.  In the late '70's consumer groups fought the banks trying to prevent them from being able to call loans.  Of course the banks won and Garn-St. Germain was passed in 1982 by Congress.  

What was exempted?  Land Trusts.  Why?  Because their wealthiest depositors as well as the congressmen who voted used land trusts regularly for privacy purposes and the banks had to keep them happy in order to get the vote to go their way.  The game has never changed and I'm afraid we're in for a rather dark period for small investors as the real estate lobby scrambles to hold on to what it believes should belong to only them.  Who pays?  The consumer and small investor.  Very sad.

Da Wiz

[Erv]

 I tend to agree with you, but I have devised and used a program since 1992, that still allows the small investor to help the distresed consumer and stay within in the law, while making a profit.

In fact I wrote a book about it.

Would love to chat with you about it by voice.