Just say this on another forum and I was wondering what you guys think:

“How I can make an easy $500K

I have 4 rental homes, 2 in AZ and 2 in CA. They are all in my name and credit. I’m going to let them all go into foreclosure and buy them back from the auction. I’ve done the calculations and can put an easy $125K per property in my pocket by doing this (difference between outstanding mortgage and buy back price). I will temporarily lose my credit, but I still have my wifes credit which is pristine. I know a ton of people that are thinking about doing the same.“

Is this legal?

muzie - 06 September 2008 09:05 PM

Just say this on another forum and I was wondering what you guys think:

“How I can make an easy $500K

I have 4 rental homes, 2 in AZ and 2 in CA. They are all in my name and credit. I’m going to let them all go into foreclosure and buy them back from the auction. I’ve done the calculations and can put an easy $125K per property in my pocket by doing this (difference between outstanding mortgage and buy back price). I will temporarily lose my credit, but I still have my wifes credit which is pristine. I know a ton of people that are thinking about doing the same.“

Is this legal?

Is it legal…yes.  Is it ethical?  That depends on you.  Fact of the matter is that you would also benefit from 9-12 months of rental income with no expenses until the banks kick out your tenants.

I also have a similar type of situation.  My dad bought a property in Las Vegas back in 2004 using 100% financing and is now underwater (although he comfortably makes the payments).  Just like you, my dad can just stop paying the bills and screw up his credit for years and have me come in and buy the property either as a NTS, a short sale, or a foreclosure.

usctrojanman29 - 06 September 2008 09:25 PM

Just like you, my dad can just stop paying the bills and screw up his credit for years and have me come in and buy the property either as a NTS, a short sale, or a foreclosure.

Just to be clear, I don’t have any houses so I’m not the one considering this. This is something I read about on some Yahoo Forum.

usctrojanman29 - 06 September 2008 09:19 PM

Fact of the matter is that you would also benefit from 9-12 months of rental income with no expenses until the banks kick out your tenants.

Huh? How would the banks kick out the tenants if “he” buys the homes at the auction? The banks would never have possession of the places if he did that. Me confused by trojanman.

No it is not illegal, but the banks could find some way to get money from “him” and maybe get the homes back. Doubt they would want the latter by then, because he might be doing again after he finds out they have continued to drop. Will he get caught? Prolly not.

The foreclosing and buying back may be legal, but I recall reading on IHB that rent skimming is illegal, at least in CA.

graphrix - 06 September 2008 10:17 PM

usctrojanman29 - 06 September 2008 09:19 PM

Fact of the matter is that you would also benefit from 9-12 months of rental income with no expenses until the banks kick out your tenants.

Huh? How would the banks kick out the tenants if “he” buys the homes at the auction? The banks would never have possession of the places if he did that. Me confused by trojanman.

No it is not illegal, but the banks could find some way to get money from “him” and maybe get the homes back. Doubt they would want the latter by then, because he might be doing again after he finds out they have continued to drop. Will he get caught? Prolly not.

My back, if that person or their wife buy the property at the auction then yeah the tenants don’t get kicked out.  It’s been a long day of showing the property plus the heat so my brain no working good today.  haha

muzie - 06 September 2008 09:05 PM

Just say this on another forum and I was wondering what you guys think:

“How I can make an easy $500K

I have 4 rental homes, 2 in AZ and 2 in CA. They are all in my name and credit. I’m going to let them all go into foreclosure and buy them back from the auction. I’ve done the calculations and can put an easy $125K per property in my pocket by doing this (difference between outstanding mortgage and buy back price). I will temporarily lose my credit, but I still have my wifes credit which is pristine. I know a ton of people that are thinking about doing the same.“

Is this legal?

The trick is you have to have CASH to buy those places back…AND you have to beat the bank’s bidding.

PadreBrian - 06 September 2008 10:49 PM

The trick is you have to have CASH to buy those places back…AND you have to beat the bank’s bidding.

If you pay Cash for those places, can you do it anonymously?  Otherwise won’t they catch on if they notice you’re the same guy who defaulted and is now buying it back?

PadreBrian - 06 September 2008 10:49 PM

muzie - 06 September 2008 09:05 PM

Just say this on another forum and I was wondering what you guys think:

“How I can make an easy $500K

I have 4 rental homes, 2 in AZ and 2 in CA. They are all in my name and credit. I’m going to let them all go into foreclosure and buy them back from the auction. I’ve done the calculations and can put an easy $125K per property in my pocket by doing this (difference between outstanding mortgage and buy back price). I will temporarily lose my credit, but I still have my wifes credit which is pristine. I know a ton of people that are thinking about doing the same.“

Is this legal?

The trick is you have to have CASH to buy those places back…AND you have to beat the bank’s bidding.

The banks rarely bid. Maybe twice or three times a week there might be one out of the 50 plus that day.

cantaloop - 06 September 2008 11:03 PM

PadreBrian - 06 September 2008 10:49 PM

The trick is you have to have CASH to buy those places back…AND you have to beat the bank’s bidding.

If you pay Cash for those places, can you do it anonymously?  Otherwise won’t they catch on if they notice you’re the same guy who defaulted and is now buying it back?

In a sense, yes you can. You do it through a company name and not yours. However, this dude sounds like a tool who will end up using his real name.

BTW, I know it is not muzie him/herself, so my snark is not directed to him/her.

I’m a bit confused.  If these are rental properties, and not owner occupied, can’t the bank go after the owner?

As far as I know, it is not legal.
I heard it is a fraud not to pay mortgage when you can.
I don’t know, however, how banks will go after the homeowner.

About buying back at the auction, I thought the original homeowner doesn’t have right to do so.
If he tries, it becomes redemption not buying back which means he has to pay back all the debt to get the house back.
I don’t know what happens if his wife buys back though.
I might be wrong but that’s how I understand it.

I don’t understand how the guy is going to “make” money on the deal.  buying back the exact same property…... wouldn’t that be some kind of red flag that signals shenanigans?  Why not buy a “like” property at the deep discount?  That way your footprints are not all over the deal.

I also think that the spouses will have to both be included in on the transaction/application process and if the guy has been in a foreclosure and has his credit trashed, what’s not for the bank to notify the IRS/ FBI to conduct further reviews?  I am aware of a mortgage company that smelled a funny commercial application for a loan and they notified the FBI - and sure enough it was a scam and the applicants were introduced to the ugly world of IRS/FBI accountability.

I think a lot of “specuvestors” got away pretty lightly under the current system.  However I would caution anyone who is trying to game the system NOW and with multiple properties to consult a real estate attorney before any bold moves.  They’ll be able to tell you the risks and whether you’re going to need to set aside a portion of your profits to retain a criminal attorney.

If this guy is chasing the money down -essentially shorting his own houses - i’d say he’s doing it on “margin” and trying to time the market.  Two very risky and expensive lessons for someone who cannot get overthe fact that he made a big mistake in the first place by buying up overpriced units that could not hold their value in the current over-supply market.

I wonder how many/% of these people now find themselves on the foolish end of several “investment” properties snapped up when the market was red hot.

Oh and one more thing.  If I was the spouse with pristine credit that my loser spouse was intending on raiding after reading a couple of yahoo message boards, the marriage is pretty much on the fast road to divorce.  Who wants to be saddled with a gambler who can’t accept a loss and can’t stay away from the housing “casino”?

Do your friend a favor and suggest he attend Gamblers Anonymous meetings, get a real job, and treat his tolerant, responsible spouse like the queen that she is.  That knucklehead has way too much time on his hands.

This is the buy and burn scam with an idiot twist at the end. People who are upside down and can not refinance buy another home for a much lower price as values have fallen dramatically and commit fraud by saying that they will rent their existing home and show false documentation (rental agreement and or use a friend or family member as the straw renter). When the people close on the new home with a smaller mortgage they let the existing home go into default. Either way, having the balls to bid on your own auction in person is just a gross example of fraud…

But is this fraud prosecutable?
If it isn’t there will be a lot of people doing it.

I speculate there is organized crime doing this already.
Bank fraud is a big money maker for them.

Do you know how to buy the Manhattan Bridge?