The horrors of real estate

BY JAY BRIJPAUL

Dealing in real estate can be like trick or treating. Some people get tricked into a transaction while others enjoy the treat of finding a good home. Real estate involves various aspects; from financing to foreclosure. For many, most of their wealth is in their home. However, there are many tricky pitfalls along the spooky road of real estate.

An elderly, lonely gentleman was befriended by a charming woman. The relationship grew and she eventually moved into his home. The children were happy that their dad met someone who brought meaning to his life. They were not worried about the family home because their father had a will. After his death the children tried to sell the home but found out that the property was registered as “joint tenant” between their late dad and his female companion. Joint tenants in real estate means that if two people own the property and one died, the property automatically goes to the other. This supersedes the will. The property was mortgage free. The woman eventually sold it for $1,200,000. The family inheritance went up in smoke.

Sara, a business executive, saw an ad for a bank sale property. The realtor told her that there were five other bidders on the property. Sara was financially secure and knew many contractors who could take care of any renovations if needed. She submitted a firm offer with a strong deposit and got the property. Prior to the move in date, her bank, in order to register a new mortgage on the property ordered an appraisal. The appraisal came in substantially lower than the purchase price and as a result she had to stretch her financial resources in order buy the property. The home was run down and the renovation cost was high. Eventually she tried to rent the property, but she was met with a tenant from hell. The bank took over. Sara was impulsive and did not bother to obtain financing and inspection. She ultimately fell into a pit.

Chris loved student rentals because they were profitable. His rental property has seven rooms, four on the main floor and three in the basement. One snowy morning a tenant slipped and fell on the driveway. The ambulance was called, and the tenant complained about severe head and back pain. Chris was sued for $600,000. The insurance company denied the claim because Chris failed to inform them that it was a rental property. On the court date, Chris’s lawyer argued that the person who was suing was not even his tenant. The person produced two government documents, showing his association at the property; a driver license and an ambulance report. Chris was taken for $600,000. It was a setup where the “tenant” applied for a driver license, using that address. An insider collected the driver license and gave it to his friend. It was the same insider who called the ambulance when his friend fell. Chris was tricked.

Fay, a homeowner, was referred by a friend to a financial planner. The financial planner advised Fay to remortgage her home and invest in a promising venture overseas. Fay received a lucrative return during the first year and introduced the planner to many other friends. Profits came pouring in and the bonanza grew. The planner assisted Fay and her friends to arrange private second mortgages for the remainder of the equity in the home and invest the funds. For the first six months everything went well, and then the planner disappeared. The funds were wired to an offshore account and then transferred to a private account that was now closed.  Fay and her friends went for the treat but ended up getting tricked.

Ayyub co-signed for his friend Josephine on the purchase of a home. Josephine could not qualify alone and Ayyub, as a co-signer or guarantor became part owner of the home. One night, Josephine’s 16 years old son stole her car keys and went on a joy ride with a few friends. An unfortunate accident happened and two of the friends died. The bereaved family sewed for damages. The court awarded the family a huge settlement. The insurance company successfully argued their way out of court and did not cover the settlement. A lien was placed on the property and since Ayyub was on title, he was dragged into the mess.

Real estate is not a “get rich overnight” plan. When a person’s net worth is zero, they don’t need to worry. For the others, someone is sizing up their loot. Protect it.