Month: February 2020

I purchased a house on a quiet (or so I thought) residential street, that houses a cooperative housing project (coop). This is a normal ranch house like the one I purchased, yet this one was transformed with government grants into a Frankenstein house that now is allowed to have 16 low-income residents instead of the typical 2-4 middle class residents per house. This also means there are 12 or more cars associated with the coop. One impact is that even when the rest of the neighbors typically just use one off-street parking space, parking is in short supply on this block, in a city where parking is generally not a problem in low density residential zoning districts.

As one city councilman expressed, the city had created a rule that limits the coop occupants to just 5 cars, two of which are to be parked on premises, and only three of which are allowed off street.  This rule was specifically created to appease neighbors concerned about the coop impact on housing values, parking and quality of life.

However, this rule turns out to be utterly un-enforceable. Coop residents are highly nomadic, rotate in and out continuously out of tiny rented rooms as small as 93 square feet that are rented for about $300/month These residents often have out of state license plates or vehicle registrations linked to prior addresses or family members and it is utterly impossible for anyone, even code/parking enforcement to reliably detect which vehicles are associated with the coop to enforce this rule. This municipality is very committed not just being a town for the wealthy, so they are willing to create and fund overcrowded houses that allow low income people to live in a city where market rents for the standard of rentals private for-profit landlords are required to uphold are higher than these occupants claim to be able to afford.

Ultimately this coop appears to lower property values about 5-10% on the particular crescent road it is located on.

This is not a diatribe against coops or low-income housing, but simply a warning to investors to factor in quality of life impacts and value impacts when purchasing. The next blocks never have parking issues. This coop block is consistently a challenge to park in.

Do not be caught unaware as an investor when that house that looks relatively unassuming as you drive by unveils itself as having the same number of habitants as the surrounding 5 or 6 houses, which in this case means the coop has the same amount of cars as 1/3 of the rest of your block. Factor your neighborhood into your purchasing decision and the value and appreciation impacts a coop may create.

Last year, in June of 2019, Ocwen Mortgage Servicing transferred a friend’s loan to PHH.

Now, in the new year, he got two 1098 mortgage interest forms, and the Ocwen one appears to be wrong. However, Ocwen appears to be out of commission. The Ocwen customer login area is shut down and all the mortgage history that used to exist there is now gone.

Per Ocwen’s website: “On October 4, 2018, Ocwen Financial Corporation (“Ocwen”) acquired PHH Mortgage Corporation (“PHH Mortgage”), an established mortgage servicing company. PHH Mortgage is a wholly-owned subsidiary of Ocwen and continues to operate as PHH Mortgage. The combination of Ocwen and PHH Mortgage creates a strong non-bank mortgage servicer…” However, wholly owned or not, PHH doesn’t address my concerns about Ocwen’s accounting. Ocwen doesn’t either, since PHH is the new servicer.

Is the mistake huge? In his case, it’s a few hundred dollars. Is he the only one? Probably not. Search “class action and Ocwen”. My search showed more than $100M in Ocwen payouts for several lawsuits. There are also lots of fraud allegations, along with the statement by a law firm that “Unfortunately, we think that PHH rivals Ocwen in poor servicing practices” (https://www.mahanyertl.com/2019/ocwen-fraud-investigations/)

My big lesson: if you get the notification that servicing is being transferred, review your mortgage statements, payment history and principal balance carefully. In his case, he was paying $200 extra in principal a month and the accounting for that looks to be flawed. However, now it appears to be impossible to get this rectified. The new servicer takes no responsibility for errors that occurred prior to their assumption of servicing.

There are numerous class action suits against banks, specifically around the misapplication of principal prepayments for mortgages. I personally had problems with ABN AMRO and was cheated out of $900 in prepaid principal that the Dutch bank just refused to correct when they serviced on of my loans in the late 1990s.

Real estate is a phenomenal investment vehicle. Being careful with the parties to your investment is part and parcel of getting the highest possible returns. Keep going after your dreams, and you will reap the rewards.

This is the root of being a good real estate investor, or a successful wholesaler (a person who gets properties under contract and sells them at a mark-up to others).

Many people list property for sale, at the price that some aspect of their more or less educated fantasy prescribes.  In interviewing real estate agents pricing gets further distorted. Many real estate agents play the game of suggesting a high listing price with a long listing contract. Then they can negotiate that their seller accepts a lower price if that’s all the market bears. However if they lead with a low listing price, another, less ethical and less fact-based agent is likely to be awarded the listing and ultimately end up with the sales commission.

Therefore, to you as buyer, offering the price that works for you is best. It’s basically mastering the art of negotiating a deal for you that is independent of the price tag a merchant might have scribbled on the asset somewhere. The price tag is an expression of fantasy. The size of your pocketbook and the actual value are an important part of reality that must be expressed and communicated in order to buy real estate in a way that works.

Offending the seller with a low offer is possible, but we cannot caretake the emotions of others. Reality still applies for all of us. If you are realistic, a seller will hopefully be able to appreciate that.

I still drive by a vacant, eventually to be collapsing brick house regularly. All the wood components, from roof joists to floor beams are about to fail from unaddressed water leaks from a roof that hasn’t been replaced since the 1990s at best.  I have spoken to the owner repeatedly over the past 20 years. He always wants to sell his dilapidated wreck that needs a $100,000 or more in rehab for the price of the newly refinished, fully remodeled Victorian home somewhere in the vicinity. It seems like he simply doesn’t understand that replacing roof framing, the roof itself, and all the other aspects that make a house a house takes money.

His price has gone up as real estate values have increased over the past 20 years, and he has never been willing to just sell the house to someone who would heal it and stop the accelerating decline of that home.  His fantasy is creating the slow destruction of the underlying asset he has to sell. Generally, you will not be able to successfully deal with people who aren’t willing to have one foot in reality. This seller’s mental model creates a lose-lose-lose outcome.

Bidding an amount and having him take it or leave it works. Getting attached to an asset and wanting it at any price is never a good strategy, unless you know there is an undamaged Picasso hidden somewhere in the moldering woodwork.

Offer at the price a property is worth to you. The seller can make a decision if that amount of money is worth it to them. Then you either have something you can work with, or you keep looking for something that does work.

we all know the good advice to unhook hoses from exterior faucets at the start of winter (for us that’s late September). However, I just was forced to remember another important piece of advice: Text all your tenants with plumbing on exterior walls to drip their faucet when the weather is colder than 20 degrees Fahrenheit at night to prevent frozen pipes.

A tenant called me saying he paid his water bill one day late and that now his water didn’t work. I told him that was not the water company, and to open his faucets and aim electric heaters at the wall with plumbing in it to try to thaw it out. Luckily no freezebreaks reported so far.

Keep your plumbing warm, and know that a slight trickle is enough movement to prevent freezing. And, here water rates are about $4/1000 gallons, so a trickle will be undetectable on your ultimate bill (especially compared to plumbing repairs to frozen pipes).