Paper Money - Paper Tales

Friday, October 20, 2006

Open House Sham.. Young and Rich? No.. Flippers!

Read this post from the Boston.com Real Estate Boards... Would a "flipper" actually stage a fake relationship in order to "move product"? You decide...

Note: This story is from last January but apparently the luxury unit is still on the market!!

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I am so shocked by the unethical and economically unsound methods that people are now using to sell flipped properties that I'm posting my experience here.

My partner and I spent Sunday afternoon last November shopping open houses in Boston's South End, Beacon Hill, and Back Bay neighborhoods. It was a gorgeous New England fall day and there were other lookers, small in number, but more than recent weeks. If any were serious buyers, I didn't see it. All open houses of the half-dozen we saw were uninhabited and empty, and most have been on the market for months.

This itself indicated the real market change, but the shocking experience about what's happening in Boston's market occurred at an open house on one of Boston's most prestigious streets.

We were greeted by a charming and attractive young couple -- a well-dressed metrosexual and his beautiful, tall blond wife sporting a 2.5 carat emerald-cut diamond wedding ring. They told us that they were the owners, and that the realtor was ill. They said that this was their dream condo, but that his wife had accepted an medical internship out of town, so they had to sell this renovated condo and the home they were currently living in. He said he was an architect. She said that she was a dental student, and that they loved skiing and kayaking -- we could imagine her hauling skis all the way along the many-story walk-up. They had never lived in this property, but renovated it beautifully with an abundance of carrera marble. Cookies were baking in the high-end oven used for the very first time. Though I'm appalled and angry at the deception I believe that the seller perpetrated, I give him credit for having good taste.

Assessing what we saw as we walked away, we talked more about the couple than the property, who were more intriguing, but something didn't smell right, and it wasn't the cookies. Were they flipping this place? Young and rich? They were asking for nearly a million dollars for a property that they were renovating while living elsewhere. And she was a student with a really big rock.

So we did some web investigation when we got home. Of course we can't be certain about the conclusions we drew from what we found, but we're certain enough to write this anecdotal account.

Fact 1: The property was purchased in late spring of '05 for about $650K, and was listed at about $950K in late summer of '05.

Fact 2: The property is listed in the name of two men: the man who introduced himself as the seller, and another man who resides at the same address.

Fact 3: The mortgage on the property is a 30-year option interest-only ARM at about 2.125% for about 80% of the purchase price, adjustable monthly beginning in summer '05, with a cap of about 10%. The signatures on the mortgage are the two men who purchased the property, who also took out an additional line of credit of 10% of the property, leaving a 10% down payment.

Needless to say, these facts are not consistent in any way with the story we were told at the open house. We conclude that the seller's account was a total artifice -- a lie intended to create the appealing image of a rich, young, successful couple who really wanted this nearly one million dollar property, but had to give it up for professional reasons. The woman's ring had to have been a big CZ. I'm naturally a skeptical person, but never expect to be lied to in this way by a seller. During the showing, the seller referred to the woman as his sweetheart, and they discussed their plans for children. If he lied so blatantly about his life, what else would he lie about? This is not a seller with whom we would be keen to conduct business.

We also concluded that the flippers and speculators in Boston are becoming desperate in this changing market. The monthly mortgage payments on this property listed a few months ago at nearly a million dollars (now reduced about 5%) are less than $2K (and half of that with the interest-only option), but change monthly with rising interest rates.

The old advice "caveat emptor" should be used especially at the peak of any market. All the information mentioned above is freely available over the web -- be sure to use it in the consideration of any purchase.

It's January now, and the same property is still on the market. Information about sellers is available at:

Massachusetts Registry of Deeds

as well as the town websites where you are looking.

1 Comments:

  • The girl in the picture looks a lot like a well known model, Marisa Miller.

    By Anonymous Anonymous, at 8:20 PM  

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