Names Have Been Changed to Protect the Innocent

Right now I could have three more signs in the ground.  For me, signs make the phone ring.  I like my phone to ring.  So, three additional signs would be freaking fantastic.  But, no signs for me.  Why?  Because I'm too dang honest I guess.

Not long ago I received a referral to list multiple properties for Baxter.  This story is absolutely true except the seller's name was not really Baxter.  I have the seller's blessing to tell his story but not his name or the addresses of the properties involved.  So, he will be Baxter.  I was pretty excited at the prospect of listing three properties.  Like I said, I like my phone to ring.  Especially since they were investment properties and should sell pretty fast.  Plus Christmas is right around the corner!

I started the process by researching each property. Initially as I looked through available records I was pretty confused by what I found.  The red flags just kept waving at me.  All three houses were purchased by Baxter at two week intervals, from the same seller (we'll call him Damian).  Each had a mortgage and they were all held by a different bank.  It gets worse.  Each property was purchased by Baxter for about two times what Damian paid just one year prior to the transaction.  I could not see where REALTORs were involved on either side.

I had a sinking feeling but kept on course researching the comps in each neighborhood.  As I suspected, the data showed that the market values were in line with a natural appreciation from the price Damian paid.  Not the price Baxter paid.  I verified that Baxter absolutely overpaid for each of the houses.  There was no way they could sell today for what he paid.  Even if an agreeable buyer could be found, it would be difficult for an appraiser/bank to agree to the value.  To sell, Baxter would be bringing tens of thousands to the closing table.  I had to meet with him and deliver the awful news.  I was sick.

As I sat at Baxter's kitchen table he verified that the information I found was correct.  I asked him what happened.  Humiliated, he shared his story;

Baxter was approaching his 40th birthday and was feeling a bit unsuccessful in his career as a civil servant.  On occasion his job required that he verify rental status for his clients.  One day, he was doing just that when he called a landlord to verify a client was delinquent in her rent.  The landlord's name was Damian.  As Baxter chatted with Damian he asked, "Damian, you own several properties and you sound so young.  How did you do it?"  Damian assured Baxter that it was very easy.  As a matter of fact, he could help Baxter get started.  He just happened to have three properties available to sell.  All he would have to do is buy them and start renting them out.  He'd be a success too!  Damian even offered to put Baxter in touch with his mortgage broker to get everything started.  It sounded like the answer to Baxter's dreams.  He contacted the mortgage broker and over the course of six weeks, he bought the three houses.  He bought one with an FHA loan and two with conventional loans with three different banks and one lender.  After each closing, the houses were reassessed by the county for the higher value.  The tax on each house went up.