Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by SCook85

Posted by SCook85 on March 13, 2000 at 19:07:23:

Not having the program in place is costing the state much more money because of the lower tax base. In Baltimore the problem is very bad. Vacant houses are everywhere and the city is not collecting taxes on these homes. By having educated consumers in these homes they stand a better chance of increasing the tax base in the city which will more then pay for the program.

Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by SCook85

Posted by SCook85 on March 13, 2000 at 09:38:43:

Many of you know the bumpy road that I have experienced since I started investing, and others are very familiar with the problems dealing with lenders and note buyers in the Baltimore area. In fact the epidemic of requirements for title seasoning, documented rehabs, and the extra due diligence being performed on sub prime borrowers is spreading across the nation.

About 1 year into my investing career I still had never gotten a deal done with a mortgage broker who was working with my buyers. At that time I was so frustrated hearing about all the deals that others were pulling off and all the money that they were making and how anyone could get financed. That was anyone except for my buyers.

My partner and I made a decision right from the start to run our business ethically and not break any rules. Recently we have expanded upon that and are operating our business on biblical principals. In the beginning when trying to get deals financed through mortgage brokers we were tempted with all kinds of scenarios to increasing purchase prices, forgiving second mortgages, gifting or lending downpayments etc… We wouldn’t use any of these so called creative methods when dealing with lending institutions. Needless to say mortgage brokers became dissatisfied with us, we became dissatisfied with them, and no deals were closed. Everyone wasted their time.

We decided at that time that we were going to finance everything ourselves. We would sell notes when we needed cash, knowing that the discounts we would have to take would be substantial because we didn’t lend 10% of the sales price for down payment, or have the appraisal pushed etc… Since then we have been able to maintain our volumes and do deals ethically.

For beginners the idea of forgiving a second mortgage, or having an appraisal pushed higher seems harmless; usually because a mortgage broker says it is OK, or other investors are doing it all the time. These practices are WRONG! It is defrauding a lender and a misrepresention of what is really taking place. A lender lends money to a buyer based on credit, value of the property, buyer participation (down payment), seller participation (second mortgages). 3 of the 4 are very easy to manipulate therefore some do it without ever thinking about it. It is a regular practice for many.

Well here in Baltimore where the practice was running rampant, the federal government has come in and started cracking down. The first of what is supposed to be at least a handful of investors have been charged. The mortgage brokers, attorneys, appraisers and all involved in helping to pull of these deals were charged with mail and wire fraud.

These deals have the Maryland legislature contemplating a new law that will prevent anyone from selling a home for more then a 100% markup from what they paid for it within 12 months. Now that can cause a lot of problems for someone who is used to turning properties in 3 months.

I must say that I am happy to see that these charges are being brought against all parties involved. Many have made it BIG in real estate only to lose it all quick, and in many cases spend time in jail. Those of you who know me well, know how passionate I am about doing things the right way. Some investors have been cringing in their shoes at the thought of what is going to happen in the future. I see a path being paved for those who want to make money the right way and I fully intend to take advantage of it. I hope that all of you choose to do the same. Taking a shortcut may not lead to where you want to go.

Happy Investing!

Steve Cook

Many newbies looked up to these investors. I wonder if they are still looking up to them now.

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by GregNorman

Posted by GregNorman on March 17, 2000 at 11:08:47:


Great post! It was a pleasure speaking w/ you at the dinner table during the convention.

I wanted to add that I think the problem centers around the appraisers (and maybe the way they are getting paid). I don’t think ‘deed seasoning’ should be necessary. If you buy below market value, that’s your gain and it shouldn’t be snuffed out by a law or lending requirement when trying to resell. I also believe that most of the creative financing methods that boost values beyond market values could be stopped w/ correct appraisals. (Although I may have a tough time conveying it in this msg…) The point is, if appraisals were correct, there wouldn’t be a problem (or opportunity) to do any of the above unless it is truely ‘a deal’. And the reasons appraisals are incorrect is due to the way they are paid and the pressure to get the loan done. What are your thoughts?

My $.02.


Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Eduardo (OR)

Posted by Eduardo (OR) on March 13, 2000 at 20:36:42:

Great post Steve–

When I first got my real estate license 20 years ago I didn’t know anything. So my second year I set out to learn all the tips, tricks and shortcuts. I spent a lot of money on books, tapes and courses on all the cutting edge techniques. This was money well spent because by my third year I began to understand why you don’t want to use all the tips, tricks and shortcuts. You need to know these things so you know the limits of what you are trying to accomplish and so you can spot someone who is trying to put one over on you. But ever since I have made good money investing in real estate and paper using very simple, straightforward methods. I buy little properties for less than they’re worth because I know how to find them, how to negotiate with the owners, and what to do with them. I almost always put a little cash in to sweeten the deal. I don’t scare anybody with techniques they’ve never heard of or acting like a big shot know-it-all. I look and act like the blue-collar owner and let him do the talking, then I say, “This is what I can do…” Works like a charm. No need to lie or be dishonest. There is no substitute for education and experience in this business. But no need for complicated techniques–KISS, Keep It Simple. There is so much money to be made out there using honest, ethical procedures it is almost frightening. --Eduardo
P.S. I gave up my broker’s license a couple of years ago. One of the reasons was the preponderance of incompetents and crooks. Don’t need 'em, don’t want to associate with 'em.

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by chris

Posted by chris on March 13, 2000 at 19:44:57:

Steve- Are the biblical priciples from one of these books or something you got straight from the bible?

Business Buy the Bible : Financial Wisdom of the Ancients
by Wade B. Cook


Business by the Book : The Complete Guide of Biblical Principles for the Workplace
by Larry Burkett

Please provide some detail on how you operate your business according to these principles.

-Thanks, Chris

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Doug Pretorius

Posted by Doug Pretorius on March 13, 2000 at 16:34:25:

Many of the comments in your (SCook85) post shows yet more evidence of the fascist socialism called the USA.

Nothing at any time ever has a fixed value, a thing is worth only what the buyer and seller agree it is worth. An appraisal is only one person’s opinion, and not an indicator of value. Even the value of the physical materials making up a piece of real estate are completely subject to supply and demand.

The idea of a law restricting profit potential that way is ludicrous, and shows that the people suggesting it have no understanding of finances whatsoever. Fortunately those who do understand captialist principles hold the resources and the power to offset this intellectual insanity, and keep our economy alive.

Knowing whom gives power to get wealth - Posted by Mark R in KCMO

Posted by Mark R in KCMO on March 13, 2000 at 14:21:04:


I find it so refreshing that you have choosen to be a leader in so many ways.

Although it may take more time to do things the Biblical ways, there is no comparison to the greater rewards that go along with these choices.

I have also been told of many of these — “Oh it won’t hurt everyone does it” — options.

I have found it easy to resist these types of deals, not matter how un-popular it has made me.

Just today a broker asked me how much I wanted the value pumped.

I politely thanked her for her time, and said no thank you.

When she asked if there was a problem, I said Yes, if you are willing to cheat the lender why would I ever think you would be un-willing to cheat me??

Mark R in KCMO
(Dut 8:18)

Unto whom much is given - much is expected - Posted by DougO(NM)

Posted by DougO(NM) on March 13, 2000 at 13:33:45:

It’s not an easy road to walk, but then nothing worth having ever is.

A salute to you and your partner, Steve, for ‘standing firm on principle’ !! (nt) - Posted by SusanL.–FL

Posted by SusanL.–FL on March 13, 2000 at 13:15:10:


Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Ken.K(IL)

Posted by Ken.K(IL) on March 13, 2000 at 13:10:05:

Steve,I applaud you for your apparent integrity in the ‘running’ of your business.Although, this site may delete “religious” opinion, I was excited to read your comment “operating our business on biblical principles”.
Would you be so kind as to ‘briefly’ explain/send them to my personal e-address?

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Charles

Posted by Charles on March 13, 2000 at 10:38:03:

I agree with the honest and ethical standards you work to and think we all should. However, you lost me with a government body (Baltimore legislature) dictating to investors how much they may sell their homes for.

If an investor puts the time, the effort, the money and the risk into a deal, market conditions should the only thing determining what he can charge for those efforts.

The fact that the people practicing the behavior you describe are being tried and found guilty proves that the laws are already in place and work. We are already chin deep in laws now, who needs more?

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Sheik

Posted by Sheik on March 13, 2000 at 10:37:26:

Funny you should mention this today.

Only this weekend I was with a Realtor trying to
explain to her what I’d like to accomplish via
a simo closing with a note sale.

I told her that I’d send her buyers (generated
from an Ad) and she would show the these Buyers
available homes for sale. When the Buyer finds a
suitable home I would negotiate a discount and
buy the home from the original seller and resell
the home to my Buyer. And that the transaction will
be facilitated via a note sale to be done at closing.

Needless to say, she was a little leery saying that
I was threading a thin line and could probably get
into trouble. That she knows of many Lawyers and
lenders that got into trouble for fraudulent practices.

I personally have never used this strategy yet but I
know many here that uses it.

Is this one of the ‘shortcuts’ you talked about?
How do you structure your owner finance deals? Are
these properties you bought outright, rehab and sell
with owner financing? Or are they simo flips?

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Zulema

Posted by Zulema on March 13, 2000 at 10:31:01:

Steve, this is a question from a newbie. You mention in your post that there might be a problem turning a property within a short amount of time (3 months). What about flipping? (I know you’re talking about Maryland) I live in Texas and I don’t want to find out sometime in the future that I am doing something illegal. Thank You, Zulema

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on March 13, 2000 at 09:58:08:

Amen to that!

Some shady investors here in the Atlanta area are taking a ride to jail as well. There were a few involved in the same townhouse complex that I have bought a few in. They used the forgivable second tool to sell many of the townhomes that they rehabbed. Now that the mortgage lenders have found out, they are suing the mortgage brokers and the investors involved. Both the brokers and investors have been charged with fraud and are facing fines and time in jail.

Don’t take these shortcuts! The risk is just not worth it!

For those of you who are contemplating doing some of these deals, can you sleep well at night? Think about it.

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by FJW

Posted by FJW on March 14, 2000 at 14:37:59:


I can smell the burnt flesh from here. That line is perfect, I have to remember it: This is what I can do…


BTW, I always read, sometimes print, your posts.


Here’s another good book! - Posted by Terry (IN)

Posted by Terry (IN) on March 13, 2000 at 22:11:25:

Check out “God Owns My Business” by Stanley Tam. Great inspiration from a very successful Christian businessman.

Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by rita_mo

Posted by rita_mo on March 13, 2000 at 22:15:28:

Great post,I too stand on ethicial,and bibical ground,and I see the same scenarioes here,and am waiting for a change,there are no shortcuts,and a comfortable honest gain is better than a million ill-gotten,

I couldn’t agree with Mark more, you … - Posted by DanM(OR)

Posted by DanM(OR) on March 13, 2000 at 15:45:54:

are doing a great job and I am proud to say I know you. In a world that is only getting more corrupt, we all have a choice. Be part of the problem or part of the solution. I am with you I choose to be part of the solution.

Dan Matejsek

Is it possible to send the whole Bible via e-mail? (nt) - Posted by Kay

Posted by Kay on March 13, 2000 at 15:07:25:


Re: Taking shortcuts will get you in the end-- Must read for Newbies! - Posted by SCook85

Posted by SCook85 on March 13, 2000 at 17:47:48:

Believe it or not the Maryland Legislature is considering such a law. I doubt that it would ever go through. They need to take the time to identify the real problem and that is education. If they want to stop what is going on I feel that they should educate the first time homebuyer in return for the first time homebuyer credit that they receive as part of the closing costs. Make it mandatory that all first time homebuyers get educated as to their rights regarding settlement attorneys, ordering inpspections and appraisals, etc… This program should be free and provided by the state- in the long run it will save them much more then what it would cost to start such a program.