Posted in friends on February 27, 2009|
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Yesterday I had a long conversation with my friend and former colleague, G. G was laid off from the company in December 2007. Other than a three-month contracting gig G has not worked. I commiserated with G about job hunting. G told me that he is on the verge of financial ruin. He told me about the outcome of the real estate deals he invested in before he was laid off. I remember G telling me about the investments and I thought it sounded fishy.
G somehow got hooked up with a guy who found people who were about to loose their houses. This man found buyers for the properties. The buyers financed 100% of the purchase price with no money down and a penalty for paying off the loan in the first year. The original owner rented the property from the new buyer. The man split the equity in the houses with the buyers for his finder’s fee. G bought two houses and a condo. G was suddenly flush with cash from the equity of the three properties. Then G got laid off. Soon after being laid off the condo renter moved out. About a month later one of the house tenants stopped paying rent. Soon after that the other house tenant couldn’t pay their rent either. In short time G was out of money and was behind in payments on all three properties. If G sold the properties he had to pay the early payoff penalty. In the midst of all this the real estate market tumbled. G had burned through his savings. All three properties ended up in foreclosure. G was able to short sell one house for $239k that he bought for $350k. G had to sign a 60k promissory note in order for the bank to approve the sale. The other two properties have pending short sells waiting for bank approval. A house that G paid 350k for is going for $298k while the 250k condo is going for 59k. Once the short sells are completed G will declare bankruptcy.
G’s once outstanding credit rating has been ruined. Thankfully, G’s partner is still working and was not involved in the real estate deals. G’s partner has been paying the mortgage on their house that is in G’s name. The man who devised the real estate investments is currently under investigation by Fannie Mae, the State of Colorado and the county that G lives in. G is also one of twenty investors involved in a class action lawsuit against the man.
It’s a sad tale. It’s also a tale that is not unique to G. I have empathy for G but I have hard time understanding why he got involved in this scheme. G is an intelligent man. I can’t help but wonder if it was greed that drove G to try a make a quick buck in the real estate market. G is now 49 years old, unemployed and broke. Thankfully, he has an understanding partner who is helping him get out of this mess.
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