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thedebtisreal

The Stripper And The Housing Bubble

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She was 22 and tired of exotic dancing for a living. So Irene Thomas bet her future on real estate, hoping that becoming a landlord would be her first step toward exiting the stage.

With the help of Universal Mortgage Inc., a brokerage company in Brooklyn Park, Thomas signed the papers to buy a house early last year. And she kept signing. And signing.

In 90 days, with none of her money down, Thomas had $2.4 million in debt and 10 houses in her name, most in north Minneapolis. Nine belonged to officials of Universal, the same company that handled the transactions for her.

Less than 18 months later, Thomas was losing every property to foreclosure after the monthly payments weren't made. Her credit ruined, she now says she was duped by a group of real estate insiders who sold houses at inflated prices.

The practice is so commonplace that real estate experts say it is helping fuel the nation's foreclosure epidemic, which is destabilizing neighborhoods as home after home is lost to banks and other lenders.

In places such as north Minneapolis, hit by 600 foreclosures already this year, investors have used real estate deals as get-rich-quick schemes, leaving empty homes, abandoned tenants and wrecked credit ratings in their wake.

Property records show Universal has been at the center of a web of transactions where a small group of investors, including several Universal employees, bought rental properties and quickly resold many at above-market prices. At least 27 houses linked to the firm have landed in foreclosure, according to property records.

Earlier this year, a mortgage lender filed a federal lawsuit against Universal, accusing two employees of using fraudulent documents to make money from another real estate deal. And two other people who bought houses through Universal are accusing the company of taking advantage of their real estate inexperience to sell them overpriced rental properties.

Nine mortgages processed by Universal and signed by Thomas incorrectly indicated that Thomas would live in the homes. In other cases, documents for two other Universal clients, both unemployed, stated they held jobs.

"All along I feel like they were just screwing me over and they knew what they were doing," Thomas said.

She said a state Department of Commerce investigator subpoenaed her early this year to talk about Universal and some of its employees. The department would not confirm the existence of any investigation.

Universal owner Donald Walthall declined to comment for this story. Marlon Pratt, who worked at Universal, said he owned five houses that Thomas bought and doesn't know what led to the foreclosures.

A lot of people get into the business of being landlords, Pratt said. "And they don't have no idea the work that comes behind it."

A growing part of the market

Real estate insiders have seen cases like Thomas' before -- so many that there's a name for it.

"This is called a straw buyer," said Kristin Wilson, a senior loan officer with Summit Mortgage Corp. in Bloomington.

Thomas' 10 mortgage applications wouldn't have been accepted by one lender, she said. "Which is why they would have submitted one to this investor, one to this investor, one to this investor ... because then everybody else is unaware of it. And if it was all done within a fairly short period of time, it would be easier to do," Wilson said.

The Commerce Department, which regulates the real estate industry, said straw buyer schemes are growing in scope and sophistication.

"This is hard to pull off by yourself; it usually takes an appraiser, a mortgage guy, a title company and, in some cases, the buyers are even part of the scheme," said Commissioner Glenn Wilson.

He said the department is adding three real estate investigators to its staff of seven and referring cases for criminal prosecution. But it's too late to stop the foreclosures that are already taking a toll.

"There are unsuspecting buyers who are victims here because they were led to believe they could afford the American dream and they can't," said Stephanie Gruver, an insurance agent who sits on north Minneapolis' Webber-Camden Neighborhood Organization board. "But the other victim here is the community."

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When selling to a "greater fool" someone has to take the role of "greatest fool." The good news for Thomas is that as a stripper her principal assets can't be repossesed so she can go bankrupt and then come bouncing back. :lol:

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The good news for Thomas is that as a stripper her principal assets can't be repossesed so she can go bankrupt and then come bouncing back. :lol:

However, a stripper's assets depreciate rapidly, so she'd better hurry up :).

Much as this is apparently a huge scam, I can't feel much sympathy for someone who expected to make a ton of money just by buying houses and then discovers that they've just made a lot of money for the people who sold them to her.

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I can't feel much sympathy for someone who expected to make a ton of money just by buying houses and then discovers that they've just made a lot of money for the people who sold them to her.

It's as if they didn't really love her, they just did it for the money.

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Another..

Then..........

http://www.armeniapedia.org/index.php?titl...eh_Tahmassebian

Zareh Tahmassebian

From Armeniapedia.org

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REAL ESTATE FRENZY Riding the Boom They snap up real estate, flip it, then chase the next hot market. They're the new day traders-and they're dancing on the edge of a volcano. By Grainger David

FORTUNE May 30, 2005

Zareh Tahmassebian is on the way to look at two of his houses in Phoenix. He is lost. Most people don't get lost driving to their own residence, but then, Tahmassebian has never actually been to these particular homes. There are a few reasons for that: (1) He has no intention of ever moving into them, (2) he lives in Las Vegas, not Phoenix, and (3) he owns six other houses-and a half share of seven more-in the greater Phoenix area. "Sometimes it's hard to keep track," he says.

Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a "frame inspection." The houses he's inspecting are somewhere inside the Cholla Ranch development that's being put up by KB Home, one of the nation's largest builders. Right now he's in the general area-cruising southeast down Highway 10 in a white Chrysler 300M rental car-but lacking specifics. "Is that Tempe?" he asks. "I think I have some houses there."

After several uninterrupted miles of cactus, desert, and tumbleweed, it becomes clear that he's missed the turn, and he exits the freeway while dialing his broker. "Papa John!" Tahmassebian says into his cellphone. "Where are my houses?" To get more help, he dials KB Home on another phone, and soon he has a gleaming silver clamshell at each ear. For a moment the car drifts dangerously across the exit ramp, until I reach over to grab the steering wheel. "It's okay," Tahmassebian whispers, nodding toward the place where his trousers meet the bottom of the wheel. "This knee can drive."

When we finally arrive at the first construction site, on Paradise Lane, Tahmassebian begins his inspection. "See this wood?" he says, gesturing to the slatted frame of the unfinished house. "This wood made money for me! I don't own it-but I own the rights. I put a 10% deposit down, I haven't even made a mortgage payment yet, and it's already gone up $45,000. What a country!"

This country is obsessed with real estate. The number of chapters of the National Real Estate Investors Association has jumped from 44 in 2002 to 170 today. Eighty-six books on real estate investing were published last year, nearly three times as many as in 1998. Even reality TV is getting into the act: This summer the Learning Channel will air a show about people flipping real estate in San Diego, hosted by a woman who has bought and sold more than 40 properties in the past seven years.

And the appreciation! Surely you've heard, because real estate profits are the kind of thing that no one-your neighbor, your boss, yourself-can seem to shut up about. Since 2000 the median sales price of a single-family home has jumped 77% in New York City, 92% in Miami, and 105% in San Diego. "Nationally, all levels of real estate activity are at all-time highs," says economist Mark Zandi at Economy.com.

Of all the phenomena that the boom has wrought, perhaps the most telling is the return of speculators like Tahmassebian. Speculators are creatures who emerge every decade or so to exploit the hot business cycle of the moment-those whose aim is to ride the wave to its highest point and then, with miraculous skill and timing, get out before it crashes on all the greater fools beneath. (They are also, like fishermen, more than willing to exaggerate the size of their catch.) Lately their numbers have been multiplying with every cocktail-party tale of a dentist, florist, or shrink buying "threesies" and "foursies" (three or four properties at a time, in speculatorese) and making a killing. In March the National Association of Realtors released a study estimating that investors represent 23% of the homebuying public. That number includes second-home buyers; mortgage lenders estimate that pure investors account for a hefty 10% of all buyers. Historically the U.S. rate has been half that.

...

Today builders in Phoenix will tell you that the new antispeculation clauses in their contracts have solved the problem. However, the example of Zareh Tahmassebian-he of the multiple houses and the knee that can drive-tells a different story. He bought several of his houses in Phoenix after the rules were in effect. How did Tahmassebian manage to circumvent them? It was, to hear him tell it, relatively easy: Sales reps for some builders, including KB Home, gave him a call every time a development was in danger of not selling out. "I didn't even care where it was," Tahmassebian says. "You have to be ready to jump." (When told of this breach, KB Home spokesman Derrick Hall is philosophical. "Is it a perfect system?" he says. "No, it's not. It's a deterrent.")

On several occasions Tahmassebian has even found himself at the grand opening of a community-an event typically reserved for "end users," as the builders like to refer to people who actually plan to take up residence. The openings are sales events where hopeful buyers are invited to gather with their families for a lottery in which the lucky new homeowners are selected. In oversubscribed communities the lotteries can get tense. Elsewhere, they take on the quality of a new-community pep rally. When a winner is chosen, the lucky family's name goes up on the board. They get a button. Someone takes a picture. Everyone applauds.

To keep up appearances, builders will often insist that Tahmassebian attend, even though they know he's an investor. When they do, he gets on a plane to Phoenix, hops in his standard 300M, and floors it to the sales office. "It's a little uncomfortable sometimes," he says. "I'm out there by myself eating eggs Benedict with all these families. Every time they announce a name, there's a bunch of clappers and noisemakers going off while I'm out there pacing."

Since last year, when the Las Vegas market began to cool off, Tahmassebian has made more than 20 trips to Phoenix to scout, buy, and inspect houses. He is obviously a quick study. At age 17 he learned about leverage from his cousin, who mapped out the principles on a napkin in a diner. ("You can buy one $200,000 house with cash, or you can buy 20 with 10% down. Which would you rather have?") At age 18 he bought his first home for $126,000, watched it appreciate, and decided not to go to college. (He sold 2 1/2 years later for $369,000.)

Tahmassebian bought his eight Phoenix houses with 10% down, a total investment of $150,000 including closing costs. To buy seven more houses, he entered into a limited partnership with his best friend's dad, who lost money in the tech crash and is looking to make it back in the housing market. Each contributed half the down payments.

The houses aren't exactly throwing off cash: Tahmassebian estimates that he loses $3,500 a month on them, since he doesn't bother to rent out all 15. "If I'm negative on a few, that's okay," he says. "I'm in it for the appreciation." In seven months, he estimates, the 15 properties have appreciated from $2 million to $3 million. He's planning to sell in the next two to three years, but if the market does crash-which he doesn't expect-it wouldn't be a disaster, he says: "You just hold on till it comes right back up."

Excerpt from FORTUNE.com article.

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In seven months, he estimates, the 15 properties have appreciated from $2 million to $3 million. He's planning to sell in the next two to three years, but if the market does crash-which he doesn't expect-it wouldn't be a disaster, he says: "You just hold on till it comes right back up."

Ha-ha-ha! Phoenix is going to be an absolute disaster zone; I'll look forward to seeing the follow-up story about his bankruptcy in a few years.

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Ha-ha-ha! Phoenix is going to be an absolute disaster zone; I'll look forward to seeing the follow-up story about his bankruptcy in a few years.

Now.........

http://www.azcentral.com/arizonarepublic/n...vestor0609.html

Investor binge

Las Vegas mortgage broker and investor Zareh Tahmassebian is among the out-of-state buyers who started the speculator-buying boom in metro Phoenix. In 2004, he was just 23 when he and partners bought 15 houses throughout the Valley.

Tahmassebian was so bullish on Arizona real estate that, in 2005, he moved from Vegas to live in one of his Valley homes in Chandler.

Now, like so many others, he is losing properties.

Earlier this year, he lost his Chandler house at a foreclosure auction. He owed $490,000 on the property he bought for $464,117 in September 2005, according to public records.

Some investors, like Tahmassebian, tapped equity in one house to buy another and now owe more than the home is worth. Others put so little down on homes they are just walking away from them.

When The Republic interviewed Tahmassebian for a story in February 2005, he talked about putting little money down and then tapping equity in one home to buy others. "Leverage is the name of the game," he said.

Shortly after that interview, national publications sought him out as an example of a young real estate speculator. Fortune Magazine quoted and photographed him for a May 2005 story.

Tahmassebian moved on to buy homes in Albuquerque. A foreclosure auction for one of his homes outside Albuquerque was scheduled for last week. He didn't return phone calls about his current investments.

Out-of-state buyers may have started a speculator boom, but local buyers quickly jumped in. At least half of the investors with multiple homes now in foreclosure have Phoenix tax-mailing addresses, according to property records.

"Most people think investors are all greedy groups from out of state, but there were also many local investors who saw the rise in home prices and tapped equity in their own house to buy other Valley homes," said Elliott Pollack, an Arizona economist and real estate investor. "A lot of people made a bet on housing and lost."

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When The Republic interviewed Tahmassebian for a story in February 2005, he talked about putting little money down and then tapping equity in one home to buy others. "Leverage is the name of the game," he said.

And leverage is a real bitch when it turns against you. Excellent.

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