How the buy to let mortgage frauds were carried out - Part 1 - by David Lawrenson of Lettingfocus.com.
Ah, here we are at the eve of New Year 2009 and we really are at the end of a fascinating year.
One of legendary investor Warren Buffett’s most well known sayings is “It’s only when the tide goes out that you can see who was swimming naked.”
As stock and property markets have tumbled, so with a sad inevitability, we start to see the sharp practices and downright frauds come to light which were once hidden in the fog and haze of the bull markets.
In the stock markets, just last week, the appropriately named Mr. Madoff emerged into the sunlight and into prison as his unique pyramid scheme collapsed.
In the residential property market, it now appears that there have been quite a few frauds taking place off the back of the boom in new build flats which were bought mostly by novice buy to let investors.
In this weeks and next weeks blog I’ll look at exactly how the fraudsters were able to pull off the fraud and who they needed to co-opt to do it.
THE RISE OF THE IDENTIKIT NEW BUILD CITY CENTRE FLAT
To understand this a bit more though, you need to go back in history a bit and understand the background.
Back in the years 1999-2003 smart people had already made quite a bit of money in buying and letting property.
Prices of residential property in most areas were up nicely from their 1992-1994 lows and rental yields were high.
Naturally enough other would-be property magnates saw this and wanted a slice of the pie too.
Smart property investment companies, syndicates and clubs recognised this growing need as well and set themselves up to bulk buy flats from builders which they would sell on to buyers (mainly investors) who would be attracted by some snappy marketing – eg You Too Can Make a Passive Income in Property.
The flats looked great in the marketing brochures – smart new pads in city centres that would be desired by an allegedly endless stream of young professionals eager for rented accommodation.
(It didn’t occur to many investors that the stream of young professionals would be limited, that they would eventually want a more suitable property with a garden for the kids or that the massively increased stock of the same accommodation would have a downward effect on flat prices and rents, but hey, that’s a different story.)
BIG DISCOUNTS ON NEW BUILD FLATS OFFERED
The builders were happy to sell these boxes in bulk offplan as this helped their cashflow and they eagerly offered generous discounts of up to 30% to the property investment companies to encourage them to bulk buy in this way.
So far, so good.
No fraud yet and it has to be said that most property investment companies doing this were not fraudsters.
In part two next week I’ll look at how these discounts, the presence of real of fictitious secondary buyers, sloppy valuations and the lack of transparency in the mortgage process allowed the mortgage frauds to happen.
Feel free to add a comment. We moderate all comments so they can take a day or so to appear. If you want to view a comment, you need to click on “Link to this Post” at the bottom right of this post and then scroll down to the end of the post.
BUYING AGENTS AND PROPERTY FINDERS
Don’t forget at LettingFocus.com we also act as buying agents and property finders, helping people to find property either for them to live in or as a property letting proposition. Read this article to find out more about BUYING AGENTS & PROPERTY FINDERS and get in touch if you would like us to act for you.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker and I run this well known property letting and investment blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008 and 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.
One of legendary investor Warren Buffett’s most well known sayings is “It’s only when the tide goes out that you can see who was swimming naked.”
As stock and property markets have tumbled, so with a sad inevitability, we start to see the sharp practices and downright frauds come to light which were once hidden in the fog and haze of the bull markets.
In the stock markets, just last week, the appropriately named Mr. Madoff emerged into the sunlight and into prison as his unique pyramid scheme collapsed.
In the residential property market, it now appears that there have been quite a few frauds taking place off the back of the boom in new build flats which were bought mostly by novice buy to let investors.
In this weeks and next weeks blog I’ll look at exactly how the fraudsters were able to pull off the fraud and who they needed to co-opt to do it.
THE RISE OF THE IDENTIKIT NEW BUILD CITY CENTRE FLAT
To understand this a bit more though, you need to go back in history a bit and understand the background.
Back in the years 1999-2003 smart people had already made quite a bit of money in buying and letting property.
Prices of residential property in most areas were up nicely from their 1992-1994 lows and rental yields were high.
Naturally enough other would-be property magnates saw this and wanted a slice of the pie too.
Smart property investment companies, syndicates and clubs recognised this growing need as well and set themselves up to bulk buy flats from builders which they would sell on to buyers (mainly investors) who would be attracted by some snappy marketing – eg You Too Can Make a Passive Income in Property.
The flats looked great in the marketing brochures – smart new pads in city centres that would be desired by an allegedly endless stream of young professionals eager for rented accommodation.
(It didn’t occur to many investors that the stream of young professionals would be limited, that they would eventually want a more suitable property with a garden for the kids or that the massively increased stock of the same accommodation would have a downward effect on flat prices and rents, but hey, that’s a different story.)
BIG DISCOUNTS ON NEW BUILD FLATS OFFERED
The builders were happy to sell these boxes in bulk offplan as this helped their cashflow and they eagerly offered generous discounts of up to 30% to the property investment companies to encourage them to bulk buy in this way.
So far, so good.
No fraud yet and it has to be said that most property investment companies doing this were not fraudsters.
In part two next week I’ll look at how these discounts, the presence of real of fictitious secondary buyers, sloppy valuations and the lack of transparency in the mortgage process allowed the mortgage frauds to happen.
Feel free to add a comment. We moderate all comments so they can take a day or so to appear. If you want to view a comment, you need to click on “Link to this Post” at the bottom right of this post and then scroll down to the end of the post.
BUYING AGENTS AND PROPERTY FINDERS
Don’t forget at LettingFocus.com we also act as buying agents and property finders, helping people to find property either for them to live in or as a property letting proposition. Read this article to find out more about BUYING AGENTS & PROPERTY FINDERS and get in touch if you would like us to act for you.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker and I run this well known property letting and investment blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008 and 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.
Labels: buy to let mortgage fraud, buying agents, morrtgage fraud, new build ghettos, property clubs
This entry was posted by lettingfocus, on
Tuesday, December 30, 2008.
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