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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Mortgage Fraud Danger in Below Market Value (BMV) says LettingFocus

Is making money in property as easy as some people say?
Well, it’s not hard, that’s for sure, providing you know what you are doing.
On a scale of 1 to 10, where 10 is very hard (e.g. running a kids football team as I do and having to deal with some of the parents) and 1 is very easy, I would rate buy to let as a 4.
To keep it simple, it is really just about doing a few things right.
First, you find a property in an area where there is currently strong and ongoing future strong tenant demand for that property.
Second, you buy the property at a good lowish price and third, you find good tenants who will look after it and pay the rent on time.
Sounds simple – and yet so many people try to overcomplicate it.
Usually the companies who overcomplicate it are trying to sell property that is supposedly dirt cheap and which does not require you to put any or much money in.

Too Good to Be True
If you see a deal that looks too good to be true, it usually is.
Very often you will see such companies trying to promote “no money down deals.”
But please keep in mind these important facts……
Mortgage lenders will ALWAYS want to see that you have put some money into the property you are buying. They want to see that you have a stake in it.
And this cannot be funny money – it has to be YOUR money – not money you have borrowed from someone else or from another company.
It has to be YOUR money and you have to tell the mortgage company where it has come from – i.e. the source of the funds.
If you don’t tell the truth about where the money comes from, you have committed mortgage fraud and if you don’t tell the mortgage company the true price you are paying for the property – with all the kickbacks made clear – then you are again liable to be done for mortgage fraud.

Use Your Own Solicitors
Lots of companies specialising in marketing no money down deals will require you to use that company’s own finance arm and legal advisers.
This is because they will make some money from the legal team and finance co. Nothing wrong with that, of course.
But you should check out the cost first as it is often not cheap – and always make sure you have the deal and the property checked by your own solicitors and valuers.
Finally, if you are paying someone to source leads you ought to check out their track record very carefully indeed. Look at the Internet and ask for references.
There are some good firms sourcing below market value property -and we can help with that too - but there are some whose leads have proved to be not so much “below value” as “very poor value.”

Final Thought
It is important to have a mix of investments.
I always laugh when I see how people who manage equity and bond funds are very keen that investors avoid direct property investments like buy to let.
And many who promote buy to let often gloss over the risks and hard work involved to make it work.

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ABOUT US
LettingFocus.com are the experts on landlord issues and I’m David Lawrenson, the author of “Successful Property Letting” – which has been the UK’s top selling property and buy to let book for the last 3 years.

We help landlords and property investors make money in property by coaching them in ways that work, that are ethical and which involve minimal risk.
I have been a landlord and property investor myself for over 25 years.
We also show you how to manage tenants properly and in ways that take up as little of your time as possible.
Finally, we advise companies such as banks, local authorities and social housing providers with their landlord or buy to let facing strategy.

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Realted article: BMV or Below Market Value

Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Fraud on Below Market Value BMV property by Lawrenson of LettingFocus.com

Further to last weeks’ post about mortgage lenders, I see the Chelsea Building Society is the latest lender who was so dopey in buy to let lending that they got hit for a big fraud.
In the case of the Chelsea, a loss of about £41m has been taken as a result of mortgage frauds involving some of its buy-to-let loans. Ouch!
The frauds appear to have involved professionals colluding to inflate the value of buy-to-let properties. Crikey, Imagine that! (Excuse the cynicism.)
A team of people are now going through these cases individually to see if fraud has been committed.
“This could take some time,” said one of their spokesmen (in what must be the understatement of the year.)
Too bad the Chelsea did not read or bother to respond to my consulting letter of a few years ago offering to help them make a better fist of their buy to let mortgage lending.

New Scam – Duff Leads for Below Market Value Deals
Talking of scams, in property fraud is a bit like the poor …….always with us!
The combination of lack of FSA regulation, rapacious entrepenuers and gullible punters wanting to get rich quick makes for a deadly cocktail.
So no surprise that my friend Paul Shamplina at Landlord Action has recently reported that their debt recovery department has never been busier due to pursuing rogue property sourcing and investment companies.
Here is the scam.
What happens is that a Dodgy Property Entrepeneur asks for up an upfront fee to source Below Market Value deals.
The Punter hands over his cash and the leads are duly delivered.
The trouble is once surveyed for mortgage purposes the value of these properties is a whole lot less - making them not so much “Below Market Value” deals as “About Market Value” deals.
The Dodgy Property Entrepeneur then refuses to refund the fee the punter paid.
Pretty simple hey and it’s the latest scam in the world of property, so let’s think of a name for it. Let’s call it “The Bogus Discount Deal Scam.”
So remember, always do your own research into property values and rental levels and check the level of demand in the area.
And for goodness sake, research the sourcing company - how long have they been operating and what does it say on the Internet about them? Always read the terms and conditions and get a signed contract.
Not all property sourcing companies are bad. Just make sure you don’t hand money over to a duffer.
In next week’s blog, I promise I’ll get round to look at studentification and the latest barmy government plans to make student areas, nicer!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiased
property seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make £s at my one to one consulting service.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.
I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
LINKS
Find out about GREAT DEALS we have arranged for landlords by clicking here: Property Investors’ Affiliate and seeing our Affilates page. (More products will be added over the coming months. If you are a merchant with national coverage, get in touch!)
For SEMINARS, click here: Property Seminars, Networking Evenings and Consulting
For the NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
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To JOIN our Free QUARTERLY NEWSLETTER simply send an email to [email protected] - Please note we WILL NOT send spam or sell our mailing list to advertisers!
Copyright of Blog: David Lawrenson 2009.
This blog is updated roughly once a week usually on a Monday or Tuesday.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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How the buy to let mortgage frauds were carried out - Part 2 - by David Lawrenson of Letting Focus

In part one last week I showed how the property market environment in the early noughties was right for buy to let mortgage fraud to flourish.
I explained how big discounts were negotiated between property companies and builders to shift new build boxes onto mostly novice property investors.
Now let’s look at what happens next.

The sales contract that the builder and the property investment company sign would show the full price but the builder hands back that discount at the time of exchange of contracts to the property company.
When the flats are built, the property company will simultaneously sell on the flat to their own buyers and keep all or some of that discunt, making a nice little earner for them. They may also charge a “finders fee” too.
Now, it must be said, SOME of these buyers will be real ones – very often people whose credit score would normally preclude them from buying conventionally. (And it is worth noting that some of the builder’s discount would often be paid back to buyers which was often used as a way for stretched buyers to buy with “no money down” using the discount as their deposit.)
OTHER buyers could be completely bogus ones who applied for a mortgage using false IDs and fabricated documentation. Some blocks in Thamesmead suffered particularly badly with this latter kind of buyer and in these types of cases the property company would be complicit in the fraud.
The key to all these frauds is that until September 2008, there was no obligation for the builder and property investment company to share information on the discount to the mortgage lender. The lender had to rely on the buyer to do this which, of course, makes the fraud relative easy to commit.

WHO WAS DUPED IN THESE MORTGAGE FRAUDS
To make this fraud work, the properly fraudster needed at least some of the following ingredients.
First, they needed a conveyancer. Whilst the conveyancing company would see the sale price on the contract they would not see the hidden discount between property company and builder. This changed last September. But one wonders how many conveyancers really knew what was going on.
Second, you need valuers who were too lazy to accurately value these new builds. Or maybe it was a case of more than just laziness -which is of course going to be up to the courts to decide.
Third, in the worst cases, the fraudster needed to set up a shell property company and get a load of fraudulent applications going in. This may also involve using REAL people with false IDs who then go and live in the flats until such time as they get evicted.
Fourth, you need dumb banks that were too ready to lend money to “people” - either real or imagined people - to buy these properties at far too high a price.
DAVID LAWRENSON AND LETTINGFOCUS.COM IN THE PRESS
Click here to read a selection of articles featuring my comments in the national papers during 2008: http://www.lettingfocus.com/pages/myarticles.html

We are having a break from blogs next week. We’ll be back on 22nd January with a new one.

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.

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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.

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Buy to Let Mortgage Fraud by David Lawrenson of LettingFocus.com. Plus, the case for Letting Agent Regulation.

Well what a year that was.
Not for a long time (since the Great Crash of 1929 in fact) have so many financial institutions made such a muck up of the economy.
Amazingly some bankers, such as John Varley of Barclays, think that WE still think they know enough to listen to their predictions on stuff like houses prices.
Well, I have long since stopped listening to these guys, preferring instead to look at property price fundamentals and reality.
But I’m amazed that other financial journalists report the predictions of senior execs at banks as they have proved so hopelessly inaccurate over the last few years.
And on that topic, full marks to Rosalind Renshaw writing in the Residential Landlords magazine who flagged up how wrong financial institutions were with their predictions on house prices last year.

REAL DEALS ON HOUSES AT LAST
Over the last few weeks the estate agents that I am pals with have started to contact me with real mark downs on London property.
These mark downs have at last started to make house prices in the capital look sensible (You may know from previous blogs that I have not bought in London for 5 years as I have considered prices far too silly.)
In London, I reckon we are now only about 8% away from the bottom for LEADING INDICATOR house price indices such as that from the Nationwide and Halifax (which are of course based on surveyor valuations. Expect ASKING PRICES to fall at least another 20%)
In the rest of the country there is much further for house prices to fall as reality has still to catch up in many places. For example, a close pal in Rochdale reports that asking prices there have barely budged downwards. In areas like this the correction is coming soon and anyone thinking of buying in such areas would be advised to sit on their cash for a while longer, I think.

LETTING AGENTS NEED GREATER REGULATION
This year, as I have predicted in the FT and Daily Telegraph, many new landlords will have a very negative experience of letting at the hands of a rogue letting agent. The full article is here: New Landlords Risk Financial Penalties - "Financial Times" (There is also a longer piece on all this in the pre-Christmas “Investors Chronicle” where I am quoted extensively.)
Good letting agents, of whom there are many, have long called for greater regulation of their industry.
I predict that 2009’s experience will prove that there is a really urgent need for more regulation because many “reluctant landlords” will fall foul of rogue letting agents.

PROPERTY FRAUD IN BUY TO LET
In my next blog I will look at how the buy to let boom allowed what looked like legitimate property transactions to be turned into fraud and how genuine buyers and dim mortgage lenders lost fortunes in the process.
I’ll explain exactly how the shady property deals were constructed and how some conveyancing solicitors, mortgage brokers and surveyors helped frauds to take place through negligence and incompetence.
ADD A COMMENT?
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.
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, property speaker and I run this well known property letting and investment blog
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 any of 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. 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.

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