Happy New Year MW readers! I bumped into an old school chum last night who has moved to the Spanish Costas. He's landed a job at a dodgy estate agent/land banking scam/firm. Here's what they do:
1) They advertise for people who want to sell their house fast for cash.
2) They also advertise for people who want to invest in buy to let properties.
3) The seller agree to sell for 70% of the 'market price' (supported by a RICS valuation).
4) The buyer agrees to buy for 80% of the RICS price.
5) The 'estate agent' provide a short bridging loan to the buyer of 20% of the RICs price.
6) The 'estate agent' helps the buyer obtain the property using a 75% LVT mortgage when really they are only putting 5% down, the sale goes through the land registry books at the RICS price
7) The 'estate agent' pockets the spread plus an £800 arrangement fee.
8) RBS and Lloyds end up with more dodgy loans on their books, and HM Land Registry end up with more dodgy data on theirs. (Ironically these people use HMLR data to do their due diligence)
He says he's doing 2 or 3 deals a week and making about £100k a year to boot. Not only that he reckons there's loads of it going on. Of course, IMO this is mortgage fraud so don't get tempted! I wonder what percentage of transactions are like this now?
Saturday, 1 January 2011
Interesting things you hear in the pub...
Subscribe to:
Post Comments (Atom)
20 comments:
SL, you've been reading this 'blog for too long! In 6) that should read "LTV mortgage" and not "LVT mortgage".
And do you mean "HM Land Registry" or whatever the Spanish equivalent is?
HM Land Registry, we're talking about British property.
Generally speaking, if you are running an investment scam targeting Brits, it's sensible to do it from Spain.
That way there is sod all I can do to you!
It's been going on for years. On-shore and off-shore. And I do means years and years.
Been thinking about when I first came across this. Probably in about 1973/75. At least that's when I first became aware of it (I was in my hippy period - don't ask).
Ok, don't trust middlemen (which includes politicians), they're not doing it for you. Fair enough. That doesn't mean it's not worth your while paying for what they do for you. Where's the scam?
I thought you were talking about dodgy Spanish practises too until further down your list. Why haven't HMRC (or whatever they are now clled) cottoned on to this one?
Happy New Year to you.
Lola, not suprising. A new one born every day and all that.
C - The lender is led to believe the house sold for say £100k when really it sold for £80k. If they knew it had sold for £80k they would not grant the mortgage on those terms. The scam is taking advantage of an illiquid market to get people 95% LTV mortgages by lying to the banks.
banned - HMRC will happily pocket the extra stamp duty I expect!
According to Alan Crisp's magisterial "Working-class Owner-occupied house of the 1930's" (on Net)the builder from whom you bought one of those pre-war semis "helped you out" by fixing you up with a mortgage.Then had a cosy deal by which the mortgage company accepted the value of the house at the builder's (inflated) valuation.
It also needs a bent lawyer to misdeclare the buy / sell prices to the lender as well as to HMRC and the Land Registry; lenders use as their benchmark for calculating LTV *the lower of* valuation or purchase / sale price. If the RICS valuation is used, the broker and lawyer must collude to misinform the lender.
That's mortgage fraud, pure and simple.
@DBC Reed - As far as incentives the lawyer must sign a declaration that no incentives not declared are being enjoyed. More mortgage fraud.
@Stephen L - HMRC in my experience never turn a blind eye to Stamp Duty irregularities whether in their favour or not.
Mark,
Nice post.....
I have heard of these scams before. As you say, they are particularly prevalent within the Buy-to-let sector.
I had thought that this kind of business tanked along with the rest of the real estate market.
At the same time, there are some signs that the BTL business is on its way back. (I carried a post on this about two weeks ago. Another is in the pipeline).
Alice
100K p/a?
Jealous!!
Chef
SL, I see, this all relates to UK properties, your man just happens to have his office in Spain.
Every town has about 6 to 10 property 'operators' in it. After you've been in business in said town for a few years you learn who they are, and how to deal with them - cash up front is best. They either pay it, fine, or go away, equally fine. They are always accompnaied by two or more bent conveyancers ona kick-back. I have beeb in business - retail FS since you ask - in my area in one or another for 30+ years. I can name all of them. And you are bound to come across their spoor sooner or later.
I can tell you a number of tales about how sellers and buyers have been stitched up, and how the practice that SL laid out is still going on and always has.
It would be nice to think that it could be 'regulated' out of existence, which is what lefty fuckwits try and do. Of course all they do is mess things up for the erst of us, the operators, are far cleverer than the lefties and the bureaucrats and just keep on doing it.
Funnily enough my curent comercial landlord is a well know 'operator'. My best one of his past stitch-ups was a young nurse to whom he'd sold and got the mortgage for a fairky scrotty one bed flatlet. This was in the last property crash and she was in 50% ish negative equity. Luckily she met me(!) and seeing as she had no ties heer at all I 'suggested that the best way out of her trap was to emigrate. I later learned from another sourse that that is exactly what she did.
SL's mates scam will precipitate similar problems and more emigration - if they can.
Not as good as my mate, he makes 200k fitting and repairing dodgy boilers that the govt deem to be good cause they are green.
And with a 7 year 40% fail rate, you are either out repairing or selling them another one in short order, as well as the service contracts.
And its all legal. No need to take risks when the govt will rig the market for you hey?
Wot I want to know is, why do we call them "boilers" when they don't?
Lola - Fraud can never be regulated out of existence, but it can be prosecuted under the Fraud Act.
There is no way to regulate theft, drugs, violence etc out of the market. The criminal justice system is supposed to punish people who get caught taking such risks however.
Of course, less prohibition and freer markets would reduce a lot of 'crime' and opportunity to commit crime.
So, Steven_L, don't take this the wrong way, but have you done your duty by your fellow citizens and the HMRC and reported this toerag to the FSA, the HMRC and anyone else who'll listen?
Or are you just cheering them on from the sidelines?
D, in the old days, (and who knows, there may still be commercial premises left with it) central heating was done with steam, for the reasons that you didn't need a pump and you could get away with quite small pipes and radiators. There are disadvantages, mainly concerned with the tendency of things to explode when something went wrong, which have led to the decline of steam heating, but back then boilers boiled.
B, I suspect D was making a clever play on words between "boiler room scam" (aka Ponzi or Pyramid Scheme) and "boiler" (as in 'things that heat up water for the radiators').
Fascinating, but I suspect RBS and Lloyds won't be hurt - after all, in the example you gave, the mortgage still ends up being only 75% of the value of the house.
Post a Comment