Tuesday, July 29, 2008

Down Payment Shenanigans

Not but a few days after I make a stand regarding the necessity for homeowner downpayments (real ones, not the fake "downpayment assistance" kind) we get this jewel:

OC Register: $625k For This?

The buyers of the property in question paid $625,000 in January '08 for a house that might fetch $60k or $70k where I live. And I'm probably being generous with that assessment. However, the only way the bank (Wells Fargo) would make the loan was with a $125k downpayment from the buyers. Or someone.

Did the buyers have that kind of money available? Of course not.

So the seller simply took the original sales price of $500k, marked it up to $625k, and "provided" the $125k as "downpayment assistance." That, at least, is what's implied, and what I'd tend to believe.

On Jan. 15, Praslin signed the deed selling the property to the Gomezes. Mario Gomez said he was surprised when it came time to sign the papers.

"They lied to us," he said of the sellers. "They said the house was really $500,000, but when I bought it, the papers said $625,000."

Gomez said someone else — he's not sure exactly who — paid the $125,000 down payment.

Documents examined by the Register, including papers in the Gomezes' loan packet, did not show who paid the down payment.

Emily Ralles, who served as escrow officer in the sale, said she didn't know or care who paid the down payment — as long as the check was good and the parties agreed to the terms of the deal.

Neat. Every party in the transaction seems to think these shenanigans are pretty much okay. Even the dubious appraisal gets a wink-wink-nudge-nudge stamp of approval later in the article.

No, really. Bailouts for this sort of crap are precisely where I want our tax dollars to go.

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— Posted by Michael @ 9:20 AM


I enjoy reading your posts! They make me laugh, and think, everytime.

And at some point people have to take ownership of their own choices, without a government bailout!


Thanks for the kind words, Micah!

For all the presidential talk of an "ownership society" a few years back, ours has certainly proven otherwise. When it comes to poor decisions, no one wants to "own" anything.




I hate to sound like a hippie because I share your frustration in tax dollars being spent to bail irresponsible people from idiocy. But what's the other option? Let them all drown?

The federal bailout plan is a bandaid at best and a policy that rewards financial idiocy at worst. But attitudes like that are what leads to the kind of de-regulation that put the country in this spot in the first place. You can't trust an industry not to stack its deck, nor can you trust the consumer to be smart (which is why you have to put warnings on EVERYTHING).

Our regulatory entities were like a collar on a snake and we have set ourselves up to be a country of fiscally irresponsible people because while arithmetic and reading are part of the standard curriculum, there are no high school classes that teach you about investment, budgeting and mortgages.

I 100% agree on a fundamental level we shouldn't be here and should never have to resort to this, but it's exactly where we are. Of course, the problems will continue when we waste money bailing out this debacle and constructing some revised bureaucracy to regulate the financial markets, we're still not going to do anything about making financial education a part of our standard operating procedure and the majority of our youth will learn their money smarts from their idiotic parents who bought their house with a mystery $125,000 that nobody bothered to check up on.


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Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]