"Before Tim Larkin"

When you, as a real estate investor sells to a sociopath, this is what all the investor teaching gurus don’t tell you.

Not every “vanilla” real estate deal comes out “sweet”.

Five yrs. ago I sold my mobile home on an installment contract to a man named Timothy M Larkin. Due to the mobile needing some work, I sold it “as-is” at a discounted price. Mr. Larkin had just split with his family and wanted to stay close enough to spend a lot of time with his daughter, but could not get financing due to an IRS lien. His lawyer wrote me a letter stating that the lien would be cleared up with in the next year, and other than that Timothy M Larkin had a pretty good credit report.

I thought this would be a “win-win” for both of us. I agreed to carry the paper with 10% down at the current market rate, amortized over 30 yrs. due in 5. This kept the payments affordable for Mr. Larkin and would provide a monthly paycheck for me. That’s one of the things the real estate gurus preach. “Buy a bunch of houses with a positive cash-flow and build your wealth.”

At one point about a year and a half into the contract, he paid me $35000.00 of what was owing, and I gave him credit for over $47000.00. Once again, a win-win. Supposedly during this time he had also remodeled.

In the meantime, he harassed the lady across the street from him so much, he finally got her removed from the park. She was a little crazy, but not dealing drugs as he had claimed every time he called the police out there. He had also encroached on the next door neighbors lot so much that she couldn’t even use her driveway. She put her mobile up for sale. The people directly across from him who had had that mobile for years, he harassed them so bad about painting the outside of the mobile, they painted, and then put up a for sale sign in their window. He demanded the owner of the park remove another mobile across from him, and when the owner had it all set up to move it, Mr. Larkin declared it was a health hazard, and stopped the whole thing! Through all of these things I should have gotten a clue as to what type of person Timothy M Larkin was, but nothing prepared me for what came next.

First he had a lawyer write me a letter trying to claim fraud when I sold him the mobile home and I should give Mr. Larkin the mobile home and all of his money back. Luckily I am a very good Realtor, trained by two ladies that dotted every “i” and crossed every “t”, so needless to say that letter didn’t lead to anything. I had offered to sell him his note for a discounted price, and instead of negotiating, he just quit paying. I had to file a Notice of Default to get the back payments. After that it was as if I had to file a NOD to get almost every payment.

The park is now in flux. The owner wants to convert the mobile home park to condos. He’s been fighting for a while now, but has lost each fight as the park fills the City’s need for low income and senior housing. If you live in the park full time, it is rent controlled and the space rent is quite low.

The contract was going to be up this Feb. 2011. I really thought that he would renegotiate for longer time or try to buy out the contract at a discount. Instead, with a balance of over $88000.00 owing, all he offered was $10,000.00 and instead chose to go through the foreclosure sale. I haven’t been able to get inside yet, but he’s out and I did get some pictures from the outside. Timothy M Larkin chose to totally gut the place of everything that was in it leaving me with the shell. While I half expected as such, my boyfriend when he saw it was just devastated. He just kept saying “How could somebody with any kind of conscience do something like this? This man’s an animal!”

This is what happens when you as a real estate investor meets a sociopath. This doesn’t even touch on all of the time taken to do paperwork, etc. because he had no integrity and didn’t keep his end of the bargain.

"After Timothy M Larkin"

Disclaimer: I don’t for a fact know that Mr. Larkin has ever been diagnosed as a sociopath. I only know he appears to have no conscience for his actions toward other people.

If you’re really asking “Have we hit the bottom of the California housing crash?”, I would have to say I don’t think so, not yet. Millions of homes are still being foreclosed on, and despite what everyone says, banks are still not truly working with their customers. While working on loan modifications on one hand, the banks are taking the homes to the courthouse steps with the other.

If you’re asking “Should I sell my home now before it loses any more value?” I would say that this is the slow time of year to sell even in a good market. It’s true, your home may lose more value if you hold on to it going into 2011. As I said, I personally don’t believe we’ve hit market bottom yet. Right now rates are at an all time low, which allows more buyers to buy, giving the seller a larger market. Historically, around the middle to end of February rates start to rise knocking people out of the affordability circle. You also widen your market if you are willing to do a little ‘creative financing’ such as carrying back a note for part of the money you receive and having the buyer pay on an installment contract.

Last but not least, if you’re asking “Is this the time to buy a house?” I would say it’s a great time to buy if you’re planning on being in it for awhile. Unless you’re buying a fixer upper way below market and doing the work yourself, the days of flipping it right back out and making a huge profit are a little slower these days. If you buy a home planning to raise a family, or stay located in that spot for the next 5 to 10 yrs., opportunities abound.

You have the advantage of the lower rates, and this time of year most sellers who have their home on the market are sincere about really wanting to sell. The inventory may not be as large, but neither is the competition for the same house. Sellers tend to be a  little more negotiable when there aren’t any offers coming in.

If you’re just curious about what’s happening in your neighborhood because you’re trying to keep track of where you are financially, equity wise, I would be happy to give you a full report of the activity in your neighborhood for free. No obligation. Just remember, I only deal with the Santa Clara County, California area. I can be reached at 408-313-3270 or at LauriBeamish@gmail.com

Another form of a Real Estate Installment Sale is buying a home on a Land Contract or Wrap-Around Mortgage. This is where the owner has a mortgage, but sells you the home and he holds your mortgage. He is essentially the bank for you. Many things can go wrong here.

Red Flag #1- There is a “Due on Sale Clause” in the seller’s mortgage stating any kind of transfer of any part of the property, and the bank has the right to declare the full amount of the original mortgage on the property due in full. This leaves the buyer in a position that at any time the original bank may ask for the full amount, and if you can’t refinance to pay them, they can foreclose on buyer and the seller.

Red Flag #2- The seller or the buyer wants to hold the contract “unrecorded”. Here again, this is done in hopes of the bank not finding out what’s going on, implementing the Due on Sale Clause, and leaves the buyer unprotected. It’s also considered to be fraudulent.

Under any situation where the seller is going to act as a bank by carrying back a mortgage on the home, it is extremely important to get a credit report on the buyer, make sure there are no liens against the seller or buyer that could attach to the property, and make sure all paper work is done correctly so that every one involved is protected.

In this market where people are having a hard time selling their homes, it is not uncommon for the seller to carry some type of financing. If you are thinking about using any form of selling or buying in installments, feel free to ask your questions or leave a comment below. I would be happy to help.

In February 2006 I sold my mobilehome on an installment contract of sale. This is an excellent way to sell your home if you can do afford to do it for several reasons. Just a couple are:
1) You only pay taxes each year on the amount you are actually paid, not the full amount of the sale(of course if it’s your personal residence you would be exempt for a certain amount of your gain. Check with your accountant)
2) It opens the market to many more buyers
3) It can provide a nice income on a monthly basis
4) Generally you can get full price if you offer terms instead of “all cash”

Unfortunately, these transactions don’t always go smoothly and sometimes you have to foreclose to get your property back, which is what is happening to me right now. While this is a “down side” to an installment contract, it’s also an upside in the way that not only have I been paid monthly payments for over 2 years, but if he gets caught up on his payments I win, or if I get my mobile back and move into it I win. While it’s inconvenient, I wouldn’t say it’s really any worse than trying to evict a tenant on a rental and I have recourse if he destroys the property on the way out.

Foreclosing on a mobile home on rented land is much easier and faster than foreclosing on real estate, but the basic red flags of an installment sale are basically the same. When I sold my mobilehome, due to the business I had at the time I hadn’t spent a night in it in four years. I was just throwing money down the drain every month paying the space rent. At the same time my house payments were rising on the adjustable rate mortgage and I couldn’t afford to hold the mobile any longer. I began actively trying to sell it. Along comes Mr. X in December of 2005.

Mr. X just lived a few blocks away, but was splitting with his “significant other”. He wanted to stay in the area because they had a young daughter and he wanted to stay active in her life. Due to paying child support, etc. he couldn’t afford a whole lot and was very familiar with the mobilehome park I was in. He would pay me my full price if I would carry the loan on an installment contract. I was selling the mobilehome “as is” and had priced it substantially below market because I didn’t want to have to mess with repairs. Mr. X was a contractor and figured he’d do the work himself so he wasn’t concerned. The sales price was $169000 and he was offering $25000 down.

Red Flag # 1

When you make decisions based on your need for the money you have a tendency to ignore the red flags. That’s the position I was in and it makes you very vulnerable. The first red flag was when we met for the second time to sign the contracts, he changed the down payment amount from $25000. to $16,900. He said the reason for the change was he needed to have some cash left for fixing up the mobile. I understood that. I figured he was still putting 10% down. I had enough money temporarily for what I needed to do, so I said ok.

Red Flag #2

He started hem-hawing around providing a credit report. He had stated he made approx. $40000. per year and he only had about $800 in debt. I still wanted a credit report. At least I had that much sense. Come to find out he was in a dispute with the IRS. I guess he figured he better tell me before I saw it, and he had a lawyer draw up a letter telling me the IRS would not attach or take the mobile for what Mr. X owed. He even attached parts of the code to show me this was highly unlikely. When I finally got a credit report from Mr. X there was nothing about an IRS lien. While I felt secure about that, it should have sent a red flag that Mr. X wasn’t completely honest, or at least was manipulative.

This is getting to be a rather long story, so I’ll cut off here as these are the two most important red flags to watch out for. Come back for part 2 tomorrow.