Real Estate Agents Help to Kill Property Values
May 30, 2009
As if housing values weren’t tanking enough on their own, now comes word that real estate agents are helping to sink them even further. With lenders trying to unload their growing inventory of foreclosed properties, they’re turning to real estate agents for appraisals, insead of traditional, licensed appraisers. The result is agents low balling values to make quick sales and homeowners getting the short end with artificially low property values. Read Tampa Tribune Reporter Shannon Behnken’s excellent report exposing the practice below:
Broker price options open controversy:
By SHANNON BEHNKEN; Tampa Tribune;
Lenders looking to quickly unload distressed properties are increasingly cutting costs by hiring real estate agents instead of licensed appraisers to value property.
The agents, who often have a stake in selling the property, give low-ball price estimates that artificially push down values, some industry experts say.
Broker price opinions, or BPOs, are performed by real estate agents who, unlike licensed appraisers, have no regulatory oversight of their valuations. BPOs are attractive for lenders because they cost between $40 and $65, compared with about $350 for an appraisal. Critics say the agents are swayed by a desire to collect a commission for selling the home later.
“If Florida was to require all lenders to use appraisals instead of BPOs, these extravagant decreases we’re seeing would stop overnight,” said David Teacher of Brandon-based Superior Residential Appraisals. “Some neighborhoods are back to 1997 prices because of this, and it’s absurd.”
Making ends meet
Amid the greatest housing downturn since the Great Depression, some real estate agents see BPOs as an opportunity to make ends meet, or as a logical extension of their business. Those who defend them say many agents are in a better position to come up with accurate price estimates because they know what will sell.
“To say that real estate licensees can’t give a price on a property just doesn’t make sense to me,” said Principal Real Estate & Auction’s Lisa Rose-Mann, who conducts BPOs regularly. Mann said she never takes a listing as a result of her BPO work.
Using BPOs only to value houses is illegal in 23 states but is permitted in Florida. Some groups, such as the National Community Reinvestment Coalition, want other states to outlaw BPOs as appraisal substitutes in distressed sales.
“We work with consumers around the country and have found this to be a big problem,” said David Berenbaum, executive vice president of the reinvestment coalition. He recently testified in front of Congress that price drops are more prevalent because of BPOs.
The Tampa-St. Petersburg-Clearwater metro area saw the median sales price fall to $135,200 in April.
Prices are down 23 percent from $176,200 in April 2008, according to the Florida Association of Realtors. At the peak of the local market in June 2006, the median sales price was $239,600.
The decrease is largely driven by distressed sales. Because of that, home prices would continue to fall, even with licensed appraisers doing all the valuations, but Teacher, the appraiser, said the prices wouldn’t fall as much.
“I saw a home that likely would have appraised at around $115,000,” Teacher said. “The BPO came in at $65,000, and the bank took $55,000.”
Real estate agents are more likely to come up with a lower estimate because it would be easier to sell the home, said Brad Monroe, a real estate agent and former president of the Greater Tampa Association of Realtors.
Monroe does not offer BPOs for a fee but performs them for lenders when he sells bank-owned homes. He said licensed appraisers should be used most of the time.
“The lender dangles the carrot that when the listing comes open, you’ll get it,” he said. “There’s not much of an incentive to get an accurate value.”
Industry experts say BPOs are used in the majority of current sales because they are most often used in distressed property sales. Teacher says he thinks as much as 90 percent of sales in some Bay area neighborhoods are based on BPOs.
Broker price opinions aren’t new, but the business has blossomed as foreclosures have spiked. Educational Web sites target real estate agents and say the economic downturn is the perfect time to concentrate on churning out BPOs. One touts that BPOs are the “the easiest and fastest way to make big money in 2009.”
Some questions raised
Regulators in some states have raised questions about the recent increase in the use of BPOs. No such questions have been raised by the Florida Department of Business and Professional Regulation, which oversees real estate agents, said spokeswoman Alexis Lambert.
Before agreeing to lend money on a sale, lenders typically order a valuation from a licensed appraiser.
When lenders approve a short sale - meaning they agree to allow a home to sell for less than the mortgage to avoid foreclosure - they often turn to BPOs to make sure they’re getting a fair price. BPOs are also used most often when lenders need to figure out what price to list a foreclosed home for sale.
When the homes are then sold at “fire-sale prices,” the rest of the neighborhood suffers, said Bill Garber of the Washington-based Appraisal Institute. Garber is in charge of the group’s government relations.
“This ultimately brings down values everywhere, and that should concern us all.”
Jack Rodriguez, president of the Greater Tampa Association of Realtors, said he understands the controversy but that lenders know what they’re getting: an opinion. Also, as long as BPOs are legal, he said, real estate agents and lenders will likely use them.
“I can see both sides,” he said. “I see it has a business decision, and a lot of Realtors know how to do this well.”
Trade School Westwood College Comes Under Fire
May 30, 2009
A Drive-By Education Doesn’t Come Cheap:
Jessica Rosales was one of those kids, watching TV, wondering what to do about the future, and seeing a commercial about Westwood College.
Now 21, Rosales is living that future as one of four plaintiffs in a class-action arbitration against the school and its parent company Alta Colleges Inc., based in Denver. Alta has more than 12,000 students at 19 Westwood and Redstone College campuses California, Colorado, Georgia, Illinois, Texas and Virginia.
“Westwood College knows exactly what the future holds because they are responsible for creating it: astronomic and insurmountable debt obtained in the pursuit of a largely useless degree,” reads the arbitration complaint filed this month before the American Arbitration Association in Denver.
The complaint alleges that the for-profit school lies to students about everything from accreditation to job placement opportunities as it loads them up with loans that they may not even know about until they leave the school.
“Everything we’re seeing at Westwood is just wrong,” said Jillian Estes, an attorney with James, Hoyer, Newcomer, Smiljanich & Yanchunis in Tampa, Fla., which filed the complaint.
“They’re putting students into mountains of debt, and giving them degrees they have very little opportunity of getting careers from,” she said.
In April, Alta paid $7 million to settle a Justice Department lawsuit making similar allegations regarding its colleges in Texas, including a claim that the schools were submitting false claims for federal student aid funds.
Despite the settlement, Alta CEO George Burnett said the school “always acted lawfully and ethically.”
“We decided to settle with the government based on the costs and time associated with prospect of litigation, especially given that these issues are over four years old,” he said.
Burnett wasn’t available to talk about the latest complaint, but said it was without merit in a statement issued through Alta’s public relations firm.
“Westwood College has made it a priority to ensure that each student understands the exact tuition and fees for attending school and acquiring a degree, as well as the costs associated with financing their tuition,” the statement said.
As for accreditation: “Like any community or traditional four-year college, Westwood College does not guarantee the transferability of its credits to any other institution.”
Rosales said that when she signed up to study criminal justice at Westwood in Upland, Calif., in fall 2006, she never had to take the plastic wrap off her books.
“The instructors are just old police officers and all they do is talk crazy stories - drug busts. It’s not learning at all,” she said.
Students milled about classrooms and hung out in the parking lot. Lunch breaks often went on for three hours. “They didn’t care if you showed up or not,” Rosales said.
Rosales had spent hundreds of dollars on books, but her instructor told her they were unnecessary, and could not be returned because they were outdated.
Deciding the school was “a joke,” she quit after only four months. But the joke was on her as the school continued to charge her tuition, racking up a student loan tab of more than $13,000.
Today, she has a job selling auto parts, and she studies at a community college, despite some unpaid student loans on her credit report. She told me she complained about the school in an Internet chat room and was approached by an investigator who introduced her to her lawyer.
“They bring you into the school like they are selling you a used car,” Rosales said. “They’re really pushy.”
Estes, Rosales’ attorney, said she has reviewed hundreds of complaints about the school on the Internet.
Another student named in the suit, Tyrone Bailey of Long Beach, Calif., claims he paid more than $60,000 for a criminal justice degree that no prospective employer has taken seriously. What wasn’t covered by federal grants and loans was covered by an internal loan from the school, at 18 percent interest, plus a 9 percent origination fee, the complaint said.
The complaint alleges that admissions counselors are merely telemarketers, rewarded with gift cards, parties and exotic vacations, to get people to sign loan documents. The sales culture is so competitive that one sales team depicted itself as ganstas doing drive-by shootings.
“Everyone hit the deck!” reads one internal email attached to the case. “A drive-by just occurred.”
The email, boasting about sales, sports a graphic cartoon depicting ghetto hoodlums poking automatic weapons out a car window.
These are the so-called admissions counselors to scores of vulnerable, young students. And then there’s Burnett.
Burnett used to work with former telecom CEO Joe Nacchio, who is in prison on insider-trading charges. They ran Denver-based Qwest, which paid $250 million in October 2004 to settle financial fraud charges with the Securities and Exchange Commission.
Burnett was CEO of Qwest’s telephone directory division, Dex.
Part of the fraud, the SEC alleged, involved secretly changing publication dates of Dex’s phone books, loading revenue into quarters where Qwest fell short of Nacchio’s promised targets. Burnett was reportedly interviewed by the SEC, but wasn’t named in the case and walked away from Qwest’s scandals unscathed.
To avoid bankruptcy, Qwest sold Dex for more than $7 billion in 2002 to two buyout firms: Washington, D.C.- based Carlyle Group and New York-based Welsh, Carson, Anderson & Stowe.
Burnett went to work for them. He cut hundreds of jobs, loaded the balance sheets with as much debt as possible, orchestrated an initial public stock offering and then helped sell the company to Donnelley for a $3 billion profit.
Burnett then became chairman of Donnelly, but he soon dumped most of his stock for a $22 million profit and quit in 2006.
It was a wise move for him. Stock of Donnelly, now overloaded with debt from overpriced acquisitions like Dex, trades for about 15 cents as it slouches toward bankruptcy.
Having made his fortune, Burnett moved on to be an educator. So far, he sure seems to be teaching the kids.
“I was only 17,” Rosales said. “I was naive. They made it sound real nice. ‘You’ll be making $100,000′ (as a police officer), and I actually believed it.”
read Al’s blog at tellittoal.com.
Delinquent Property Taxpayers about to get Socked
May 29, 2009
Foreclosure Crisis Having Impact on Delinquent Taxes
This is a bad time of year for delinquent property taxpayers.
Local tax collectors are about to begin a yearly ritual that puts homeowners who don’t pay their taxes on the hook for *interest on what they owe, sometimes as much as 18-percent interest. It’s the annual tax certificate sale, and it brings in big profits for investors.
With foreclosures way up, so is the amount owed in delinquent taxes. In Hillsborough County, Florida, which is the Tampa area, $161-million in delinquent property taxes is owed for 2008.
Travel Insurance - Do I Really Need It?
May 28, 2009
By Terry Smiljanich:
So you’ve gotten your travel invoice and see that somehow you signed up for travel insurance (see our article from last week on how you can get tricked into purchasing such insurance). You have to cancel within ten days or you’re stuck with it. But should you cancel it? Maybe it’s something you will be glad to have.
Let’s look at the travel insurance policy that Access America, the company that Orbitz automatically signs you up for to give you “peace of mind.” As always, the details are buried in the fine print.
Trip Cancellation or Interruption
One of the main selling points of travel insurance is to protect you should your trip have to be canceled or if you have to suddenly interrupt your trip due to an emergency.
The Access America policy covers you if you or your traveling companion are seriously ill or injured. According to the fine print, however, such injury or illness must be certified by a doctor who has examined you and recommended that you must cancel or interrupt your travel. Your death also qualifies you to cancel or interrupt your travel, always a good thing to know.
If you are hijacked, you are allowed to interrupt your travel. Also, if there is a “terrorist event” at your destination within 30 days of your arrival date, you are allowed to cancel the trip, unless there have also been other terrorist events at the same location in the 30 days before you obtained the travel insurance policy. Terrorist events must be by an “organized terrorist group,” but don’t include civil protest, unrest, rioting or acts of war.
Forget it, however, if you cancel due to an epidemic or pandemic. Canceling your trip to Mexico due to an outbreak of swine flu would not be covered.
Refunds
Should you qualify under the policy to cancel or interrupt your trip, what exactly do you receive? You get back any payments or or deposits you previously made, less any refunds to which you are entitled.
This refund policy is one of the main reasons you consider before deciding to keep the travel insurance. Have you bought an airline ticket in advance? Is it a refundable ticket? If so, your travel insurance policy will pay you nothing. Is it non-refundable? Most airlines will still allow you to cancel your flight and will provide you with a full credit for use on a future flight, in which case your travel policy will still pay you nothing.
Cruise ships are different. Most cruise lines (Carnival, for example) have prepayment requirements, together with strict cancellation policies. You may have to pay hundreds of dollars of up front costs. If you cancel within 30 days of the scheduled departure, you are entitled to a refund of your deposit. If, however, you cancel between 29 and 8 days of departure, you will owe 50% of the total fare. Cancel within a week and you will owe 100% of the total fare. Your travel insurance policy will, however, cover these differences, if your cancellation qualifies under its strict definitions.
So, if your main concern is trip cancellation and you are traveling by airplane, cancellation insurance is not particularly beneficial. If you are traveling on an expensive cruise with substantial deposits, travel insurance may make much more sense.
Medical Coverage
Travel insurance usually includes some form of medical insurance, covering you should you require emergency medical care while on your trip. The fine print specifies that the treatment must be medically necessary and provided by a doctor, hospital or other licensed provider. Existing medical conditions are also not covered unless you pay extra for this benefit.
Such medical coverage is “secondary” to your own health insurance, so any such costs have to be submitted to your own provider first. The travel insurance policy will only cover any qualifying costs not covered by your own insurer.
Check your own health insurance policy first. If foreign emergencies are already covered, you will be wasting your money on this travel insurance benefit.
On a recent trip to Greece, I fell and broke my nose and hand (at a “temple to Poseidon”). I was treated by four doctors at the main Athens hospital, had a follow up treatment at a clinic on a small Greek Isle, and came home with my x-rays in hand. Total cost? Nothing, due to Greece’s health care system which covers such emergency costs. We are not recommending that you rely on foreign health care systems to cover your overseas medical emergencies, but not having travel insurance may not necessarily pose a problem, depending upon the country.
Summary
There are other miscellaneous travel insurance coverages, such as lost or stolen luggage, but these extras are not, of themselves, worth the cost of travel insurance, which usually runs between 5-7% of the total cost of your trip.
Travel insurance makes sense if you and your family are planning an expensive trip with substantial nonrefundable costs. Several websites (for example, here, here, and here) give advice on how to evaluate the need for such insurance.
Travel insurance should be, however, a voluntary choice you make, and not something quietly slipped into your bill by an online travel service.
Travel Insurance - How Did I End Up Ordering That?
May 21, 2009
More and more travelers are finding out that their travel costs include a bill for travel insurance that they don’t remember ordering. How did they end up with travel insurance? And what the heck does it cover, anyway?
How You Got Travel Insurance
Many people planning a cruise or a long vacation decide to get travel insurance to cover the risks that they might have to cancel their trip due to unforeseen circumstances. Going out and getting travel insurance is fine, but having it forced down your throat is something else entirely.
If you book travel through a popular online travel service such as Orbitz, you might discover that somewhere along the way you “asked” for travel insurance. How did that happen? Well, as you were working your way through the various web pages and filling out information, you might not have noticed the little box that “asked” if you wanted travel insurance. You also might not have noticed that the helpful people at Orbitz already filled a “yes” in the box for you.
Why would a company like Orbitz force you to uncheck a box that is ordering an extra service you will be billed for? When asked why it engages in such a practice, Orbitz states: “We have found that many of our customers choose travel insurance when booking an international vacation to protect their investment. Therefore, we default to ‘Yes, Add Ticket Protector Plus’ to provide this peace of mind.”
Really? To provide “peace of mind” Orbitz makes the choice for you? It sounds more like Orbitz wants to provide mindless “choices” rather than peace of mind. Shouldn’t travel insurance be something you choose to get, rather than have Orbitz choose it for you?
We think any form of preselected extra options on an online service is just a way to trick people into buying something they may not necessarily want. This type of marketing practice is the reason that you should be very careful when filling out web pages for a service you are buying. Don’t let someone make mindless, and sometimes expensive, choices for you.
How You Cancel Travel Insurance
Once you discover that you purchased travel insurance and decide that your “peace of mind” is better served by canceling something you didn’t want to order, what do you have to do?
Once again, read the fine print. You have only ten days from the date you inadvertently “ordered” this insurance to cancel it. Waiting until it shows up on your credit card bill is too late, even if your trip is still months away. Sorry.
Assuming you’re astute enough to notice that you are going to be charged for something you didn’t want, it should be fairly straightforward to cancel it, right? You call Orbitz, but it tells you to call “Access America,” the company actually providing the travel insurance. I guess that even though Orbitz wanted to order it for your convenience, it’s not convenient for Orbitz to undo the transaction for you.
So you call the telephone number provided, and after working your way through a convoluted “message tree” (you know, “if you’re calling about … press …”) you are ultimately directed to another website where, after working your way through some more forms, you can finally get your policy canceled and now can wait to get a refund of the premium you’ve already been charged- assuming, of course, that you acted quickly enough in discovering the charge and going through this cancellation procedure.
If you are too late, or if you had decided all along that travel insurance is something you actually want, what is it? Does it cover, for example, that trip to Mexico you had to cancel due to the swine flu outbreak? (Here’s a hint - no). And who is Access America? We will help answer those questions next week when we examine the fine print on these insurance policies.
Body Language: Learn How to Spot a Liar & Avoid Getting Scammed
May 13, 2009
Sometimes words don’t matter. Watch now and learn more about body language. Retired FBI agent Joe Navarro says it’s often more reliable than what someone actually says. Consumer Warning Network’s Angie Moreschi interviewed Navarro, an expert on human behavior, about his new book What Every BODY is Saying, to get some insight on how to avoid getting scammed. Click the video above or click “read more” below for more information.
Fight Foreclosure: Make ‘Em Produce the Note
May 12, 2009
Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process. Read the step by step “how to” under the videos.
Special note: In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.
Produce the Note - Steps To Follow:
Fraud By Mortgage Companies Key Cause of Foreclosures
May 11, 2009
Figuring out just how much junk major banks have on the books was a goal of the federal government’s just released “stress test” for the 19 major banks receiving federal bail-out dollars. There’s still no clear answer, but we continue to see more evidence that a high percentage of sub-prime mortgages were steeped in fraud and have a high probability of failure.
The American News Project just released the video above which reports fraud carried out by employees of major sub-prime lenders, like Ameriquest, was a key factor in the mortgage meltdown. Consumer Warning Network first reported our findings on this very issue more than a year ago, and is cited in the ANP report. ANP reporter Lagan Sebert talks with a former Ameriquest employee who says her company promoted a system rife with fraud as a way to make profits faster.
New Gasoline Pricing Scam - Let the Buyer Beware!
May 11, 2009
In a new attempt to mislead consumers, gas stations everywhere are resorting to a new technique - advertise one price and charge another. As you are driving down the street looking for a fill up, you see the following sign advertising gas at a very reasonable rate:
You pull in, insert your VISA card, and fill up with high test at what you think is $2.29 per gallon. If you bother to look carefully at the price on the pump or at your bill, however, you see that you’re really being charged $2.34 per gallon. In a typical 18 gallon tank, that’s almost a dollar more than you thought you were going to pay! What gives?
Westwood College Has Lessons to Learn
May 6, 2009
Westwood College’s website makes flashy promises to students of “one HUGE opportunity,” but last month, the college agreed to pay the U.S. government one huge amount. Alta Colleges, Inc., the parent company of seventeen Westwood College campuses, agreed to pay seven million dollars for violations of the False Claims Act, better known as the Whistleblowers Act, in connection with a laundry list of recruiting and reporting infringements. But, for a school that raked in over 250 million dollars last year, is this drop-in-the-bucket enough to finally point the school in the right direction?
The Whistle Blowers
On April 7, the United States of America, on behalf of the Department of Education, filed an amended complaint detailing dozens of ways in which the school defrauded potential students and the federal government. The complaint was brought as a result of government intervention in a suit by nine former employees who decided to blow the whistle on the school’s dirty practices.
Based on the employees’ information, the U.S. government alleged that Alta Colleges knowingly violated at least fourteen provisions of the Texas Educational and Administrative Codes. Among the host of allegations, the government asserted that the school’s recruiters were forced to use practices “designed to mislead prospective students and to misrepresent material facts to them.”
There was no limit to the lies the recruiters would tell students to sign them up. Recruiters would promise students that credits could transfer to another school, when there was no known accredited school in Texas that would accept Alta’s credits. They would promise that more than 90% of past graduates had jobs in their field with Alta’s help, even if the student was signing up for a program that didn’t have any past graduates. The real average for employment is just over 50%, and less than a third had any help from Alta.
Alta was so brazen to even make false claims directly to the federal government, the complaint alleged. The school made blatant lies about graduation rates, employment rates and quality of education for certification. In one instance, the government said, the school pretended that a student was working for a real estate buying company, when he was really a baggage handler for an airline.
Ultimately, the government concluded, “Alta Colleges misled the United States into believing that it was eligible to participate in the (federal loan program).” The government requested that Alta be forced to pay back every dime of federal funds given to the three Westwood campuses in Texas.
Denial of Wrongdoing
A mere eight days later, Alta Colleges cut a deal with the government and the case was dismissed.
Even though the school agreed to pay back seven million dollars to the government, Alta Colleges CEO, George Burnett, maintains the school did nothing wrong. “We believe that we have always acted lawfully and ethically,” he said in an internal statement. The school maintains that the settlement wasn’t because they were wrong, but just because they wanted to avoid the cost of litigation.
Burnett never offered an explanation for the lies told to students and to the government.
The Apple Doesn’t Fall Far From the Tree
We’ve heard those kinds of denials from a Burnett company before.
Burnett joined Alta Colleges in August 2006 after a long career in the telecommunications industry. For the final six years of his telecom career, Burnett rapidly jumped from company to company with buy-outs and takeovers. But the catalyst for the rapid movements seemed to stem from his tenure with Qwest Communications.
In 2004, Qwest settled a $250 million suit with the SEC based in part on misreporting of company expenses from June 1999 to March 2002. Burnett was a senior officer with the company from 2000 to 2002.
When the case settled, a spokesperson for Qwest’s CEO, Joe Nacchio, claimed that he “never did anything improper or illegal.” If this sounds familiar to Burnett’s current mantra at Alta Colleges, it should come as no surprise. Burnett’s career was largely built by Nacchio, and he followed Nacchio from AT&T to Qwest, before moving on to Dex Media when Qwest began to unravel. A former Dex executive claimed that Burnett was “really close to Joe” and that the men bonded even more when they shared private flights from Denver to New Jersey.
On February 25, 2009, Joe Nacchio began a six-year federal prison sentence for nineteen counts of insider training.
Lesson Learned?
The allegations in the recent Alta settlement pre-date Burnett’s tenure there. But, his flat denial of responsibility seems to be a stamp-of-approval on the practices in question.
When Burnett started at Alta, one reporter stated that, “Westwood College would be a great business school if the new chief executive of its parent company could teach what he knows.” Now it’s time for the roles to reverse.
Alta Colleges has the opportunity to take this settlement as a sign to change its practices. But to do that, the school will have to take a cue from its students and learn a lesson.
So far, Alta Colleges gets a failing grade.
Banding Together and Fighting Back!
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