Talkcast Transcript - FlyingMonkeyWarrior

From CaseyPedia

Jump to: navigation, search

This is a transcript of a segment from the 25th May 2007 Foreclosure Fridays Live talkcast.^[1]

Casey Serin is quizzed by FlyingMonkeyWarrior. This segment begins approximately 1:29:53 into the talkcast.

Casey: FlyingMonkey, are you there? FlyingMonkeyWarrior, actually, that's the username.

FlyingMonkeyWarrior: Yeah, hi Casey.

Casey: Hi.

FlyingMonkeyWarrior: I just wanted to know what your angle is for the tax situation you've gotten yourself into?

Casey: Oh yeah? Well, which tax situation?

FlyingMonkeyWarrior: Well, when you were just talking about it. I mean, I didn't really have any questions, I basically called in to listen, but LossMitPro was just talking about taxes; doesn't that situation also apply to your foreclosures?

Casey: Well yeah, definitely, in terms of 1099Cs.

FlyingMonkeyWarrior: Right. So what is your plan to deal with your taxes?

Casey: Well that's a good question.

FlyingMonkeyWarrior: Thank you.

Casey: That's a good question. I'll tell you kind of what I know, and think, and then I'll just give another word to LossMitPro and see what he thinks. But he already mentioned that they may or may not even do a 1099C, I may or may not be liable for that. Now if I am, then I just have to do the best I can and pay those taxes. I mean what else am I going to do? Am I not going to pay taxes? That wouldn't be smart. So at this point it's just going to be a waiting game for me.

FlyingMonkeyWarrior: Well how long until you find out whether they've sent the 10-whatever document in?

Casey: I don't know, let's hear from LossMitPro. How fast do they send that out?

FlyingMonkeyWarrior: I mean, is that something that you should look into, or do you just wait around to see if maybe they did, maybe they didn't?

Casey: Yes, let's hear from Loss. How do we do it?

LossMitPro: Okay. A 1099C won't be issued for... I mean, the lender doesn't issue a 1099 the first year they incurred the loss. They generally do it, in fact they have to do it under current standards, they have to do it by the end of the third year. The lender will pursue collection efforts first, and they have to follow some procedures that the IRS holds them to. The problem with the 1099C device is that lenders, traditionally, their collection people don't know any better, and they start collection either by way of assignment to a collection agent or in-house, and that defeats the purpose of the 1099. Once the 1099C is issued, it's basically saying, "this person owes us money and we forgive the debt." But in the force and scope of that they continue collection efforts, that's what many lenders mess up on -- and believe me, it's a lot of lenders. I would guess that 90, 95% of recovery efforts are involved in the 1099C. And when that happens, they're basically saying, "well, we forgive this debt, but we're still trying to collect it." Well you can't have it both ways.

FlyingMonkeyWarrior: So what happened to the property taxes in your homes? Who has paid those? And also what happened to the values of the houses in the neighborhoods where you purchased homes and then had the foreclosures and short sales? Does that drive the values down? So: what happened to property taxes, who got stuck with those, and also what happened to your neighbor's values of their homes? Kind of a few questions here.

LossMitPro: That is a good question. The property taxes are incurred by the lender. In other words, when the lender takes a property back on REO, which is real estate owned, when they own it again after foreclosure: they're responsible for maintenance, they're responsible for upkeep, they're responsible for taxes. They pay all those. So they homeowners adjacent to the property are not responsible for that. The effect and drawback to the homeowners in the adjacent area is that that house may sell for a lot less. And what it does is it draws down the comps, the comparables in the area. So consequently if there's a lot of homes in the area, the given geographic area, that are being foreclosed on and they're being shorted or they're being REOed and then liquidated short: that does have an effect, unfortunately, on the surrounding neighbors. Because it has a reflection on the comparables. But the foreclosure itself doesn't necessarily bring down the property values.

Casey: So if the foreclosures are being sold for less than they were bought for, or less than was owed, it's basically going to bring the market down. And unfortunately that's what's already happening.

LossMitPro: It's the effect of foreclosure is what I'm getting at, Casey. The effect of foreclosure afterwards. Now if somebody's in foreclosure and they happen to sell their home for top dollar or what, versus what your home might be worth, if it's down the street from yours, well then that doesn't affect property values.

Casey: No. So it all comes down to what did it sell for when it was liquidated eventually.

LossMitPro: Precisely correct.

FlyingMonkeyWarrior: Okay. So in your situation it probably drove the property values down. So Casey, Casey, I want to ask you: whatever happened to the swimming pool that was all green and full of algae-fied-ness? Did you have to do anything? What happened to the pool?

Casey: If you were in my situation would you go do anything about it if you had no money?

FlyingMonkeyWarrior: Um-- I'd never-- I wouldn't begin to know how to get into your situation. I mean, I don't even know what to say to that. (laughs)

Casey: Right. So you're not sure, if you were me, if you would clean that pool up. Let me give you the decisions I was going through--

FlyingMonkeyWarrior: Well I've been an entrepreneur, I have been an entrepreneur for 11 years, I do sweet deals and all those different kinds of things as well.

Casey: (laughs)

FlyingMonkeyWarrior: I stayed away from real estate, you know, so I'm more into consumer goods. But I take very small baby steps and I make sure the people around me bring something to the table. And I don't pass up--if I see an opportunity -- and you've been offered opportunities, without, you know outing anybody, I'll leave that up to the end of the individuals if they want to talk to you -- that I would have never passed up. And you've signed contracts that I would have laughed at. So I'm not a good person to ask. You tell me, to turn it around on me, I'm stunned at the situation that you're in. The only thing I could give you kudos for is that you are really young and obviously thinking about your future. When I was your age I was just our partying and going to college and playing golf. So I can't relate to anything about your world. So I just wondered: what happened to the pool? Is it clean? Is it beautiful? Is it still a pigpen? What did you do?

Casey: So you're not sure what you would do in my situation. Well let me tell you the thoughts I--

FlyingMonkeyWarrior: I would never be in your situation! I would never be in your situation, ever.

Casey: Well I was just asking for you to imagine. That's all I was asking. But that's all right, if you don't want to answer, that's fine. I was just, so, let me answer your question--

FlyingMonkeyWarrior: There's no answer to that.

Casey: What was that?

FlyingMonkeyWarrior: There's no answer to that. I cannot relate to where you are. In my wildest dreams.

Casey: That's all right.

FlyingMonkeyWarrior: Which is why I follow your blog I guess.

Casey: Yeah, that's fine. So I'll answer the pool question head-on. At first, I was trying to find a way to clean that up. Obviously I wanted to, even though it wasn't improving my own financial situation any, I wanted to at least be courteous to the neighbors and whoever was going to be buying it. And also take care of that mess because it was in short sale and the new owners--

FlyingMonkeyWarrior: Right, but I just want to know: what's the situation of the pool right now? Because I don't want to go on and on.

Casey: You don't want to hear all the rambling, you just want to know: is it clean or not?

FlyingMonkeyWarrior: Is it clean or is it still green?

Casey: Is it clean or is it still green? It's still green.

FlyingMonkeyWarrior: Okay. I have a quick question. Now, I understand that it is illegal to get cash back at closing if there are any outstanding debts when you purchase housing, right?

Casey: It's not illegal if it's done right.

FlyingMonkeyWarrior: Well how did you get around that?

Casey: Well I wasn't, I was doing it kind of in a shady way. But there's ways to do it clean.

FlyingMonkeyWarrior: Well how-- What's the difference between shady and illegal? Okay, is LossMitPro still on?

Casey: Let me get LossMitPro on.

FlyingMonkeyWarrior: Because maybe he can help us out here. Because I-- I mean I've done a lot of real estate. But there's always been professional--

Casey: So is your question: can you do or can you not do cash back at close legally?

FlyingMonkeyWarrior: No, about, specifically about you. How did--

Casey: Did I do it illegally?

FlyingMonkeyWarrior: How did you get cash back at closing? Because it's illegal to get cash back at closing if there are outstanding debts on a home.

Casey: Okay, okay. Well first-- Did you want me to go over all the specifics, or what kind of answer are you looking for?

FlyingMonkeyWarrior: Well what's the difference between shady and illegal? You did it the shady way but not the illegal way, is that what you're saying?

Casey: Well-- but I-- but I-- no, the word shady, I use loosely, shady, I may or may not mean illegal. At the time I didn't think it was, but apparently it is.

FlyingMonkeyWarrior: But that's not-- okay. Go ahead.

Casey: Yeah, no, it was, no, okay, looking back on it, it was definitely illegal to conceal the cash back at close from the lender. Okay?

FlyingMonkeyWarrior: Right, it has to be on the HUD--

Casey: And I did it in a couple of different ways, sometimes on the HUD, sometimes not on the HUD. But even on the HUD, you can play tricks to make it look like the lender sees the item on the HUD but doesn't think it is cash back at close. So, I realize there was all sorts of tricks that I could (unintelligible) to someone--

FlyingMonkeyWarrior: Well, so who advised you? Did you just pull this stuff out of the sky, or did someone advise you to do this? Do you own this and take responsibility for this?

Casey: Of course I take responsibility! I don't blame anybody, I did it. And in terms of where I got the ideas with it, different places. I watched how some other people were doing it, other investors, and just through my own creativity and understanding the mechanics, yeah there was a lot of that.

FlyingMonkeyWarrior: Well how did you get away with saying your homes were owner-occupied? I mean, did you actually homestead eight different houses in eight different states?

Casey: (chuckle) Do I have to share all my tips and tricks? Okay, look, check this out, there's a--

FlyingMonkeyWarrior: Fine, it's okay with me, I'm not going to use them.

Casey: Well, okay. There's a little bit of a window, as a lot of people are realizing, you can actually buy a bunch of homes all at once, and using different lenders -- again, and I'm not proud of it -- but there's loopholes in the law. Or not in the law, in the system. And yeah, you can buy a bunch of homes owner-occupied if you're doing them all at the same time. And again, I'm not proud of it, I shouldn't have done it that--

FlyingMonkeyWarrior: So what you're saying is -- wait a minute, wait a minute. What you're saying is: because you did them all at the same time, nobody could double-check, so everybody in all eight neighborhoods thought that you were owner-occupied. But if you had done it, you know, over a period of a few years--

Casey: Yeah, exactly.

FlyingMonkeyWarrior: You wouldn't have been able to get away with it. So what you did, you did them all close together.

Casey: Exactly. So I was doing them all-- I was doing them all within like a short window.

FlyingMonkeyWarrior: Is that why you did it in eight different-- is that why you did it in eight different states, because if you'd gone bought eight houses in one neighborhood you couldn't have claimed owner-occupied? They would've been able to catch you?

Casey: Um, I'm not sure about that. The reason I was doing them all over the place is -- really I don't know why -- is that I was finding deals. And I wasn't really caring about where I'm buying them, because I wanted to-- again I was trying to be-- I was getting ahead of myself. I was trying to establish other markets, I wanted to have all these connections and so I figured I'd do deals in different markets and kind of learn all the players and, ah, make some money. It wasn't necessarily in order to get away claiming them owner-occupied. In fact it was harder because, check this out, here I am living in Sacramento, buying an owner-occupied home in say New Mexico. Well, I have to find a way to justify it to the lender. Because lenders aren't stupid, they're like, "hey, are you moving to New Mexico? If yes, why?" So yeah, I mean, it was actually harder to do owner-occupied if you're buying it out of the area.

FlyingMonkeyWarrior: That is just stunning. So, let me ask you another question, if you don't mind, I hope I'm not taking up too much time. Why, why, why are you living with your sister-in-law when you owned eight houses? I mean, I know you're living there to save money, that's what you told your brother, but why-- while you're saving money, she's supporting you. Does that make sense? I mean in other words, if you weren't living with her, you would be supporting yourself and the money that you quote-unquote are saving by living there would go to you and your wife. And she would probably have a higher quality of life. And here you had eight houses and you're basically sofa-surfing with your family as a homeowner. So why didn't you just keep one of the houses and live in one of the houses?

Casey: Well I mean that's a-- it looks like a good point on the surface. But for one I was paying rent--

FlyingMonkeyWarrior: And then you would only have lied about seven owner-occupied houses. And then you would have one house that you were actually, you know, legally homesteaded in.

Casey: Sure, sure. You going to let me answer that one?

FlyingMonkeyWarrior: Yeah.

Casey: Okay. So here's what's going on here. The eight weren't all in my local area, so I couldn't-- I didn't want to, like, relocate to New Mexico. The only one that was local that I could have moved in was-- actually there were two, there's one in North Highlands and one in Sacramento, they're both Sacramento area, Larchmont and Burdett. And then the only other one possibly I could have moved into was in Modesto, but that's seventy-five miles away, you know, it would be too expensive and impractical for me to relocate to a whole new town. And now--

FlyingMonkeyWarrior: But Casey, you're an entrepreneur, you're an entrepreneur--

Casey: Hey, are you going to let me finish answering or...

FlyingMonkeyWarrior: I'm an entr-- No, I've got to say this.

Casey: Okay.

FlyingMonkeyWarrior: An entrepreneur can live wherever they want. That's why you have a wireless computer. So you can live anywhere. Seventy-five miles from where? I can live where I want--

Casey: Well let me ask you this, are you married?

FlyingMonkeyWarrior: No, I'm not married.

Casey: Okay, so it's-- it's easier for you to-- to not understand this. If it was me, I would live in one of those. I would probably have moved into the New Mexico one, it's a really nice property, I would just have lived there for a while, because I knew I could have lived there for free for a long time before they foreclosed.

FlyingMonkeyWarrior: That one was beautiful, that was my favorite house.

Casey: Yeah, I know, it was a really nice house, I wish I could have done it.

FlyingMonkeyWarrior: Really nice house. That was a beautiful house.

Casey: Look, I have to-- I have to be responsible to my wife too. I mean, she didn't want to relocate to those properties. And she had her reasons. In fact, a lot of them were halfway into repairs. So a lot of them we couldn't have moved into because they're just not really livable. As a single guy, yeah, I could live and fix them at the same time, but I have to consider my family.

FlyingMonkeyWarrior: So she was not willing to move seventy-five miles away from her family.

Casey: Yeah. And honestly, I kind of wasn't willing to either, because look: I knew I might loose them. And so if I'm going to loose them--

FlyingMonkeyWarrior: So this is Galina's--

Casey: Why go to all the expense.

FlyingMonkeyWarrior: So this is Galina's fault, that you lost one of those-- that nice house.

Casey: I'm not saying it was Galina's fault. I'm saying that was an extra-- that was an extra consideration I have to make. A single guy, it would have been a much easier decision.

FlyingMonkeyWarrior: Right.

Casey: Does that make sense?

FlyingMonkeyWarrior: Yeah-- I don't know, I'd have gone anywhere my husband wanted me to, I'd have lived in a tent, because I was in love. But that's my-- my values. So. Anyway, well, I enjoyed meeting you, Casey, thanks for answering my questions.

Casey: Sure, no problem.

FlyingMonkeyWarrior: And I really enjoy your blog. And the other blog, exurbannation.blogspot.com.

Casey: Ah, thanks for the plug.

FlyingMonkeyWarrior: Right, bye.

Casey: Okay, later. All right, that was a good one. Addressed a few issues.