House prices to stagnate for 'years'

[wayneL]

Hey Wayne , your on the pulse of the UK house market . Are prices rising still ?
I assume this more so in and around London would be the case , given that it is the hub of culture etc. that it is known for . A City , sorry greater city , that has everything , all compacted in a cosmopolitan basket with everything in close vicinity .

Or is there a decline in housing in the outer regions ?

We are either about to

a/ do a repeat of 2005

b/ crap out completely

London is a putative special case, but there are still signs of stress and some falls.

Whatever it is, it will take a few months to become clearer.

Check out: http://sigmaoptions.blogspot.com/2008/01/britains-biggest-house-price-falls.html

 

[Tysonboss1]

Can you explain how this works? How does the wrappee end up with equite?

If the wrappee owes say $200,000 on the loan and the house gets sold by the bank for $260,000 the bank can only take the $200,000 that is still owed on the property so that $60,000 left over is the wrappee's equity so it is the wrappee who would get the $60,000.

Or the wrappee can try and refinance the deal with another lender before the **** hit the fan, Even though in the beginning the wrappee was unable to secure finance with a traditional lender normally after 3 years the house has increased in value so they have the equity which the bank needs and the have a prooven track record of paying the wrap payments and the banks like that.

But under normal circumstances it is very unliky that a professial wrapper will go bust simply because it is a positive cash flow investment on the wrapper's side of things, It doesn't require the wrapper to be putting in his own money in regularly so the wrapper can lose his job and not affect the deal,

And if the wrapper does have some higher risk investments such as businesses then they should be held in company structures so as to put a fire wall between them and the wrap deals

 

[wayneL]

If the wrappee owes say $200,000 on the loan and the house gets sold by the bank for $260,000 the bank can only take the $200,000 that is still owed on the property so that $60,000 left over is the wrappee's equity so it is the wrappee who would get the $60,000.

Or the wrappee can try and refinance the deal with another lender before the **** hit the fan, Even though in the beginning the wrappee was unable to secure finance with a traditional lender normally after 3 years the house has increased in value so they have the equity which the bank needs and the have a prooven track record of paying the wrap payments and the banks like that.

Excuse me? The title of the property is not in the wrapee's name, it is in the wrappers name. How does the wrappee end up with the equity? How can the wrappee refinance a property whose title is in someone else's name?

Are you sure of your facts here?

 

[Tysonboss1]

Excuse me? The title of the property is not in the wrapee's name, it is in the wrappers name. How does the wrappee end up with the equity? How can the wrappee refinance a property whose title is in someone else's name?

Are you sure of your facts here?

It is wriiten into the wrap contract the the wrappee benefits from any capital appreation should the property be sold,... weather it is the wrappee who decides to sell or the bank. It doesn't matter weather the property is sold for $200,000 or a million dollars the wrapper will only ever get paid the amount still owing on the loan between him and the wrappee.

for example using the numbers I used earlier If a wrap deal began with the wrappee owing $225,000 to the wrapper, and two years later the wrappee only owed $210,000 but the property was worth $260,000 and for some crazy reason the house had to be sold, the wrapper would probally only owe $180,000 to the bank the wrappee would owe $210,000 to the wrapper. So if the property were sold the bank would get the $180,000 and pass the extra $80,000 to the wrapper, the wrapper would deduct the $30,000 still outstanding by the wrappee and pass on the remainig $50,000 equity to the wrappee.

when it comes to refinanceing most wrap deals are refinanced by the wrappee to a traditional lender within 5 years,.... The point of a wrap deal is not that the wrappee keeps the wrap going until he repays the last $ 30years later, It is a stepping stone to help the wrappee build enough equity till they can qualify for a bank loan, at that point they refinance to a cheaper interest rate.

 

[wayneL]

It is wriiten into the wrap contract the the wrappee benefits from any capital appreation should the property be sold,... weather it is the wrappee who decides to sell or the bank. It doesn't matter weather the property is sold for $200,000 or a million dollars the wrapper will only ever get paid the amount still owing on the loan between him and the wrappee.

for example using the numbers I used earlier If a wrap deal began with the wrappee owing $225,000 to the wrapper, and two years later the wrappee only owed $210,000 but the property was worth $260,000 and for some crazy reason the house had to be sold, the wrapper would probally only owe $180,000 to the bank the wrappee would owe $210,000 to the wrapper. So if the property were sold the bank would get the $180,000 and pass the extra $80,000 to the wrapper, the wrapper would deduct the $30,000 still outstanding by the wrappee and pass on the remainig $50,000 equity to the wrappee.

when it comes to refinanceing most wrap deals are refinanced by the wrappee to a traditional lender within 5 years,.... The point of a wrap deal is not that the wrappee keeps the wrap going until he repays the last $ 30years later, It is a stepping stone to help the wrappee build enough equity till they can qualify for a bank loan, at that point they refinance to a cheaper interest rate.

But the property is not being sold, it is being repossessed. Somehow I doubt the wrappee would count as a secured creditor. There is no hope in hades that the wrappee would realize 100% of their equity... if any.

 

[Tysonboss1]

But the property is not being sold, it is being repossessed. Somehow I doubt the wrappee would count as a secured creditor. There is no hope in hades that the wrappee would realize 100% of their equity... if any.

What are you saying,... the house wouldn't be repossessed it would be sold to repay the debt to the bank, the bank isn't in the business of collecting house,... they are going to sell it. When they sell it they are only going to keep enough money to clear the debt that is owed to them any money left over beening the "Equity" will be handed back up the chain.

Any way using this arguement to bag out wrap is just silly, Wraps are a perfectly sound option. You would be surprised by how common wraps actually are.

 

[wayneL]

What are you saying,... the house wouldn't be repossessed it would be sold to repay the debt to the bank, the bank isn't in the business of collecting house,... they are going to sell it. When they sell it they are only going to keep enough money to clear the debt that is owed to them any money left over beening the "Equity" will be handed back up the chain.

Which goes to secured creditors first. If the bankruptcy is severe, unsecured creditors may only get a few cents in the dollar. Don't forget a receiver takes over.

Any way using this arguement to bag out wrap is just silly, Wraps are a perfectly sound option. You would be surprised by how common wraps actually are.

No it isn't!! It's a real risk and you would be surprised how often this occurs.

 

[BSD]

Any way using this arguement to bag out wrap is just silly, Wraps are a perfectly sound option. You would be surprised by how common wraps actually are.

If these deals are so good for all involved why has someone not successfully commercialised such structures?

These ventures are the realm of rip-off merchants preying on people who don't know better.

Getting off the rent-treadmill by borrowing at exorbinant rates to have watered-down equity is a mug's deal.

So many people get burnt by such rubbish deals - a public entity would not last a couple of years in the business.

Wayne - that UK property link was great, thanks.

 

[tech/a]

If these deals are so good for all involved why has someone not successfully commercialised such structures?

These ventures are the realm of rip-off merchants preying on people who don't know better.

Getting off the rent-treadmill by borrowing at exorbitant rates to have watered-down equity is a mug's deal.

So many people get burnt by such rubbish deals - a public entity would not last a couple of years in the business.

Wayne - that UK property link was great, thanks.

Rubbish. To you and I maybe.But if you've been a bankrupt through no fault of your own---example doing a large project and the principal doesn't pay are struggling to get back on your feet but successful--lost the lot but come hell or high water your going to get it back.
Then a wrappor is one valid solution.
As it is for the recently divorced who have been scun.
Those who are earnings rich but asset poor.Many of these people exist but banks wont look at them.What about Low Doc's I here you say.
Err yeh higher interest,blah blah.

I see Waynes point about the wrappor going broke sure it can happen but as rare as a bank going broke in my view.

Steve McKnight.
Still going.Has over 100 wraps going as far as i know. I'm sure there are many more who specialise in wrapping.

I've not seen 1 wrappor "exposed"
I've not see one story from one Wrappee warning the masses about these deals.
Only Jenman.

I have seen Queensland developers flying in the Property illiterate to purchase over inflated apartment pricing using their own paid off solicitors and valuers.

Mind you that went quiet as well when the boom came,even those clearly ripped off came out kings.

 

[Tysonboss1]

If these deals are so good for all involved why has someone not successfully commercialised such structures?

These ventures are the realm of rip-off merchants preying on people who don't know better.

Getting off the rent-treadmill by borrowing at exorbinant rates to have watered-down equity is a mug's deal.

So many people get burnt by such rubbish deals - a public entity would not last a couple of years in the business.

Wayne - that UK property link was great, thanks.

So your saying I am a rip off merchant, I don't feel that a person paying an extra 1.75% interest for 3-5 years to help them off the rent treadmill for life is a mugs deal.

After all the interest rate I am charging is 9.75% which is actually 1% lower than I am paying on my Business loan and probally not to much higher than alot of margin loans.

I totally disaggree with the comment about peole getting burnt,... there may be a couple of less than honest people that take advantage of this system but I would think it is less than 1%, And there are less than honest people in just about any industry so picking on wraps is just wrong, I mean there are horror stories involving Mortgate brokers, financel advivisors, franchise systems, trademens, car dealers etc.etc these cases often make the headlines but far from the norm.

As I said in my original post it is about building win-win outcomes,... I know that my mate and myself were extremly careful with the way we structre things to make sure the payments are easily affordable and the client will have a good outcome.

Remember one of the biggest risks is that the family will just continue there consuming life style and never save a deposit for a house or build any equty at all in there life,... so 1.75% interest for 3-5years is really nothing compared to the benefits

 

[wayneL]

So your saying I am a rip off merchant, I don't feel that a person paying an extra 1.75% interest for 3-5 years to help them off the rent treadmill for life is a mugs deal.

After all the interest rate I am charging is 9.75% which is actually 1% lower than I am paying on my Business loan and probally not to much higher than alot of margin loans.

I totally disaggree with the comment about peole getting burnt,... there may be a couple of less than honest people that take advantage of this system but I would think it is less than 1%, And there are less than honest people in just about any industry so picking on wraps is just wrong, I mean there are horror stories involving Mortgate brokers, financel advivisors, franchise systems, trademens, car dealers etc.etc these cases often make the headlines but far from the norm.

As I said in my original post it is about building win-win outcomes,... I know that my mate and myself were extremly careful with the way we structre things to make sure the payments are easily affordable and the client will have a good outcome.

Remember one of the biggest risks is that the family will just continue there consuming life style and never save a deposit for a house or build any equty at all in there life,... so 1.75% interest for 3-5years is really nothing compared to the benefits

I imagine you yourself act with good intent and good will. But your clients are still exposed to you ever crashing and burning (and I sincerely hope you don't).

However, there are plenty of unscrupulous and/or risk taking operators out there who wouldn't give a toss about their clients. I once went to a seminar where they taught that "you really hope your wrappee defaults; best thing that can happen" (as you can re-wrap at a higher price and they've probably improved the property) WTF?

Tech,

You never see where you don't look mate. There was a program I saw a couple/three years ago chockers full of sob stories involving wraps/LOs.

 

[theasxgorilla]

These ventures are the realm of rip-off merchants preying on people who don't know better.

Getting off the rent-treadmill by borrowing at exorbinant rates to have watered-down equity is a mug's deal.

I have to admit, I actually agree. People should be paid for the value in their offering. I see this as just another debt-creation layer in the capitalist layer cake. Kiyosaki explained it perfectly in his original RDPD book...he runs the numbers and then pronounces smugly, 'see, money is really just an idea and can be created out of thin air'. I won't say more as there are people here who have wrapped and clearly feel good about the whole 'win/win' idea.

ASX.G

 

[wayneL]

PS If this one issue could be resolved, the likes of Jenman could be tamed on the whole issue I reckon; and it would have a legitimate and ethical place in RE finance (given adequate legislative safegaurds). IMO

 

[tech/a]

No never saw it.
Never seen a write up in any property mags either on the cons of wrapping.

Much much worse out there than wrapping.Legitimate business which as Tyson says is generally designed to create a win win situation,the only way to do business.

Seen plenty of developers taking life savings of retirees on deals that go crap.
So I suppose that buying off plan is also shady business practice?

These ventures are the realm of rip-off merchants preying on people who don't know better.

Your missing the point.
There are legitimate cases where people are cash rich asset poor who do know what they are doing and come to a win win business deal with a partner(wrappor) in purchasing their home.
I have seen wrappors actually buy the home of the Wrappee's choice. Well they worked on option to purchase here in Adelaide.

There are good and bad in EVERY business dealing----you cant tan ALL with the same brush!
Not all are disasters,very few.
Many are winners and very happy clients.

 

[wayneL]

Seen plenty of developers taking life savings of retirees on deals that go crap.
So I suppose that buying off plan is also shady business practice?

Non-Sequitur. There are risks in any deal and clearly some off plan deals stink. But that doesn't mean all off plan deal stink.

Thought along these lines: http://en.wikipedia.org/wiki/Socratic_method often leads to the crux of the matter and should preclude argument such as the above.

 

[theasxgorilla]

I've seen first hand on many occasions the likes of Steve McKnight demonstrate the alchemy of taking a qualified wrap mortgagee, matching them to a house on the market at $60,000k, buying said house for $40,000, then selling it to his customer for $80,000k, with a 2% mark-up on the going variable rate, all for a positive cashflow of $50 a week (minimum) and some astronomical ROI.

Good for him, good for the happy 'winning' mortgage. Personally, in spite of the money on offer I just couldn't motivate myself to do it. Felt too much like I was hiding something from people who just didn't know what they didn't know.

ASX.G

 

[Tysonboss1]

Felt too much like I was hiding something from people who just didn't know what they didn't know.

ASX.G

I never hid anything on my deal,

When I sat down and explained the concept I Had full disclosure of the numbers in the deal,

The young couple that I wrapped to know exactly how much money I am putting into the deal and how much, how and why I am making the margins that I am.

And wanyeL my wrap deal is particularly safe,... my other business is held in a company structure and my other properties are held in a company/ trust struture , the only assets I own in my own name are 2 houses valued at about $750,000 which I owe about $390,000 on so there is plenty of fat to absorb any crisis. so as far as going broke and risking there wrap deal It is not really a problem.

 

[wayneL]

I never hid anything on my deal,

When I sat down and explained the concept I Had full disclosure of the numbers in the deal,

The young couple that I wrapped to know exactly how much money I am putting into the deal and how much, how and why I am making the margins that I am.

And wanyeL my wrap deal is particularly safe,... my other business is held in a company structure and my other properties are held in a company/ trust struture , the only assets I own in my own name are 2 houses valued at about $750,000 which I owe about $390,000 on so there is plenty of fat to absorb any crisis. so as far as going broke and risking there wrap deal It is not really a problem.

That's cool. Clearly most wrappers won't go broke. Some might however (and do). The wrappee is not aware of this and has no capacity to examine the wrappers finances anyway... RISK!

A few wrappees may see that as an acceptable risk, I don't and would never enter a wrap deal even if it was the only finance available to be, no blinkin' way!

But how many are actually aware of it? Pretty close to zero I would say.

 

[wayneL]

In The Times http://business.timesonline.co.uk/tol/business/economics/article3193239.ece

RICS says that house price falls are worst since slump of early Nineties
Gr�inne Gilmore and Gary Duncan

Falls in house prices across the country may now be at their most severe since the property slump of the early Nineties, according to bleak figures today suggesting that Britain's housing downturn is gathering pace.

A highly influential barometer of housing market conditions reports this morning that 49.1 per cent more surveyors found that house prices fell last month than saw them rise.

The gloomy result is the worst since November 1992 in the closely watched poll carried out by the Royal Institution of Chartered Surveyors (RICS), when this “negative balance” fell as far as minus 60.1 per cent. December's figure compares with a negative balance of 40.6 per cent of surveyors who reported that prices were on the slide in November.

With virtually every other reliable indicator of the housing market also pointing to grim conditions and falling prices, today's RICS report will deepen already intense gloom over prospects for homeowners this year.
Related Links

* A short, sharp housing shock may be best

The RICS finds that confidence among surveyors in the outlook for both sales and prices fell last month to their lowest levels in a decade.

House prices are seen to be falling in every area of England and Wales - although the results suggest that they rose slightly in Scotland. The heaviest falls appear to be taking place in the West Midlands and East Anglia, according to the survey's findings.

Anxieties are being heightened by a growing build-up of unsold properties on estate agents' books, with stocks of homes up by a further 7.1 per cent in December, on the heels of a 9.1 per cent leap in the previous month, according to the RICS data.

The survey's findings suggest that this increase in stocks - which threatens to act as a drag on house prices - may get worse, with December bringing a rise in new instructions by would-be sellers putting their homes on their market at the same time as demand remains seriously subdued.

The number of new instructions to sell properties climbed last month, with a net 4 per cent more surveyors reporting that these rose rather than fell, the RICS reports. That compares with a balance of minus 7 per cent in November. There were scant signs of improvement in demand from potential buyers, with 25 per cent more surveyors saying than buyer inquiries fell last month than said they had risen.

The surveyors' body said that the overall balance of supply and demand last month indicates the loosest market conditions since August 2005, during the last serious setback for the property market.

Demand from buyers may be being sapped by the toll from the credit squeeze, as mortgage lenders toughen their criteria for making home loans and reduce the amounts they are willing to allow housebuyers to borrow.

Ian Perry, a spokesman for the RICS, said: “The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007.” However, he argued that while sentiment “appears to have reached it lowest ebb” economic conditions now were vastly different from those that aggravated the housing downturn at the start of the last decade.

Simon Rubinsohn, the RICS chief economist, drew some comfort from the survey's finding that demand in the market, although still falling, was not declining as sharply as previous results suggested. “It doesn't mean that we are over the worst - but we may at least be finding a floor,” he said.

 

[wayneL]

...and from "What Rupert Wants You To Know"

http://www.dailymail.co.uk/pages/li...article_id=508501&in_page_id=1770&ito=newsnow