Please! Before trying to pass new laws Washington should look at the “Elephant in the Room.” I am not taking away the fact that there are bad people in every industry… including politics. What I’m saying is start with the biggest problems and work down to the smaller issues.

Matthew 7:3-4
”Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye? How can you say to your brother, ‘Let me take the speck out of your eye,’ when all the time there is a plank in your own eye?

The speck is over valuation by appraisers.
The plank is lending practices and guidelines dictated by Wall Street Investment Banks.

Values spiraling upward had much less to do with appraisers over valuing property and more to do with lending guidelines and consumer sentiment. Just look at the types of loans originated.

- Prior to 2002 – Amortized, Fixed Rate, Verified Income – people could qualify
- 2003 Amortized, Fixed Rate, Stated Income – people had to fib on income to qualify
- 2004 ARMs, Stated Income – people had to fib on income and take a lower initial payment to qualify
- 2005 Neg Am & Interest Only ARMs, 100%, Stated Income – people had to outright lie about income and take low initial payments. Underwriting became about reasonableness of stated income… is it reasonable for the McDonalds fry guy to make $5,000/mo?
- 2006 Neg Am & Interest Only ARMs, 100%, No Income – The income lie became so ridiculous that lenders said don’t lie in fact don’t put any income.

The simple math behind the melt down is that Lenders/Wall Street designed loan programs that were easy to qualify for and had an affordable initial payment. This allowed more people to buy and more people to buy multiple properties. The availability of easy money and consumer sentiment of “get in before it is too late” caused high demand and less thought about affordability after the teaser payment. More demand leads to higher prices, higher prices leads to sentiment of “get in before its too late”, which leads to more demand. What Law Makers are proposing would is in Jesus words, removing the speck while ignoring the plank.

Of course the sad irony… Lenders/Wall Street Investors are getting bailed out by the Government!

Colin Wright.

Felonspy takes this to another level. Not only do they list sex offenders, but cross reference other data sources for criminal records. They link the data through some GoogleMap API and show ex-felons and sex offenders in relation to the address that you typed.

You can quickly become uncomfortable seeing how many dots pop up next to your home.

Check it out with their quick search here.

Scared?  Well, turns out this site is a hoax.

What Nouveau Riche University Is

Nouveau Riche IS an MLM company. Their most loyal and passionate “alumni” will argue otherwise until you’re blue in the face. Just remember, if it walks like a duck, quacks like a duck, and looks like a duck, it’s a duck. So what if it is? The concept of MLM is actually a good business model. It’s just that MLM has gotten a bad rap. For example, unethical people misleading others that “it’s not MLM.” For those living in denial, let me offer some advice. First, if you are so convinced that you’re onto something real, be proud of it. Most of the MLM stigma is because you’re afraid to admit it and “trick” prospects into coming to a recruiting meeting. Second, tell the truth. You created the stigma MLM as earned, you get rid of it.

How to spot an MLM? Look for the signs, catch-terms, and typical MLM phrases. Here are some Nouveau Riche terminology and its translation into MLM:

Independent Student Advisor (ISA) = Up-line, Sponsor, Mentor. This is the person who brought you in and gets a portion of your money you paid to get in. In this case your up-line gets about half of the $16,000 you pay to get in.

$16,000 Regent Tuition/Education/Courses = Product. If you don’t provide something in return for money, the government considers it an illegal pyramid. As long as you receive something “of comparable value” for the amount of money you paid, you’re not a pyramid. I suppose if it’s spun right, it’s not totally beyond the realm of possibility that you get $16,000 worth of education. Just understand that you can buy the same information at Border’s Books for under $500.

Learning Seminar = National Conference. Every MLM has them. They are very motivational, uplifting, attitude strengthening meetings. They are needed to keep you “in the game.” They are the high school equivalent to a pep rally. Nouveau Riche even throws in a few investment seminars. They have a few motivational speakers and self-help workshops that most can benefit from. You also get a heavy dose of the “success stories”, an endless parade across the stage of “ordinary people like yourself who’ve made it.” If you’re looking for a self’-help seminar, you might get your money’s worth. If it’s real estate education you’re going for, stay home, pick up a copy of Rich Dad, Poor Dad and put the rest of the money you would have spent into a high interest CD. By the end of the year, you could have enough for a down payment on your first property.

Learning Event = Recruiting Meeting. Your first introduction will most likely be through an invitation to one of these by someone you know who probably just joined and wants to share this exciting new opportunity with you. The meeting starts with some exciting ways to make lots of money fast in real estate. They may show “hypothetical” examples of the riches that lay ahead for those who see the “opportunity” and are willing to make the “investment” into their own education. The “education” you pay for will give you ALL the tools you’ll need to be a successful real estate investor. Next up will be the testimonials of people who have “had their lives changed” from NRU. With the excitement level peaked, they tell you how you can start your education to riches. You can start for as little as a few hundred dollars, but the person who brought you will tell you why you want to get the Regent tuition package which is slightly higher, about $16,000.

Other Commonly Used MLM Words & Phrases: Opportunity, life changing, mentor, coaching, coachable, conference call, retirement, financial freedom, synergy, network, passion.

What Nouveau Riche University Is Not

NRU is not a scam. At least not totally. You will get an education in real estate investing. It’s just REALLY expensive and you CAN get the $16,000 Regent tuition equivalent education for much less than $1000. I give the same education for free. I say it’s not really a scam because they do tell you up front what you get, and usually most ethical ISA’s present things straight, although there is a lot of exaggeration that goes on. But then again, tell me when there isn’t some form of exaggeration when sales are involved. The problem is, most people that cry scam don’t do any research before jumping in head first. They got wrapped up in the hype and take it all at face value. There’s always some vision of “financial freedom and getting rich fast” the person has formed when deciding to “enroll.” Some time after shelling out $16k, they realize it’s not what they expected, a get rich scheme via easy street, and cry “foul.” For them, their education was a $16,000 lesson in life. Although $16k is a lot for a dose of reality, I know of “life lessons” that have cost people hundreds of thousands of dollars.

I will acknowledge that there are people who have made money in NRU. Some have made a lot of money. The success stories fall into two categories. The first category are the ones that should be commended. But these same people would have made it with or without NRU. These people have the discipline, mindset, attitude, work ethic and most important, the constant pursuit of learning and improving; qualities all successful people possess. These people applied what they learned at NRU and with HARD work, became successful. Who cares that they paid more than they had to for their education? They’re not complaining, so what do you care? The second category of people who’ve made it leave a path of destruction behind them. While it’s true they made money in NRU, their journey involved recruiting. Lots of it. After their first two Regent recruits, every Regent recruit after that puts about $8000 in their pocket. If you get someone decent at sales, put them in a room full of hype, frenzy and a road map to riches, well, it’s like shooting fish in a barrel. Each “fish” equals $8k. You do the math. It doesn’t take long before you’d have a nice war chest to start your investing. Sadly, most of those fish will soon be crying scam on some blog. They’re the path of destruction I referred to.

NRU is not a university. At least not in the context that many people enroll under. They do have fancy marketing stuff that looks official, but when you really look at it, it’s a very HIGH priced education that is nothing revolutionary or contains any top secret formulas. But if you think that paying $16k makes it valuable and empowers you, who am I to stop you? Just be smart and do your homework before forking out $16k.

NRU isn’t as easy as it’s made out to be. In fact, it just doesn’t work in most cities. The theories taught are real. But theory and real world can be very far apart. It’s possible that if you applied some of the strategies taught enough times (100 or more), you might eventually get a hit. But the reality is most people give up frustrated way before that. Also, it could literally take 100 or more tries to get that one deal. Along the way, be prepared for LOTS of rejection; some pretty personal and cruel. One of the education courses should be on developing thick skin and handling rejection. That would be the most valuable course. If you think the rejection thing is minor and you’re not worried about it, be prepared for an eye opening experience. You have no idea what you’re getting into.

NRU’s examples of their “favorite deals” on Concierge are not accurate. Question the numbers. That’s all I’m going to say about that.

Now that you have a little more insight, here’s your homework. Read the comments on this post and see if you can tell the level of and length of time that person has been in NRU.

Here’s the scale:

1) Just joined – 1 year: Passionate defense of NRU; calling all naysayers ignorant, uninformed or close-minded. Anything negative about NRU takes a little toll on their faith and creates a little bit of doubt.

2) 1 year – 2 years: Defense not so passionate but still believe in NRU saying their experience was worth it.

3) 2 years – longer: Support of blogs calling NRU a scam.

Elliot Lau

Fees Charged by Management Companies For Condominium Association Documents.

Were you expecting something bigger or more ground breaking? Before you dismiss this article as a post by a crazy person with too much time, read this post and then decide. As I started writing this post, I wondered if the use of “rip off” was too harsh. After looking up the definition, I realized no other word or term could be a more accurate description of this issue.

Dictionary.com defines “rip off” as “exploitation of those who cannot prevent or counter it“.

The Multi-Million Dollar Rip Off

This rip off is neither small or new, and if you’ve ever owned or plan to own a condominium, it affects you. How? Every time a condominium is sold or re-sold, the purchase contract calls for the Seller to furnish the Buyer with a set of the condominium documents of that condominium association. These documents include the financial statements, minutes of Board of Director and Homeowner Association meetings, Reserve analysis, House Rules, etc., and serve as part of the disclosures that Sellers have to make to the prospective Buyer. Furnishing these documents to the Buyer is an important contingency of the sale and are not of public record. Except for rare exceptions, the Seller of a condo can only get these documents from the association’s managing agent/company. This is where the exploitation by management companies takes place.

Condominium Association Managers’ Fiduciary Duties

On average, a set of these documents costs the Seller $300. Most people, including myself, would agree that $300 is insignificant compared to the price of the condo being sold. That’s exactly what management companies want you to think. But $300 is still $300. Would you take $300 out of your wallet and throw it into the wind? If my question is ridiculous, so are the charges for the condo docs.

By law, management companies have a fiduciary to every condominium association they manage. The law also imposes an “obligation of good faith” in the performance of their duties. Knowing this, take a look at what that insignificant $300 charge looks like to the management companies.

Revenue of Condo Doc Fees

To be fair, I gave the management companies the benefit of the doubt by only counting 90% of the total sales and using $300 for the cost of each set of docs. Even using such low numbers, the revenue collected in the last 5 years totaled more than $9.3 million dollars. ALL of this revenue goes to the management company and allowed as “reasonable fees for administrative costs.”

Reasonable Fees For Administrative Costs

Recent legislation was enacted to address this issue. A bill was passed that limited the amount that can be charged to $1.00 per page for “reasonable admin costs”. So how well did legislation help? Let’s look at two current transactions I’m involved with.

Transaction #1: Condo docs were ordered and the management company charged $327.00. Within half an hour, the full set of documents were transmitted by email to us and we had to print the full set of 500+ pages. We live in an age where everything is now in digital format. It probably took the management company 5 minutes to locate the electronic files on their computer and email them to us. For that, the charge was $327. I wonder if this is what our legislators had in mind when they wrote “reasonable fees for admin costs.” The figures used in the chart above to illustrate the cost to produce these documents were based on EVERY page being printed to paper. Over half of all documents ordered today are delivered in digital format eliminating cost of reproduction.

Transaction #2: Buyer spent hours locating most of the documents through several means to save some money. He was fortunate that the condo association he was buying into made most of their documents available to anyone on-line. I say fortunate because this is the FIRST time in 20 years that I’d heard of this. But he still needed to order one document, not available on-line, from the management company. This document is required by all lenders. It’s called the lender’s questionnaire and some lenders have their own form. It’s a two page form with about 20 questions. This Buyer’s lender has their own form. The management company’s policy is not to complete lender’s forms and only make available their form. We ordered their form. This two page document was emailed within a few hours. It was incomplete, inaccurate and useless. The charge for these two pages: $78.00. It was obvious that the document had been previously filled out. If it had just been completed, there wouldn’t have been the inaccuracies. The document was only inaccurate because it contained old information. In this case, the charge of $78 was to locate a previously completed form on their computer and email it to us. I’m guessing it took a few hours because the person wanted to finish lunch first.

The Biggest Profit Center

The revenue generated by management companies for supplying these docs create the only legal means of attaining returns on investment that exceed 1000% that I know of. This legal license to print money is, by definition, a rip off! Owners of condos have no choice but to pay these prices. With the exception of the one association mentioned above, an owner has no option but to pay what amounts to extortion. How accurate are my claims here? In the 80′s and 90′s, I owned my own management company. I used to charge $50 for the same set of docs and I felt guilty doing it. I knew exactly what it cost and how much money I was making on it. All of the numbers here are real. The number of condo sales and the price to order the docs are public knowledge. If you doubt any of this, make an unannounced visit to any management company. You’ll see at the front desk stacks of large manila envelopes containing condo docs waiting to be picked up. Each one you see represents $300 of revenue and took no more than half an hour to compile.

The travesty is that this rip off is legal and tolerated. Where’s the fiduciary duty and obligation of good faith required by law? Are revenues in excess of $9 million dollars in 5 years with returns on investment topping 1000% a year considered acting in the best interests of the people they serve? You decide.

Elliot Lau