Donald Trump: A Poor Real Estate Examplar

May 29, 2016

Donald Trump got his start (with his dad’s help) in real estate. Everyone knows that.

And Trump lent his name and endorsement to Trump University. Most everyone knows that.

But unless you’re involved in real estate investing, you may not be aware of Trumps other ventures into real estate and his organization’s symbiotic relationship with real estate investor clubs and associations.

There are hundreds of real estate clubs (often called REIAs–real estate investor associations) around the country. Some are affiliated with national organizations; others are independent. Some have only a few dozen members; others have hundreds. But these aren’t just “clubs” in the traditional sense. Their members spend a lot of money. One REIA in the mid-Atlantic has members who spend about $45 million annually . . . just at The Home Depot. Imagine what they spend elsewhere. Then multiply that by . . . well, who knows? Point is: Real estate investor associations are a real force in real estate investing.

Trump and Ragland

Sherman Ragland, head of DCREIA, and Donald Trump.

It was these groups that Trump and his companions worked their ways into over the past 10-15 years. It was one reason why Trump University initially was so successful; Trump was already revered. He had created an image and became a role model for investors. But . . .

Most REIA leaders preach that investors are there to help, to find solutions, for people who are in financial trouble. Yes, those solutions can produce big profits for the investors. But the investors are offering solutions that the traditional real estate establishment (brokers, real estate agents, etc.) can’t. They help people buy homes with lease options. They help restore neighborhoods by buying run-down homes and rehabbing them. They help people sell homes quickly, even when the homes are in terrible condition or when the sale has to be completed in weeks, not months. The message investors hear, and most accept, is: You can get rich by helping people solve their problems.

The problem with Trump is that he’s not concerned about helping solve other people’s problems. In fact, Trump despises people with problems.

In 2006, nearly two years before the housing collapse, Trump said:

I sort of hope that happens because then people like me would go in and buy. If there is a bubble burst, as they call it, you know you can make a lot of money. If you’re in a good cash position—which I’m in a good cash position today—then people like me would go in and buy like crazy.

That was real estate. The problem is: Trump doesn’t have any sympathy or empathy for anyone in a tough situation.

Remember the John McCain statement:

He’s not a war hero. He was a war hero because he was captured. I like people who weren’t captured.

I’m writing blog this on Memorial Day weekend, and I wonder if Trump (who never served in the military) feels the same way about members of the armed services who died serving their country. Are they heroes only because they died? But does Trump only like people who didn’t die? Does he consider those who died, to use his term, “losers”? (Oh, heck. I don’t have to wonder. Of course he does.)

Then there’s this:

Ariana Huffington is unattractive, both inside and out. I fully understand why her former husband left her for a man. He made a good decision.

That’s consistent with “Kick ’em When They’re Down Donald.”

From the National Review on Trump and eminent domain:

“Most of the time, they just want money,” he said. “It’s very rarely they say, ‘I love my house, I love my house, it’s the greatest thing ever.’ Because these people could buy a house now, that’s five times bigger, in a better location.” Trump has firsthand experience with eminent domain fights. In 1993, he tried to purchase the home of Atlantic City resident Vera Coking to expand his hotel and casino. When she refused to sell, New Jersey attempted to condemn the property and have her evicted. . . .

Trump later said he offered Coking $4 million; her grandson said Trump’s top offer was $1.9 million. Whatever the sum, Coking refused. In July 2014, with Coking now in a San Francisco retirement home, her family sold the property for $530,000. Trump called that amount “peanuts.” “She saved me a fortune!” Trump said with amusement. “I didn’t build a hotel in Atlantic City, which is dying, okay? I should send her a letter [of thanks.] I mean, honestly!”

There are dozens of other examples. But the point is: Trump is not, nor has he ever been, a shining example for real estate investors to follow. In fact, The Donald typifies everything a real estate investor should not be.

And with that lack of empathy, you don’t have to wonder what Trump would be like as President.

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We Read This Crap So You Don’t Have To: Mike Warren

November 9, 2011

Would you buy a car if the car dealer itself had a banner: We only sell overpriced clunkers.

Would you go into a restaurant if the menu had a warning: Our hamburgers are made from spoiled meat from diseased cows.

Then why would anyone respond to a real estate guru’s promotion boasting about one of his own students going bankrupt (presumably after following his real estate advice)?

Mike Warren email on his student's bankruptcy Here. See for yourself:

“A student”–presumably Mike’s student–had to declare [except Mike misspells it “delcare”] bankruptcy because “they” [should be “she,” not “they”] were over-leveraged on properties she’d bought.

Never fear, though. Mary Jane wants to keep doing what she’d been doing. Never mind a little bump in the road like a bankruptcy. So Mike’s got a way for Mary Jane to keep buying real estate. And he says it’s honest, ethical, and legal. It could be.

My question is: Will it help Mary Jane make some money? Or are the only folks making the money Mike and his “buddy”?

That sure is a great testimonial: My buddy can help you buy more real estate, even though the real estate you bought as a student following my advice landed you in bankruptcy.

I think I’ll pass.


Are All Deeds Since 2005 (Not Just Foreclosed Ones) At Risk?

October 13, 2010

Worms crawling out from under the rocks of foreclosures.I was listening to a radio program this week (The Kojo Nnamdi show on WAMU in Washington, D.C.) and the topic was–what else–the foreclosure crisis and robo-signing. OK, I thought, this might be interesting. And it was. Not from Kojo’s guests–who were OK but pretty predictable–but from one of the callers. It was a guy named Matthew (who I think is Matthew Weidner, a Florida attorney) who raised a scary point about the foreclosure mess.

Incidentally, Matthew Weidner’s blog has all sorts of fascinating information on it. Some of it’s a bit technical, and some of it’s Florida-specific (that’s where he is), but it’s worth looking at.

While robo-signing is the most recent problem to arise, a deeper problem is all the paperwork that accompanied all the purchase and sale transactions since about 2004 or 2005. Basically, the paperwork is a mess–severely flawed–since all those loans were sliced and diced over and over again to sell to investors. Heck, I even blogged about that–a book review called The Big Short by Michael Lewis. [Tip: Buy it. Read it.]

But caller Matthew’s point was that none of these properties–foreclosure or not–really can be said to have clear title. The paperwork’s bad on all of them. He called this “the elephant in the room” that no one wants to talk about. And, obviously, for good reason.

A lot of the problems with the foreclosure paperwork are coming to light because one of the parties (the owner) is highlighting the problem and using it to block further action. You don’t have the same situation in cases where you’ve got a willing seller, a willing buyer, and no bank in the middle of that transaction.

However, just because no one’s raising a fuss doesn’t mean the problem doesn’t exist. And as those rocks start getting turned over and the worms start wiggling out, someone’s going to notice that a lot of those worms are crawling out from supposedly “clean” sales.


What Are YOUR Myths About TARP (The Financial Bailout)?

October 11, 2010

Another myth: Flat EarthSunday’s [October 10] Washington Post (editorial section) has a piece “5 Myths about TARP.” Now, I generally like the Post’s “5 Myths . . . ” series. Except when there’s a clear ulterior motive and the mythbuster has an ax to grind. In this case, “5 Myths about TARP” is written by none other than Timothy Geithner, current Secretary of the Treasury and former president of the Federal Reserve Bank of New York. Not exactly an unbiased or critical source.

Geithner’s “5 Myths” are:

  1. The TARP cost taxpayers hundreds of billions of dollars.
  2. The TARP was a gift for Wall Street that did nothing for Main Street.
  3. The TARP was a quick fix for the market meltdown but left our financial system weak.
  4. The TARP worsened the concentration of the banking sector, leaving it more vulnerable to another crisis.
  5. The TARP was the centerpiece of a strategy by President Obama to assert more government control over the economy.

I won’t even critique Geithner’s article to cite its inconsistencies. (Well, OK, just one. He notes in Point 3 that “Of the 15 largest financial institutions before the crisis four are no longer independent entities” and in Point 4 that “It is true that the financial system is more concentrated today than it was before the crisis.” Yet Myth 4, inexplicably, is “The TARP worsened the concentration of the banking sector.”)

Most of us may not have the resume of Mr. Geithner. But I suspect we have some real-world experience and some up-close-and-personal knowledge that the Secretary of the Treasury/Former Federal Reserve Bank of New York president may not have. Plus the common sense to be able to separate myth from reality.

So, let’s add to the list of myths about TARP [Troubled Asset Relief Program]. Or–more appropriately–create our own “X Myths about TARP.” What myths did the honorable Mr. Geithner somehow overlook that really should have been included in a listing of myths about TARP?


Stop Those Foreclosures Now!

September 22, 2010

Stop those foreclosures now!

The Washington Post reported on September 22 that Ally Financial and some other large mortgage lenders did not follow proper procedures when processing foreclosures. An excerpt:

Some of the nation’s largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork – an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

The legal predicament compelled Ally Financial, the nation’s fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally’s foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.

Wow. 10,000 a month for five yearsYou do the math.

Let me say that I have precious little sympathy for homeowners who lied about their incomes in order to obtain loans. Or buyers who bought, knowing there was no way they could afford the homes, but figured they could sell for a nice profit. Or for others who gamed the system. Or for others who are now walking away from homes that they’re fully capable of making payments on, just because the home’s lost value. If there was mortgage fraud, then prosecute them to the full extent of the law. (I do have sympathy who, through job loss, illness, or other tragedy beyond their control lost their homes.) Hopefully, I’m making myself clear.

But it looks like Ally may not have been playing by the rules, either. If that’s the case, then let’s go after them to the full extent of the law. And if that means stopping hundreds of thousands of foreclosures, then so be it. And if that means going after them for already completed foreclosures that can’t be undone, let’s do that, too.

Here’s a passage I love from Robert Bolt’s A Man for All Seasons about Sir Thomas Moore:

ROPER So now you’d give the Devil benefit of law!

MORE Yes. What would you do? Cut a great road through the law to get after the Devil?

ROPER I’d cut down every law in England to do that!

MORE (Roused and excited) Oh? (Advances on ROPER) And when the last law was down, and the Devil turned round on you-where would you hide, Roper, the laws all being flat? (He leaves him) This country’s planted thick with laws from coast to coast-man’s laws, not God’s-and if you cut them down-and you’re just the man to do it-d’you really think you could stand upright in the winds that would blow then? (Quietly) Yes, I’d give the Devil benefit of law, for my own safety’s sake.

It may be distasteful. It may be messy. It may stick in your craw. But if Ally failed to comply with the law or applicable regulations, then it must be held accountable.