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I didn't want to start a comments battle on his site by submitting my comments so, I sent the email instead.
Even though Ed is "friends" with John Hoff aka Johnny Northside, who was sued for getting someone fired and had a $60,000 judgement slapped on him when he lost (click here to read), I have exchanged several emails with Ed in the past year and have a relationship with him that I would describe as "coordial," even though Ed has not acknowledged the email.
The article mentioned TJ Waconia who owned a lot of houses in north Minneapolis and were accused of driving the values of the area up in a fraudulent way. Since I am former friends with one of the owners of TJ Waconia, I was told how the company acquired their houses in north Minneapolis. Below is a sentence from Ed's article:
The company was involved in a ton of fraudulent real estate transactions where homes were purchased at above their market value and later foreclosed while lots of money was pocketed.At the sentencing hearing for TJ Waconia, Minneapolis City Council President Barb Johnson lied on the witness stand when she was asked how the city became aware of TJ Waconia and their housing transactions. The following is what Johnson told the court and is a direct quote from the court transcript.
"It was bought to my attention by neighbors, was the increasing uptick in the price of the housing. Neighbors would very carefully watch the paper on Saturday to see if the prices that were being paid for homes that were selling on their block or in their neighborhood, and there was a giant escalation in some of the prices, and neighbors were really, you know, had their eyebrows raised because of it."While I actually live in Texas, the foreclosure process after the lender forecloses on a house, is the same in all 50 states. The following is a copy of most of the email that was sent to Ed Kohler, that explains how TJ Waconia bought their houses and why what has been reported about TJ Waconia is not correct and explains how President Barb Johnson lied under oath.
TJ Waconia bought the majority of their houses in north Minneapolis directly from the lenders after they had foreclosed on the property. Otherwise known as REO (Real Estate Owned) properties. The houses were listed on MLS but, the houses were each listed individually, as all other single family residential are. TJ Waconia bought most of their houses from the lenders REO departments but... They bought them in bulk (10-25 houses at a time) AND they bought them using a "blanket loan."The moral to the story: Don't believe everything that the media reports. In this case, ask anyone who is familiar with real estate transactions dealing with REO properties and comparables and they will tell you the same thing.
When this happens, the listing on MLS is pulled and because only one loan purchases all of the houses at once, it is not possible to determine how much of the total purchase price went to each individual property.
When a transaction like that takes place, a few things happen:
1- There is no "comp" (comparable) submitted to MLS for appraisers to reference when they appraise a house.
2- When a bank is able to unload 25 houses from their dead-weight books, they sell them at significant discounts. In that time frame, it was common for the overall discount to be from 20% to 40% less than current market rates.
Those two points are the reason I am saying that your sentence in your article is not accurate.
Further, when they sold the houses to the straw buyers, they were selling them at a big profit but, they were only selling the houses for the current market rates.... Not inflating them at all.
Add to that, since the seller (TJ Waconia) sold the houses to the investors (straw buyers) directly, they did not list the houses for sale on MLS. Meaning, they sold the houses FSBO (For Sale By Owner) and those houses do not have comparable's.
There is no way anyone can determine how much TJ Waconia paid for an individual house AND there is no comparable sales record of how much TJ Waconia sold any of the straw buyer houses for but.... The lenders who funded those purchases... They (not TJ Waconia) ordered the appraisals so, if the asking sale price was way over the current market prices... The lenders would not have funded the deals.