V.I.P. Trust Deed Company
February 2002
Once in a while my column is devoted to a subject that is OBVIOUS to the reader. This is one of those columns and is not intended to teach you anything that you didn’t know; it is intended to REINFORCE that knowledge. Perhaps this fresh reminder may save you a little or a lot of money and heartache in the future.
Everybody has heard the expression “If it sounds too good to be true; its probably not true”. MY favorite two expressions are: “Everything is relative” and “Water seeks its own level”.
If you think back over your life you will realize that many of your monetary losses resulted from deals that were “too good to be true” and “frankly, GREED”.
The most obvious example of this is a recent web site that the Securities and Exchange Commission recently created. It was a phony company and they sent unsolicited E-mails (spams) to thousands of E-mail addresses. The E-mail highly touted the phony company stating there were like the stock, expected to go up 300-400% in a few months; at the bottom of the E-mail there was a price for “click here to invest” – when a potential investor “clicked”, a message popped up identifying the SEC and warning people that they could have easily been scammed.
The next example would be shopping for a loan. The obvious answer is to shop for the lowest rate-WRONG. Mortgage rates are usually very competitive. The typical loan obtained from a mortgage company would be approximately the same as a loan obtained DIRECTLY from a major lender. The variables in most loans are fixed/adjustable and 15 years/30 years. Also a “No point” loan will have higher interest rate and (usually) higher incidental charges. If you see or hear an ad offering a rate MUCH BETTER than someone else-BEWARE. Just because it is in the newspaper doesn’t make it a fact. That lender maybe using the horrible and illegal “BAIT AND SWITCH”. Either that 5-½% interest rate includes loads of points and other costs or, perhaps, it is great but YOU don’t qualify: Usually you can find the “catch” with a simple phone call.
Unfortunately the “too good to be true” deal may get you tied up with a broker who “thinks they can deliver”, or a broker who doesn’t INTEND TO DELIVER. In either case, you may find out, too late; that the deal really was “too good to be true”. Always deal with a regular conventional lender or a mortgage broker that has been in business for years and has been HIGHLY RECOMMENDED by professionals in the industry.
My last example involves a mortgage broker who is presently in jail. A few years ago my rate on a first trust deed for a private party lender was approximately 12%. The other broker did first trust deeds at 16%. My company charged the lender a small collection fee; the other broker had no collection charges. My company reports (by law) lender interest earned to the IRS. The other broker did not send “1099s”. What a deal! Higher interest, no collection fee and no IRS report. Too good to be true? Yes. Do you remember my favorite expressions, i.e. “everything is relative” or “water seeks its own level”. Many of the “burned” lenders came to us for advise and research when they discovered that most of their loans did not even exist. Yes; it was too good to be true.
In conclusion, let me again remind you that – GREED KILLS; as they used to say on Hill Street Blues — “Let’s Be Careful Out there”.
Peter Rosenthal
VIP Trust Deed Company