Case Studies

Mr. and Mrs. Ashley (Mr. and Mrs. A) purchased their home in 2001, weeks after the 9/11 attacks on New York City. At that time, they had credit scores in the mid 700s, and owned a rental house in Everett. Soon after buying this home, Mr. A changed jobs, resulting in significantly less, and sporadic, income. CRE talked with Mr. A three weeks before the scheduled sale of their home, and discussed options as to how to assist the As in solving their housing problems. Discussed was bankruptcy, re-payment plans, different employment, and sales potentials. CRE and the As concluded that the best solution was for CRE to purchase the A’s home and lease it back in order for the As to pay off bad credit, put money in their bank account to cover expenses for a length of time, and re-establish their credit scores. The As re-purchased their house in the first few weeks of 2006. Upon closing this re-purchase, the As were able to put over $20,000 into their bank account for reserve money that should allow them to have credit scores back in the 700 range within a year – thereby allowing them to refinance again and obtain payments lower than when they first owned the home.

Sales price to CRE: $230,000
CRE's Mortgage on Property: $218,500
Re-Purchase value: $350,000
Gross Equity: $131,500
Payment to Investor = 25% of Equity: $32,875
Net Buyback price: $251,375
% of value that Homeowner buys back for: 72%

Rolystyn:

(Mr. R) trained in electronics in the navy as a young man, and has been a computer main-frame engineer since main-frames were the only real computers in existence. The Rs purchased their home in the early 1980s, and had raised both of their children in this house. One month both vehicles literally blew up, and a grown daughter needed financial help with their sick grandchild. After their mortgage company lost a mortgage payment in the mail and refused to credit the money to their account, a spiral towards foreclosure began. CRE talked with the Rs about 2 weeks before their sale date and organized a plan where one of CRE’s investors purchased their home with the written agreement that the Rs could purchase it back for 25% of the existing equity within the next 3 years. Today, the Rs have been in the program for less than 1.5 years and are talking with a lender to finance the re-purchase of their family home.

Sales price to CRE: $300,000
CRE's Mortgage on Property: $270,000
Re-Purchase value: $400,000
Gross Equity: $130,000
Payment to Investor = 25% of Equity: $32,500
Net Buyback price: $302,500
% of value that Homeowner buys back for: 76%

Dashin:

Mr Dashin (Mr. D) is a manger for a construction company, and Mrs. D was a key employee for a large day-care center in Snohomish County. One day Mrs. D was instructed to give medicine to one of the children, and mistakenly gave medicine to another child who had the same name, resulting in being fired. This led to a spiral in finances which brought the Ds to the brink of foreclosure. 2 weeks prior to the sale, CRE talked with the Ds, and discussed options for bankruptcy, sale, additional employment for Mrs. D, and a lease-option. The Ds requested CRE to put together a lease-option agreement according to the company’s typical agreements. CRE caught up the D’s mortgage, and 4 months after signing the initial contract the Ds sold their house to one of CRE’s investors. Directly prior to closing, a judgement was discovered against Mrs. D which resulted in a significant financial loss for the investor at closing – but the investor closed and the Ds agreed to pay the judgement back to the investor when they re-purchased their home. Today the Ds have an agreement that will allow them to purchase their property back within the next 3 years, and their lease payment is within a few dollars of their previous mortgage payment.

Delton:

Mr. and Mrs. Delton (Mr. and Mrs. D) were in financial difficulties due to Mrs. D’s diagnosis with Leukemia 3 years previous – which required Mrs. D to stop work and took significant time from Mr. D’s job. CRE was introduced to the Ds after their bankruptcy trustee allowed their lender to obtain a “Relief of Stay”, which is the document allowing a lender to withdraw from a bankruptcy and complete a foreclosure. CRE brought in an investor who was able to purchase the property from the Ds, and allow them to lease the property back with an option to buy the property some time within the next 3 years. Today, Mrs. D has received a bone marrow transplant, is recovering from this deadly illness, and is still living in their home hopeful of a soon repurchase.

Colton:

Mr. Colton (Mr. C) is the owner of an electronics company that had fallen on difficult times. When faced with a choice of paying his employees salaries or his own mortgage, Mr. C chose to put his employees before himself, which resulted in IRS liens and late mortgage payments. Mr. and Mrs. C proceeded to sell 2 different residential homes they owned and utilized these proceeds to pay off and pay back many of the bills that were owed, but eventually they came to a time where they owed over $35,000 in late payments and could not obtain this money prior to their scheduled foreclosure sale. CRE entered into an agreement with the Cs which paid off the C’s late payments and resulted in a lower lease payment than the C’s mortgage payment. The Cs are expected to re-purchase the property within the next couple years – and Mr. C’s electronics business has been reborn with significant new and profitable contracts.

Lowenstien:

Mr. Lowenstien (Mr. L.) had worked for Microsoft for many years before leaving in 1999 to start his own business, with over $1m in net worth. Soon after starting his own business, Mr. L became sick, and began a spiral of health concerns that prevented him from working for 2 years. In June of 2000, Mr. L had to sell off all of his Microsoft stock options – historically at the stocks’ lowest value – in order to pay for health expenses, contractor misdeeds, and basic living expenses. When CRE met Mr. and Mrs. L in August of 2005, they had been in foreclosure 4 times, and were attempting a refinance to pay off their mortgage to prevent a sale for the 5th time. While discussing the situation, Mr. and Mrs. L clearly indicated that filing bankruptcy was against their morals, and CRE concluded with the Ls that a refinance would indeed be the cheapest way to solve the L’s problem short term. The greatest concern was that a new loan, due to the poor recent credit, could easily put them in a much more difficult situation due to the significantly higher payments and high loan fees. However, a month extension for the sale was granted by the Foreclosure Trustee and CRE acted as a counselor to assist the Ls in obtaining a loan.

Exactly 7 days before the new sale date, the lender informed the Ls that a new loan could not be accomplished in time. (NOTE: This typically is what has occurred, in CRE’s experience, when a refinance is attempted at the last stages of foreclosure proceedings – regardless of how fervently the lender promises a loan is possible) CRE then crafted a contract with the Ls which saved their home, gave them enough money to pay all their debts (except a few family debts), put $15,000 into a reserve account in case they had future trouble paying their mortgage, and put $83,000 into an investment account (which is has earned in excess of 10% in its first 2 months). The Ls are currently living in their same house, and are very pleased with the results. Mr. and Mrs. L expect to begin real estate investments in the future, and are currently working with CRE principals in other technology joint-enterprises.

Scolley:

Mr. Scolley (Mr. S) lost his mother, the original owner of his house, 3 years before CRE met him. Mr. S had been made the executor of his mother’s estate, and miscommunications with the estate attorneys led to a conflict that resulted in all the estate’s money being spent and nothing remained with which to pay the mortgage. Mr. S had ambitions of going to college with his fiance in eastern Washington, and requested that CRE simply give him some money so he could “move on with his life”. Mr. S simply wanted to be done with the emotional baggage involved with his mother’s death. CRE hired an attorney for Mr. S to settle his mother’s estate, and then helped him financially to get started in college in eastern Washington. Once Mr. S moved, taking only the items he wanted, CRE cleaned out his house, remodeled it, and sold it, requiring Mr. S to sign final closing documents when CRE sold it.

Mrs. Jowken:

Mrs. Jowken (Mrs. J) divorced her husband a year previous, and had since been unable to earn sufficient income to pay the mortgage and the pay the expenses of herself and 3 children. In addition to this, the mortgages on her property were significantly higher than the actual value of the home, in the home’s existing condition. CRE participated in helping Mrs. J to conduct a short-sale, where the mortgage holders reduced the payoff amounts owed so that it was feasible to actually have a sale occur prior to a foreclosure sale. CRE helped Mrs. J get out of overpowering debt, and gave her some money (unknown to the mortgage holders) so that she could move into a rental unit with significantly lower payments and re-establish her credit. CRE then remodeled the home and sold it.

Shay – Boise, ID:

Mr. Shay (Mr. S) was a hard working contractor who owned his home in Boise, Idaho. A combination of marital issues and work layoffs led him to a place where he was days away from a foreclosure sale due to late mortgage payments. CRE orchestrated a contract where one of the company’s investors purchased the property and leased it back to Mr. S at payments which were slightly higher than his previous mortgage payments. Mr. S missed the very first mortgage payment and refused multiple attempts at contact through the second month. CRE eventually sent an emissary to the home and another man answered the door who appeared to be high on crank, an illegal drug. Eviction paperwork was sent to Mr. S the very next day – resulting in the loss of his option to re-purchase the property. This is the only eviction CRE has been involved with regarding any of the company’s lease-option programs.

On behalf of investors:

Jackson:

Mr. and Mrs. Jackson (Mr. and Mrs. J) had already been through a bankruptcy which did not satisfy the mortgage debt on their home before the bankruptcy was closed. CRE made contact with the Js less than 5 days before their scheduled sale date, and was informed that the Js had been interviewing numerous other “investors” who also orchestrate “lease-option” deals. During the first conversation with the Js it became evident that CRE’s program was significantly better than any of the other “investors” with whom the Js had talked. CRE also discussed bankruptcy, refinance, and sales options prior to discussing a lease-option possibility. Mrs. J was very insistent that CRE provide the contract to her at that first meeting in order for her to sign “so that it will be done”. However, CRE does not, ever, bring paperwork to the first meeting simply in order to prevent anyone from signing without having sufficient time to consider all the possible solutions before making a decision. On the Wednesday prior to the sale, CRE returned with a contract for the Js to sign, after which CRE paid $60,000 in arrears and fees to save the Js house from foreclosure.

3 months after the J’s home was saved brought the time for the Js to sign the final closing documents that would allow one of CRE’s investors to take title to their home, pay off all the mortgage debt and transaction costs, and allow the Js to lease the property back prior to re-purchasing the property. For an unknown reason, the Js refused to sign the closing documents and offered to repay the company only a portion of the money paid forward on behalf of the Js. CRE had no option for the recovery of the money already spent other than to ask the courts to require the Js to complete the contract as written. As of this writing, CRE has obtained a Summary Default against the Js and has a scheduled court date with which to ask the court to allow CRE to complete the deal. Once CRE obtains this court order, the Js will still have the right to lease the property from CRE, and to buy the property back from CRE at any time within the next 3 years. The following numbers represent the “deal” numbers if the Js were to re-purchase the property immediately after completing the contract.

Sales price to CRE: $300,000
CRE's Mortgage on Property: $240,000
Re-Purchase value (value as of 1-1-06): $300,000
Gross Equity: $60,000
Payment to Investor = 25% of Equity: $15,000
Net Buyback price: $255,000
% of value that Homeowner buys back for: 85%

It is significant to know that since this problem has occurred, CRE has begun to use a Deed of Trust to secure the company’s investment. The documents in the contract with the Js did not provide any other way to recoup the dollars than to complete the deal as contracted. All deals since the Js has had a Deed of Trust included so that, if the home owner changes their mind between the time of saving their house and signing the closing documents, the company has some recourse other than taking the homeowner to court.

Georgia:

Mr. and Mrs. Georgia (Mr. and Mrs. G) found themselves in a difficult position. Mr. G had been in jail off and on since his previous wife had died 4 years before, and was in jail on DWI charges during CRE’s first contact with the current Mrs. G, who was in process of filing for a divorce. Both Mr. and Mrs. G had decided neither wanted to live in the house anymore. CRE approached Mr. G’s attorney and explained how the company could help, and the attorney told Mr. G that this was, “the best deal you’ll ever get”. CRE provided money to the wife immediately, would give money to Mr. G upon selling the property, and began the process of fixing the house up to sell. CRE also offered to pay 80% of the cost to send Mr. G to the Shick Shadell alcohol rehabilitation center. Mr. G refused.

When it came time to sell the property, Mr. G had received a settlement in the divorce court that paid the majority of any proceeds from the sale of the house to the now Ex-Mrs. G. Hence, Mr. G refused to sign the closing documents when that time came. CRE’s investor had already put up over $30,000, and CRE then either had to take Mr. G to court, or lose the money put into the house. CRE, reluctantly, took Mr. G to court and won a summary judgment ordering Mr. G to sign the closing documents. Court costs and additional costs due to time lost reduced Mr. G’s (and the ex-Mrs. G’s) share of the profit to essentially zero. CRE obtained a judgement for court costs against Mr. G, which the company simply assigned over to Mrs. G.

On behalf of homeowners:

Kapson:

Mrs. Kapson (Mrs. K) had been divorced and had multiple, ongoing restraining orders against her previous husband – resulting in his refusal pay his divorce obligations of paying her mortgage. Mrs. K had 4 children, was remarried, and was pregnant with her new husband’s child when CRE met her. Mrs. K’s full time job was as a stay-at-home mother, and her new husband was an international businessman who had significant money tied up by the Patriot Act – resulting in no money immediately expected. For this purpose, a bankruptcy was not a viable option and in order to stay in her house, the only realistic option was for an investor to purchase the property while giving her the right to buy it back. CRE orchestrated a contract that accomplished this through one of the company’s rarely utilized investors. In December of 2005, the investor took title to property and the new lease payment was only a few dollars from what the previous mortgage payment had been.

Interestingly, a few weeks prior to the investor closing on this property, the international businessman husband received a large sum of his money and purchased a new house into which the family moved. After moving into the new house, Mrs. K decided that ownership of the house in contract with CRE was no longer an item she wanted. CRE’s contract are specifically organized to protect both the investor and the homeowner from either party not following through with their contractual obligations. One component of this contract allows the homeowner to “assign their rights to the option agreement” without permission of any other party. This means that, if the homeowner has moved out and decided not to stay in the property, the homeowner may sell their rights to the contract, or simply list the home for sale, and receive the value of their option when a new buyer takes title. Mrs. K informed CRE that they wished to sell their rights to the property 3 days after it had been closed – hence CRE instructed Mrs. K to ask the investor if the investor was willing to purchase the option from Mrs. K. The investor proceeded to tell Mrs. K that Mrs. K could not do anything other than let the investor have the house, or buy the property back for Mrs. K to live in. This is, specifically, NOT what the contract says nor what was discussed by all parties prior to signing any parts of the contract. The investor would have a significant financial gain by disallowing Mrs. K from exercising her option to re-purchase the property, and although it is unclear why the investor made these statements to the homeowner, it certainly appeared to Mrs. K and CRE that the investor was seeking financial gain by contorting the contract into saying something that it clearly did not say. When Mrs. K informed CRE, and CRE then choose to purchase the option directly from Mrs. K, thereby allowing Mrs. K to move on with her life, and placing CRE in the position to enforce the contract as it was written on equal terms with the investor. CRE has since terminated any relationships with this investor, believing their actions to be directly opposite of CRE’s core values that are expected of all the company’s investors.