Trust — Experience — Common Sense — Value

 Articles of Interest - Table of Contents

Please scroll down to read a brief synopsis of the article.  In order to read the article in its entirety, click on the links within the synopsis where the article was originally published or on the red blog link to read and comment on the article in my blog.

1.     Understand Risks In Carry-Backs - December 20, 2008 by Scott W. Hyder (originally published in the Arizona Republic and www.azcentral.com)

2.     Cheap Prices May Mean Disaster Anyway - January 6, 2009 by Scott W. Hyder

3.     Medicare Mania - January 7, 2009 by Scott W. Hyder

4.    Creative Sales in a Tough Real Estate Market - February 1, 2009 by Scott W. Hyder (originally published in the Arizona Association of Realtors Magazine and www.aarnews.com/tag/carry-back)

5.    Schadenfreude:  Taking Pleasure in Other People's Pain - February 24, 2009 by Scott W. Hyder (originally published in the East Valley Trubune and http://www.eastvalleytribune.com/story/138319)

6. Protect Your Own Southfork - May 30, 2009 by Scott W. Hyder (originally published in The Arizona Republic and http://www.azcentral.com/business/realestate/articles/2009/05/29/20090529biz-re-hyder0530.html)

7.  Using DNA to Clear the Innocent- May 27, 2009 by Scott W. Hyder (originally published in the East Valley Tribune and http://www.eastvalleytribune.com/story/139682)

Additional articles can be read in The East Valley Tribune and The Arizona Republic (www.eastvalleytribune.com and www.azcentral.com)

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I have this client who has been trying to sell his home for more than a year, and he walked into my office the other day with a huge smile.

Although unable to get a loan, a prospective buyer had proposed to do a "carry-back" sale. My client would accept a down payment and the buyer would make monthly payments to him over the next seven years at 8 percent interest. At the end of the seven years, the buyer would pay the remaining amount due in a balloon payment.

My client would make 8 percent interest, and he could get the house back if the buyer stopped making payments, a worst-case scenario.

Sounds great, right?

Maybe. When I asked whether his home was free and clear, my client's grin started to fade, confirming he still owed $250,000. When I reminded him that he risked foreclosure if any default occurred under the original loan, no more grin.

This wonderful deal had just become much more complicated. It actually was not a bad idea and may work under certain circumstances so long as a seller understands the risks. One creative way to sell a home is to use seller "carry-back" financing. As long as the seller can accept the business terms and risks associated with a carry-back, this type of deal could be appealing. In a typical carry-back, the seller agrees to accept a down payment in exchange for the buyer making monthly payments over a period of time at an agreed-upo interest rate. The seller will usually require a final balloon payment at some later date. If payments stop or the buyer otherwise defaults, the seller can foreclose and take back possession.

However, this structure can get complicated. If a seller has loans attached to the home, the seller is responsible to make payments and comply with all loan terms, regardless of who has title of the home. The seller ultimately could face foreclosure for any breach of any loan terms.

Furthermore, most lenders have a "due on sale" requirement that may prohibit or restrict transfer of the home while a loan is still in place (obtaining the lender's consent may be a solution to this restriction).

If a seller has an existing loan, an intelligent buyer will want to make sure that the lender will get paid as required under the existing loan terms. Even if the buyer makes timely payments, the seller could take the money and jet to Jamaica.

One solution would be to require an escrow agent to make the monthly payments. Instead of making payments directly to the seller, the buyer could pay the escrow agent, who in turn would pay the lender and forward any remaining amounts to the seller. Other scenarios may be possible.

The seller should take all the precautions that a lender takes when deciding whether a prospective buyer is a good risk. This means reviewing tax returns, pay stubs, credit reports, banking accounts, criminal records and so on.

Another idea may be a "lease-purchase" deal by structuring the transaction as a lease with a buyer's right to purchase the home at a later date. This could work, but the risks need to be understood, such as the seller needing to comply with all laws applicable to landlords, such as the Arizona Residential Landlord and Tenant Act.

All of this takes time and money. Normally, buyers pay these costs as "closing costs" in a typical lender-financed sale. Sellers could require the buyer to pay or reimburse these costs.

But don't hold your breath. A buyer in dire straits is most likely using every cent to pay the down payment and probably has little left over.

The most important thing to remember is this: Most agents, brokers and title companies are not sufficiently qualified to properly advise the participants regarding all risks and issues.

An attorney experienced with secured real estate transactions should be consulted, especially if you are a seller. The business and legal risks, including an agent's and broker's liability, could be enormous if anything goes wrong.

Proceed with caution.

Real estate and business attorney Scott Hyder practices in Phoenix. His Web site is www.scotthyderlaw.com. 

You can read the article on the Arizona Republic's website at: 

http://www.azcentral.com/realestate/articles/2008/12/19/20081219biz-re-hyder1220-ON.html

Click here to read or post comments or questions about this article on my blog

Cheap Prices May Mean Disaster Anyway

January 26, 2009 by Scott W. Hyder

Synopsis:

During and right after the holidays, discounts and sales were everywhere.  They still are.  However, is this really "good news" for us consumers?  Is it really good for business?  Will it help or ultimately hurt our already fragile economy?  You see, when retailers try to make their "bottom line" during this recession by selling more merchandise at cheaper prices, this may result in more problems down the line.  And when these "discounted high-definition televisions" are paid by regular consumers, we may find that our money "well spent" should have stayed in the bank to pay for more essential things such as our mortgages, our rent, our food and our kids' health insurance.  When Best Buy's bottom line is ultimately shown to be "way at the bottom", Wall Street may take notice, and stocks may go through another round of torture.  The real bottom line, however, is that us consumers may get knocked out again, even if it is in the "12th round".

Great deals?  Yes.

Smart allocation of limited financial resources?  Probably not.

Corporate greed at its finest?  Absolutely.


Click here to read the entire article or post comments or questions about this article on my blog

Medicare Mania

January 7, 2009 by Scott W. Hyder

Synopsis:

The Medicare Prescription Drug Program is fleecing American seniors.  Actually, it is fleecing America.  The amount we have spent on the Iraq war is a drop in the bucket compared to the amount we have spent and will continue to spend with the current Medicare Prescription Drug Program.  But, seniors need drug coverage.  So, is this essential cost "for the people and by the people?"  Yes and no.  Yes, seniors need prescription drug coverage.  No, we don't have to bankrupt Medicare and America to do it.

Click here to read the entire article and to post comments or questions about the article on my blog.

Creative Sales in a Tough Real Estate Market

February 1, 2009 by Scott W. Hyder

Synopsis:

This is a similar article on the pros and cons to doing a carry-back deal, published by the Arizona Association of Realtors Magazine.  In addition to explaining the legalities of a real estate transaction involving carry-back financing, it also warns realtors that professional consultants (especially lawyers knowledgeable in secured real estate transactions) should be consulted to avoid common mistakes the agents (and their brokers) could be liable for.

You can read the article on the AAR website at:

http://www.aarnews.com/tag/carry-back

 Click here to read the entire article and to post comments or questions about the article on my blog.

Schadenfreude:  Taking Pleasure in Other People's Pain

April 24, 2009 by Scott W. Hyder

Synopsis:

There’s this funny-sounding German word that describes a very real and sadistic feeling we sometimes experience: “Schadenfreude.” Ever heard of it? Don’t worry, I can’t pronounce it either. It means to take spiteful, malicious delight in the misfortune of others.

Schadenfreude is not just some speculative feeling. Recent brain scan studies show that a chemical is released in the brain causing pleasure when we sometimes see others suffer misfortune. It’s real and it’s sadistic.

It might seem like all fun and games until it infects our legal system.  This is nothing new.  Read about how it played a part in the manslaughter conviction of former Phoenix Suns nutritionist Doug Grant.

You can read the entire article at:

http://www.eastvalleytribune.com/story/138319


Click here to read the entire article and to post comments or questions about the article on my blog.

Using DNA to clear the innocent is right

Scott Hyder, Commentary

May 26, 2009 - 9:53PM

Let’s be honest: People generally despise lawyers. What was once a respected profession has been tarnished by vindictive prosecutions, sloppy defenses, frivolous lawsuits, and lawyers resorting to legal trickery and fighting that they justify as the necessary evil to ensure “vigorous advocacy” for their clients.

So I was pleasantly surprised to read about Dallas County District Attorney Craig Watkins. He previously worked as a defense attorney and his only prosecutorial experience was a brief internship handling misdemeanors in the city prosecutor’s office.

How does a defense lawyer get elected as a Texas district attorney? Watkins ran an unconventional and smart campaign. He reminded voters that it wasn’t in anyone’s best interest for innocent convicts to rot in prison. Watkins campaigned to be “smart on crime” instead of just “tough on crime.”

Once elected, Watkins instituted a highly publicized DNA exoneration program that has already resulted in the release of 19 former convicts. One was Patrick Waller, who served 15 years in prison for robbery and kidnapping. A DNA test proved Waller’s innocence. When the judge told Waller he was a free man, he collapsed in his mother’s arms, sobbing.

Johnnie Lindsey spent 26 years in prison after he was convicted of rape. Seven months ago, Watkins supported Lindsey’s release after DNA evidence proved he did not commit the crime. When Lindsey appeared on ABC’s “The View” three weeks ago, his childhood sweetheart told Whoopi Goldberg that Lindsey refused to get married until he was able to secure a job, something that has been difficult since his release because the governor of Texas has yet to timely sign Lindsey’s pardon.

Why is all of this so amazing? Because Watkins is willing to show his office’s mistakes in order to make sure that the right person goes to jail. In a state like Texas, which is the capital of capital punishment, it makes it even more amazing that Watkins was named the 2008 Texas Man of the Year.

Watkins’ insistence on ensuring fairness and maintaining prosecutorial integrity probably makes him one of the few lawyers who can sleep peacefully at night.

To be fair, I can’t imagine most elected prosecutors adopting what many critics refer to as Watkins’ “Hug-a-Thug” programs. And why should they? After all, it goes against the “convict-at-all-costs” approach and opens up the dreaded possibility that mistakes occur via vigorous prosecutions.

But it is startling that Watkins (who prosecutes criminals in a county smaller than Maricopa County) has secured the release of 19 innocent people in just the last two years. So how many innocent people would be released here in Arizona?

Take for example Courtney Bisbee, who is serving 11 years for molesting a 13-year-old boy. After the trial, the victim’s brother stated in an affidavit that their mother told the victim “to lie and stick to the story and you’ll be a rich kid.”

Other affidavits and depositions show witnesses’ admissions that no crime occurred.

In 2002, former Maricopa County Attorney Richard Romley supported Ray Krone’s release after a DNA test showed another person committed the murder. But $4.4 million of Maricopa County taxpayer money was paid to Krone for the 3,769 days he spent on death row. Surely a DNA exoneration program would be cheaper than that!

Arizona was recently awarded a $1.4 million federal grant to help determine if there are people in prison who have been wrongfully convicted. This is a step in the right direction. But should “dollars and cents” and “conviction ego” get in the way of a prosecutor’s basic job responsibility to investigate, when warranted, a person’s wrongful incarceration?

Most attorneys will admit that the battles of the law profession have scarred them over the years, jading their personality to some degree. An attorney like Craig Watkins shows it is possible to overcome those scars. He reminds us how dignified the practice of law can be.

Scott Hyder is a Phoenix business attorney. Visit his Web site at www.scotthyderlaw.com.

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