Thousands hit by buy-to-let fraud

baby_boomer

The tide is going out and we are starting to see who's not wearing any bathing gear. As predicted by quite a few of our House Price forum regulars.

The disreputable & the ignorant will always flock towards any inflatable asset bubble. It's a pity that the taxpayer will have to pick up some of the pieces .

The Times front page - Buy-to-let fraud hits thousands

"Detectives are investigating one of Britain’s biggest buy-to-let schemes in which large numbers of investors have seen their savings wiped out. They fear thousands of people who sought to cash in on the buy-to-let dream during the boom years of 2004 to 2007 may turn out to have been victims of organised fraud.

The Serious Fraud Office (SFO) is investigating alleged scams that have cost government-owned banks such as Northern Rock, Royal Bank of Scotland and Bradford & Bingley millions of pounds on loans that should never have been made.
Senior police officers said the full scale of the buy-to-let scandal was only beginning to emerge in the wake of the credit crunch and the collapse of house prices.

One chief constable said: “We can expect to see one or two of the same type of [scheme] emerging in every major city.......”

Times - Buy-to-let scandal spreads nationwide

Was it the companies who were to blame?

"....Many of the firms involved used adverts, brochures and a slick sales pitch to persuade investors to buy new-build flats or refurbished houses at allegedly inflated prices with overstated promises of rental income. Investors, drawn in by the mirage of ever increasing house prices, were attracted by “discounts” of more than 10% and promises of rental income that, in the event, failed to materialise...."

Or is it just the fault of greedy mugs who got caught up in the national Property Ladder / LocationX3 mindset and thought money grew on property?

".....In Leeds, Simon Morris denies wrongdoing. His lawyer said he is threatening legal action against the police :rotfl:. Yesterday, Morris said that many of his clients had merely invested in the market at the wrong time and were victims of poor judgment. He also denied selling properties at inflated prices and said he had benefited from the lack of local competitors to his firm and the greed of investors. “We were beating them off with a stick,” he said...."

carolt

So who 'made' them buy?

What kind of mug invests hundreds of thousands or millions of pounds of borrowed money without due dilgence first?

(Well, apart from all those who invested in Madoff's schemes, obviously. :eek:)

baby_boomer

The tax benefits were so great, that the government practically "forced" the rich into buy-to-let .

amcluesent

Clown will forcibly seize these houses to be reallocated as "people's homes" for 'hard working' families when his election campaign needs a cheap boost. After all TruLabour wishes to destroy property rights in England.

baby_boomer

I thought part of the problem was that Gordon was imitating King Canute and trying to help people buy?

bluejake

amcluesent wrote: »

Clown will forcibly seize these houses to be reallocated as "people's homes" for 'hard working' families when his election campaign needs a cheap boost. After all TruLabour wishes to destroy property rights in England.

What are you on about.

GDB2222

None of this could have been done without the valuations (produced by professional valuers, remember!) stacking up. There are going to be heads rolling amongst the surveyors soon. The question is whether they were criminal or merely naive?

Gorgeous_George

There are NO tax benefits.

As house prices soared and with the benefit of hindsight, BTL was seen to be a great investment. Thousands of asset rich homeowners were convinced that they too should get into BTL. Property !!!!!! on TV, Inside Track and similar companies, newspapers and friends all conspired to spread BTL as the new coming of the Lord. People wanted to be sold the idea of riches beyond their dreams.

It was never going to be that easy and just like endowment buyers of the 80's, IceSave profit seekers of 2008 or Madoff fund investors, the house of cards would have to collapse. As it collapses, people suffer. Their lack of research is the cause of THEIR problem. Anybody who believes the sales literature is stupid.

Where fraud is proven, the money needs to be confiscated from those who stole it. It is financial terrorism. Where companies have profitted legally, then the mugs who bought into the idea of easy money should lose everything (until THEIR debts are repaid). As a taxpayer, I do not want to bail them out. The same applies to the banks and the bankers who were (potentially fraudulently) awarded massive bonuses on the back of financial mismanagement.

GG

silvercar

GDB2222 wrote: »

None of this could have been done without the valuations (produced by professional valuers, remember!) stacking up. There are going to be heads rolling amongst the surveyors soon. The question is whether they were criminal or merely naive?

I suspect they will use the arguement that a house is worth whatever someone is prepared to pay.

I am surprised that valuers haven't come in for more flack. Blame has been thrown at the lenders and the buyers, but little has been heading towards the valuers.

In times of houseprice growth, lenders encouraged valuers to value high as they wanted to lend the money; now they are instructed to value low to protect bank's assets. In the pay of the lenders they sing their tune.

Gorgeous_George

Spot on silvercar.

The sad thing is that mortgage holders have paid £millions for the services of professional valuers. These valuers are definitely as guilty as anybody else in the house price scandal. Let's see them pay back the costs of the valuations. After all, their valuations had no value.

GG

baby_boomer

Houses are effectively worth what banks are prepared to lend to people.

You can't accuse valuers of failing to predict the credit crunch when bankers and regulators missed the signs as well.

Gorgeous_George wrote: »

There are NO tax benefits.

The name of the game was anticipated capital gains, and there were plenty of ways to reduce your CGT liability under the current tax regime.