Editorial in TheWest re wrapping in WA

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From: Bruce Sutherland


Currently there is a Royal Commission into Finance Broking in WA. This follows a number of shonky deals where quite a few investors got badly burnt. One of the upshots of this is that various aspects of property investment seem to be coming under scrutiny.

The Editorial in Saturdays edition of our local paper seems to have wrapping firmly in their sights. The concluding paragraphs included the following:

"This sort of scheme (wrapping) offends against any idea of a fair go. The department was right to take steps to alert the public to the dangers of such schemes.

It would also be in the public interest if the department could arrange for elements of the schemes to be tested legally in a court. The schemes should not be allowed to spread."

Anyone contemplating wrapping in WA would be well advised to do some more exploring before jumping in.

Here's a link to the editorial:
http://www.thewest.com.au/20010721/unassigned/tw-unassigned-home-sto3967.html
 
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Reply: 1.1
From: A. .


DO YOU KNOW IF THE VICTORIAN EQUIVALENT REGULATORY BODY AGREES WITH W.A.'S POINT OF VIEW. DO YOU THINK THERE WILL BE ANY PROBLEMS HERE?
ASH.
 
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Reply: 1.1.1
From: Michael G


Hi,

Don't know, I've heard it said the FHOG grant in Vic was written with wraps in mind :)

Michael

On 7/22/01 11:19:00 PM, Ashley Clarke wrote:
>DO YOU KNOW IF THE VICTORIAN
>EQUIVALENT REGULATORY BODY
>AGREES WITH W.A.'S POINT OF
>VIEW. DO YOU THINK THERE
>WILL BE ANY PROBLEMS HERE?
>ASH.
 
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Reply: 2
From: The Wife


And if you think the publication that wrote the article is wrong, send them your letter of disapproval, [email protected]

TW
~Life is a daring adventure, or nothing at all~
 
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Editorial / dragged from another site

Reply: 2.1
From: The Wife


Author: MatthewC (Host) (---.clmbus1.ga.home.com)
Date: 07-26-01 20:46

This well-written letter has been made available to everyone who is interested in reading it and fully authorized by John Burley.

I recommend that everyone read it and think for themselves.

MatthewC (Host)
==================================================


Letter to the Editor
John Burley
Burley & Associates 20165 N. 67th Avenue Glendale, AZ 85308 USA


WA Newspapers
50 Hasler Park
OSBOURNE PARK WA 6017
Fax: 08 – 9482 3830


Thursday, 26 July 2001


Dear Sir,

I read with interest your editorial “Wrap lenders prey on the poor” in Saturday’s West Australian and I take a few moments of your time to clarify some of the issues raised in the article.

My name was mentioned in an article in your newspaper on Friday on the same subject. I was pleased that a journalist from your newspaper did try to contact me however I was on a short holiday break and unavailable. When we did call back we were told that the journalist was no longer interested in talking to me. That’s unfortunate, as I would like to have had the opportunity to outline a few important points.

The wrap around real estate concept is one of my primary businesses in the USA. I have invested in many properties using this concept, that is legal in both the USA and Australia. One of the interesting things to note is that ‘wrapping’ is not foreign to Australia. In fact, there is a favourable Australian taxation case dating back to 1927 that proves that the ‘concept’ has been around for a long time here in Australia. I have not invented it, nor have I introduced it to Australia. I have however introduced the concept to a number of Australians over recent years.

The NSW and Victorian governments, while they cannot endorse a concept, have however reviewed and approved this form of real estate purchase for the purposes of qualifying for the First Home Owners Grant (FHOG). This clearly shows that the concept is legal and valid in Australia.

This concept is shown to those who attend my seminars and I always stress at these events that one must investigate the legalities in their own country (and state for that matter) before embarking on a real estate transaction that may or may not eventuate in a “wrap”.

The article questions how the buyer is protected. This is done by the buyer taking possession of the property and placing a caveat over the title, which protects the interests of the buyer under the purchase contract. The price is fixed in the contract, and the buyer enjoys all future profit in their homes. and assures them of all profit on their future on sale. In Australia, both the vendor and purchaser of real estate usually seek independent legal advice and this independent legal advice is encouraged, especially for purchasers, when entering into a “wrap” transaction.

While I was in Perth two weeks ago, we requested a meeting with the Department of Consumer Protection Agency (formerly known as the Ministry of Fair Trading). My solicitor and I met with a Mr Rod Tilley from the Agency and a colleague of Mr Tilley’s. They made it quite clear that while the Department of Consumer Protection stated that they were not in a position to endorse any type of plan, they could in no way find or claim that there was anything wrong with the program you have called a ‘wrap’. During the meeting we also discussed their concern regarding the necessity for a vendor to have a credit providers licence. Once again this is an issue I cover in detail in my seminars. All participants are made aware that they should meet with their legal advisor and review all statutory requirements before they undertake a “wrap”.

Aside from clarifying the above issues, my primary concern with your editorial is the emphasis on ‘preying on the poor; a tactic that I find abhorrent. What I do is give people ‘a fair go’. We work with regular people who want to own a house in regular neighbourhoods (not the cheap property and poor people as insinuated in the article). For many they would never be in a position to own their own home. In the USA many of the hundreds of families who have bought property from me are now on selling their homes, making a significant profit and being able to qualify for a new home loan because they then have a “trade record” of home loan repayments.

Unfortunately, as in America, over one third of Australians do not own their own home. They are honest, decent hardworking middle-class people who have tried to do their best. But circumstances in life (slow credit, the inability to come up with a deposit and/or self-employment issues) make them unable to get a traditional loan. This concept allows those who desire the opportunity to own their own home, to do so. It does so because of the low deposit requirements and term payments.

Sadly, in Australia the finance industry has turned their backs on this large segment of the community and shut them out of home ownership. By providing instalment finance we allow them this opportunity.

Surely giving someone the ability to buy a home is more beneficial than sending them pre-approved credit cards with 16% + interest rates (which happens regularly to the middle-class and traps them in a debt spiral). The subject of morality is by nature a debatable issue. However, I could think of few things better than offering someone who would otherwise be destined to rent for life, the opportunity to purchase their own home. If the two parties (who are in full compliance with the law have sought independent advice) can enter into an arrangement which is good for both then what can be immoral?

Personally I am for helping others and giving them the opportunity to fulfil the Australian dream….which is to own their own home.

With Regards,

John Burley
 
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