Evening star., 1960-06-06
HOMES
Continued From First Page

AlOAAACO" iAC4o . Al JOuL al CO. VIC
would like to know if you. need
any work such as roofing, paint
ing, siding or a recreation
room If the homeowner ad-
mitted he was thinking of do
ing some work. the solicitor
would make an appointment
for the salesman. He would try
not to identify the company
when he called" (This pre-
vented the homeowner from
checking on the company's re-
putation)
with the lead from the tele-
phone solicitor, the salesman
would knock on the door. He
would put on the pressure. He'd
say, Well do the work and it
won't cost you anything or just
a nominal sum. We're going to
do it as a sample for the neigh
borhood. If we paint the whole
inside of your house, we'll
charge you for only one room
Now the homeowner would
begin to get interested. The
salesman would say, 1t just so
happens that our estimator is
outside in the car right now.
Well just have him come in"
How did he estimate the
cost of the job? The actual
cost, Mr.. x explained, was only
a minor part Of the calcula-
tions. What was more impor-
tant was how big a commission
the salesman could get and how
the job was to be financed.
Here's how he explained
that:
Suppose the actual cost of
fixing up a house was $40 a
room. To that. the salesman
would add SIS for the firm. His
commission would be so per
cent of whatever the home
owner would pay above this
SIS. If he sold the job for $40
a room, the firm would get
$3.50 and he would get $3.50.
Finding Out Credit
That took care of the COM
mission. The second question
was financing. Mr.. K and his
fellows were experts at guess
ing a homeowner's credit,
whether he could get a bank
loan to pay the home improve
ment bill, whether he could be
fast-talked into signing papers
without reading them. whether
another mortgage could be ar
ranged on his home. And they
had an assist. Before they Wis
tied the homeowner, they knew
more about the debt on his
home than he ever suspected.
They assured him they would
arrange the financing
If they thought his loan
would be approved by a bank
or savings and loan associa-
ton, Mr.. KS firm would apply
for it.
If Mr.. x and his colleagues
didn't think they could get
bank financing, they would
focus on another and more ex-
pensive form of financing-in-
creaSing the homeowner's debt
on his home. They would get
the homeowner to sign two
papers-one headed Deed of
Trust" the other a deed of
trust note.
The deed of trust would place
a second or third mortgage on
the home. When it was re-
corded, it signified that the
homeowner had borrowed on
his home. that he owed a debt
to a home improvement firm
and that he would pay it back
with interest over a period of
years in regular installments.
The note, secured by the
deed of trust. was the promise
to make the payments stated in
the deed of trust. AS soon as
the homeowner signed the
note, he was committed. It
was just as negotiable as a
check.
Mr.. x would take the signed
deed and the signed note back
to his firm to be peddled to a
buyer of these notes. Suppose
the note was for $4,000. It
might be sold for 50, 900 because
buyers of these notes want to
be paid for the risk of their
investments. The $4,000 would
go to the home improvement
flrm. The homeowner, then,
would pay $4,000 plus interest
for $4,000 worth of work.
Kept In Dark
No part of this financing ar
rangement would be explained
to the homeowner. He would
simply be told-as homeowners
are being told today - that
financing had been arranged
and that he wouldn't have to
make any payments until the
work was completed. He would
not be told that his note had
been sold and that the note
holder-who had nothing to do
with whether or not the work
was done-would expect to get
his monthly payments regard
less of whether the work was
ever done.
Since the homeowner would
never understand why he had
to pay $4,000 plus interest for
$4,000 worth of work, Mr.. KS
estimator had to make the job
look as if it cost $4,000.
That's why the method of
financing figured materially in
how the. estimator added up
the costs of the job. On an
FHA-insured loan, he puffed it
up as far as he dared to in
crease his commission. He left
it to the lending institution
to notify the homeowner of
the finance charge involved in