This is real manipulation. The first deal my employer and I worked on together clearly demonstrated his manipulative ways. I had brought him a $150,000 second mortgage loan application from a desperate builder who was willing to put up nine small apartment properties as collateral. My employer expressed an immediate interest in the loan, and when I relayed that fact to the prospective borrower, he became very anxious to have him come to town and inspect his properties. The situation was ideal for my employer: the prospective borrower was anxious; my employer could care less. If you're on the anxious side of a deal you have two strikes against you before the negotiations even begin.
After my employer inspected the prospective borrowers properties, he shook his head discouragingly and said that he would need more collateral in order to make a loan. The owner protested, insisting that the nine properties he was prepared to put up as security constituted more than sufficient collateral. My employer courteously thanked the builder for his time, then said that, under the circumstances, he would be leaving for the airport right away to try to catch an earlier flight back to New York. It was an eye-opening experience to witness a professional manipulator in action.
The buyer, desperate for cash looked like he was going to have an apoplexy. He quickly backed off and agreed to give my employer, as additonal collateral, a first mortgage on a 10 acre parcel of land that he said was in the process of being zoned for industrial usage.
My employer not only accepted the land as additional collateral, but as we got nearer the closing, insisted on inserting a clause in the loan agreement stipulating that if the land was not rezoned within 12 months, he could require the borrower to pay off an additional $20k on the principal of the loan.
This struck me as a rather harsh condition, particularly since it appeared that the nine apartment properties alone were more than sufficient collateral for the second mortgage.
But as it turned out I had only witnessed the tip of the iceberg. My employer's greatest moves were yet to come.
Just as it began to appear that all the details for a closing had been worked out, and with the burrowed looking 10 years older than when the negotiations had begun, my employer "after reviewing the figures carefully" said there was no way that he could make a 150k loan based on the collateral they ha been discussing. He told the borrower that due to this lack of collateral, 100k was the biggest loan he was willing to make.
At that point, the burrowed became outwardly hostile. He adamantly refused to the lower loan figure, which prompted my employer to once again thank him for his time and indicate that he had better things to work on. Result? You guessed it the borrower limped back to the negotiating table they "finally compromised" at 105k meaning that the borrower had to put more collateral for less money!
By this time the borrower was beyond desperate, and rest assured that his desperation did not not go unnoticed by my employer. Before he was finished my employer took advantage of his intimidating posture to land two final blows.
First he required that the borrower deposit with him, each month, one twelfth of the annual real estate taxes on each of the properties. This meant that my employer would have the use of the borrowers tax money until the real estate taxes were actually due, which in turn deprived the borrower of the use of his own funds.
The second and final blow however was the coup de grace. When my employer examined the rent rolls for fac of the properties, he noticed that one of the buildings the construction of which had just been completed, still had a considerable number of vacancies. he insisted that 20k of the 105k loan be readiness by him until that's property reached and occupancy rate of proximately 80% . The same protest on the part of the borrower; The same threats of departure on the part of my employer; the same result: the borrower ended up agreeing to all of my employers condition.
This was all a matter of at what point the lender was willing to display mercy. He had the cash; the borrower was desperate.
As my employer and I walked out of the buliding where the closing had taken place, I told him that the borrower seemed like a nice guy and I hoped he would be able to abide by all the conditions of the loan agreement.
With a smile on his face my employer replied "that's not possible" puzzled I asked him what he meant by that, he then said "if you take the trouble to read the agree to carefully, you see that he was technically I'm default the moment he signed it."