Another wrap deal turns sour.
Article originally published DECEMBER 10, 2004 –Reviewed and approved.
By Neil Jenman
In July 2001, Michael Gruber and his partner Yuchen Chen, bought a home in the NSW town of Beresfield (near Newcastle). They paid $76,000 and obtained a loan from the ANZ Bank.
A month later, Gruber and Chen resold the home for $93,000. Their instant profit of $17,000 was just the start of more profits for the property ‘wrappers’.
Gruber and Chen sold the home under a ‘wrap deal’. The family who bought the home were not eligible for a loan from a normal lender. And so, they paid a small deposit and signed a contact which required them to make payments to Gruber and Chen.
The payments made by the family were higher than the payments made by Gruber and Chen to the ANZ Bank. More profits for Gruber and Chen. This is called a ‘wrap deal’.
There are eight members of the family. A husband, a wife and six children.
In 2002, tragedy struck when the wife was diagnosed with breast cancer. A few months later, the husband’s employer closed down. The family went from two incomes and good health to no income and serious illness.
Despite their troubles, the family still managed to pay Gruber and Chen. At times they slipped behind but soon started paying again. It has been a rough couple of years.
Today, the husband has another job, but his wife’s cancer treatment has taken its toll and she is still unable to work. With one income they have struggled with payments. They are now $2,000 in arrears and are trying frantically to catch up.
According to the family, Michael Gruber visited them on Sunday, December 5. After insisting that the children leave the room, Gruber reportedly offered the parents a “special deal”. He was prepared to forego the arrears plus give the family a thousand dollars and, as an added sweetener, another thousand dollars to assist with “moving expenses”.
A letter was handed to the family with details of this “final goodwill gesture”. Gruber offered to let the family “reside in the premises for the duration of Christmas” – provided, of course, that they paid fees in advance. They were given three days to “comply” – if not, they would face “formal legal procedures” plus a string of financial charges and an “immediate request to vacate the premises within 7 days”.
A relative of the family said, “These wrappers are trying to evict a family from their home two weeks before Christmas because they got sick, lost their job and fell behind with their payments.”
Since entering into the wrap deal, the family has paid around $30,000 in payments, plus their deposit, plus repairs and maintenance to the home. While the price they paid may have been high back in 2001, the real estate boom has seen the value increase to around $140,000.
The family now stand to lose all their payments, plus every cent they have spent on repairs, plus the loss of around $50,000 in equity. And, of course, the place they all call home.
When asked to comment, Michael Gruber said his lawyer had advised him not to say anything.
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