Schadenfreude: Taking Pleasure In Other People’s Pain

April 24, 2009

(Originally published in The East Valley Tribune on April 24, 2009 (http://www.eastvalleytribune.com/story/138319)

There’s this funny-sounding German word that describes a very real and sadistic feeling we sometimes experience: “Schadenfreude.” Ever heard of it? Don’t worry, I can’t pronounce it either. It means to take spiteful, malicious delight in the misfortune of others.

Schadenfreude is not just some speculative feeling. Recent brain scan studies show that a chemical is released in the brain causing pleasure when we sometimes see others suffer misfortune. It’s real and it’s sadistic.

Even the foul-mouthed puppets in the Tony Award-winning musical “Avenue Q” sing about Schadenfreude, with lyrics like “don’t you feel all warm and cozy, watching people out in the rain,” and “D’ja ever clap when a waitress falls and drops a tray of glasses?”

We had a field day when a Malawian judge prohibited Madonna from adopting another child. Adoption is one of the most selfless acts of love and humanity. And yet, we attacked Madonna as another self-indulgent “Angelina Jolie wannabe.” It was icing on the cake when Madonna tumbled off another horse while riding in the plush Hamptons.

Explanation for our glee? Schadenfreude.

Seedy sex scandals involving politicians are perfect fodder for Schadenfreude. Take Elliot Spitzer, the once well-respected New York governor who got caught in a prostitution ring. The scandal became more titillating when the prostitute giggled to the press that Spitzer kept his dress socks on during each encounter. In fact, the long-running publication The Economist coined a new phrase for our national Spitzer obsession: “Spitzenfreude.”

Which brings me to former Phoenix Suns nutritionist, Doug Grant. In 2001, Grant found his unconscious wife, Faylene, underwater in their bathtub after she ingested a large amount of Ambien. Last month, he was convicted of involuntary manslaughter for contributing to her death, according to Valley media reports. He could go to prison for up to 12½ years.

Oh, I almost forgot to mention that Grant married his mistress, Hilary, three weeks after Faylene died. Bad timing? Uh, yeah! Sleazy? Definitely. Proof that he killed his wife beyond all reasonable doubt? No.

By the way, Faylene knew about Grant’s relationship with Hilary, even encouraged it. Shortly before her death, Faylene wrote a letter, as reported by the Phoenix New Times, saying she “held a secret hope and desire for several weeks that I would be able to see you both married, that I could be there!”

Faylene also wrote that she wanted Hilary to be the mother of Faylene’s children. She even predicted a premature death, writing about her joyous anticipation of entering the Celestial Kingdom as soon as possible and asking Hilary to remind Faylene’s children “that they are precious to their mother who has been called to serve her mission elsewhere.”

All of this suggests Faylene may have had suicidal tendencies, casting reasonable doubt that Faylene’s death was even a homicide. Even the Maricopa County medical examiner testified that there was no evidence to support a homicide.

Oh, and speaking of “Celestial Kingdom,” Grant happens to be Mormon. So is his very capable defense attorney. So was Faylene. So is Grant’s new wife. Why is this relevant? Because we relish in punishing those we perceive as morally superior “do-gooders” and exposing them as self-righteous hypocrites.

Plus, HBO’s popular show “Big Love” doesn’t help, with its soap opera depiction of polygamy and characters resorting to crimes and tactics reminiscent of “The Sopranos.”

It makes us feel better when those we perceive as religious fanatics have sinned worse than us.

As Grant’s trial unfolded, the prosecutor became concerned that premeditation for first-degree murder may not be provable beyond a reasonable doubt. So late in the trial, the prosecutor convinced the judge to allow the jury to consider the lesser charge of involuntary manslaughter (aka “reckless homicide”), primarily based on evidence (also disputed) that Grant failed to timely call 911 once he discovered his wife’s body.

Clearly, this a “Hail Mary” attempt for any conviction.

This case was about a perceived sleazy defendant. He worked for the almighty Phoenix Suns. Just three days before her death, the couple was on their second honeymoon in Utah when Faylene miraculously survived after skiing off a cliff, with Grant witnessing the event close by.

He is a wealthy Mormon who could afford a high-power Mormon lawyer to come to his rescue. The guy married his mistress three weeks after his wife’s death! Allowing the jury to conclude that Grant’s failure to timely call 911 was reckless conduct contributing to his wife’s death simply provided the lame “legal means” to seal Grant’s fate.

But c’mon. The real reason for Grant’s conviction? Schadenfreude, beyond a reasonable doubt.

Scott Hyder is a Phoenix business attorney specializing in real estate, bankruptcy and estate planning. You can visit his Web site at www.scotthyderlaw.com.

Creative Sales in a Tough Real Estate Market

April 21, 2009

Posted on 01 February 2009

——————————————————————————–

By Scott W. Hyder
My client, having tried to sell his home for over a year, smilingly described his potentially great deal. Conventional financing being unavailable, the prospective buyer agreed to a “carry-back” sale: the seller would be the lender. The buyer would pay a down payment and monthly payments on the loan amount at 8% interest, with a balloon payment of principal due in seven years. The seller imagined making 8% interest, and in the worst-case scenario of buyer default, he could get the house back. Sounds great, right?

Maybe — had the seller considered the downsides? First, the seller himself still owed $250,000 on the house. Second, the seller still risked foreclosure if he defaulted on his loan — having owner-financed the buyer did not protect him. The wonderful deal now looks much more complicated.

Seller financing can be a good idea in some cases, if the seller understands the risks. Many sellers would desperately like to sell their homes as in the good old “lender financed/booming market” days, but the realities of this challenging market make selling much more difficult now.

Seller “carry-back” financing offers a creative alternative that can appeal to both sellers and buyers. In a typical carry-back, the property seller accepts from the buyer a down payment and monthly payments of principal and interest, with a balloon payment due at later date. If payments stop or the buyer otherwise defaults under the agreement, then the seller can foreclose (like any typical lender) and repossess the property.

Carry-back deals can present complications. The seller who still has loans on the property must still comply with all loan terms or face foreclosure for default — regardless of whether the new buyer holds title. Also, most commercial loans have a “due on sale” requirement prohibiting or restricting the owner from selling the home without the lender’s consent while the loan is still in place. Depending on the circumstances, a commercial lender may give permission; occasionally a seller decides to ignore the requirement and assume the risk.

The buyer in a carry-back deal faces risks, too. Even if the buyer makes timely payments, the seller could abscond with the money to Jamaica, conveniently forgetting to pay the lender. No government “bailout” addresses trips to Jamaica, so the seller’s existing lender could foreclose on the new buyer’s property.

To protect against that risk, the prospective buyer in a carry-back deal should make sure the seller’s commercial loan is paid as required also. One solution is an escrow: the new buyer pays into an escrow instead of directly to the seller. The escrow agent would first pay the seller’s existing loan payment and then forward any remaining amount to the seller.

In any carry-back deal, the seller faces the risk having to foreclose if the buyer defaults. Like a typical lender, the seller would have to go through the entire foreclosure process. If the buyer retaliates or has simply not maintained the property, the seller may end up repossessing a property in poor condition. Homeowner insurance can provide some protection if the seller is named as an additional insured on the buyer’s policy.

As would any prudent lender, the seller should take necessary precautions and investigate the prospective buyer to determine the risk. This means obtaining consent forms and reviewing tax returns, pay stubs, credit reports, banking accounts, criminal records and so on.

An alternative to the carry-back sale is the “lease-purchase” deal: the tenant-buyer occupies and pays rent with an exclusive option to purchase the home at a later date at a stated price. Such deals can work, but there are legal and business risks to recognize, and the landlord-seller must comply with all landlord-tenant laws, such as the Arizona Residential Landlord and Tenant Act.

Creative transaction structuring takes time and money. Normally, buyers pay these costs as “closing costs” in a typical lender-financed sale. Although carry-back sellers could require buyers to pay these costs, a buyer in dire straights likely has only enough money for the down payment. The costs could thus be “rolled in” to the total loan amount.

Remember: Most agents, brokers and title companies lack the qualifications to properly advise the participants about the issues and risks. Sellers especially should consult an attorney experienced with secured real estate transactions. The attorney can assist with background checks, due diligence, and drafting and recording the documents. The business and legal risks, including the agent’s and broker’s liability, could be enormous if anything goes wrong. Proceed with caution.

© Scott W. Hyder, 2009. Scott Hyder is an attorney in Phoenix. You can reach him at 602-923-7370 or shyder@scotthyderlaw.com or visit his website at www.scotthyderlaw.com

Medicare Mania

January 8, 2009

Doesn’t everybody realize that the Medicare Prescription Drug Program costs more than even the Iraq war right now? And, then consumers are getting “fleeced” because they do not realize what they are buying.

In Maricopa County alone, they have 46+ different Medicare Prescription Drug Plans offered by various insurance companies. Each plan has a diffrerent premium with different options and covering different drugs.  A person can actually get less benefits by paying for a “gold standard” plan than a person who pays pennies for the basic plan without any bells and whistles.  I was a Math major in college, and I never thought I would use algebra again.  But, when I computed the out-of-pocket costs for my elderly relative on a $15/month plan with the dreaded “donut hole” versus an $85/month plan with some “donut hole coverage”, the $15/month plan cost much less out-of-pocket when you considered all premiums and co-payments. 

Some of these companies (like SierraRX) are not even enrolling any new individuals (they are only willing to provide service to existing members that enrolled within the last couple of years). That is because the cost of these drugs are bankrupting our government.  They are also making it too expensive for insurance companies to even want to ”throw their hat in” and help administer this thing.

Wait a minute! Regular insurance companies have been paying for and offering drug benefits for years. They aren’t bankrupt! What is Medicare’s problem?

Good question. What IS Medicare’s problem? See, the pharmaceutical companies (one of the largest and richest lobbys in our country) got our brilliant elected officials in Congress to agree that Medicare could not even “negotiate” cheaper prices with individual drug companies for specific drugs. However, insurance companies have been permitted to negotiate for years. Actually, they had no choice to negotiate with drug companies.  Otherwise, all of our health insurance companies may have gone out of business by the time they went bankrupt paying for Celebrex, Celexa and Celine Dion (oh, sorry, no that is very inappropriate…sorry again).  So, when the retail price of Oxycontin, for example, is $717, most insurance companies pay much less for that based on their individual contracts with the drug companies.

So why didn’t Congress allow Medicare to do the same thing when they passed the Medicare Prescription Drug Program in 2005 (it first went into effect in January, 2006). You know what? I DON’T KNOW!!! Oh, sure, certain people from Congress may try to put on their “I’m smarter than everyone else” hat and come up with some explanation that even a child of 4 would giggle at (forget Barney, Congress is more entertaining than Barney!). IT MAKES NO SENSE!

Well, actually, there is an explanation. Good old fashion politics.

And good old fashion stupidity.  Yes, believe it or not, both Democrats and Republicans can be silly and stupid.  Like Barney, only Congress does it with a straight face.

I am sure Congress is going to have to change this eventually. I mean, these kinds of mistakes are how we have gotten into this economic mess, right?

Do we ever learn?

Cheap Prices May Mean Disaster Anyway

January 6, 2009

Prices were slashed this past holiday season to get consumers back into the stores. I was at Fry’s Electronics two days after Christmas, and the prices were incredibly low. I have been a loyal internet shopper (like Amazon.com) for the past couple of years. Depending on the site, a consumer can get a real deal with cheaper prices, no tax and no shipping fees. In addition, because online shopping sites have less overhead than the big box stores, they can sell products on the cheap.

The Fry’s television department was very packed with people. I asked a sales rep how business was. He was exhausted because he had been working for 10 hours straight. However, he admitted he was concerned because prices this low means much lower sales commissions. Retailers are trying to make up for their dwindling profits due to their dwindling sales by trying to sell more volume at cheaper prices.

My fear is that when the dust settles and retailers like Fry’s examine their Excel spreadsheets and accounting books in a couple of months, their bottom line may still look dismal because profit margins are so slim. This could really hurt publicly traded companies because reported low profit margins means lower stock prices. A retailer’s falling stock price may mean goodbye retailer (Circuit City anyone?).

And there we are, “America’s consumers” who still can’t seem to learn our lesson. Great shopping bargains for high end electronics or other goods may once again result in our eyes becoming bigger than our wallets. Instead of using our spare change to make our mortgage/rent, insurance, and utility payments, we may have just chosen to spend our hard earned money (that may come to a harsher halt during each quarter in 2009) on big screen TVs, golf balls and Liz Claiborne on the cheap.

Great deals? Yes.

Smart allocation of limited financial resources? Probably not.

Corporate greed at its finest?  Absolutely.

12-16-08 Arizona Republic: Understanding risks in carry-backs

December 21, 2008
  

by Scott Hyder – Dec. 19, 2008 05:55 PM
The Arizona Republic

I have this client who has been trying to sell his home for more than a year, and he walked into my office the other day with a huge smile.

Although unable to get a loan, a prospective buyer had proposed to do a “carry-back” sale. My client would accept a down payment and the buyer would make monthly payments to him over the next seven years at 8 percent interest. At the end of the seven years, the buyer would pay the remaining amount due in a balloon payment.

My client would make 8 percent interest, and he could get the house back if the buyer stopped making payments, a worst-case scenario.

Sounds great, right?

Maybe. When I asked whether his home was free and clear, my client’s grin started to fade, confirming he still owed $250,000. When I reminded him that he risked foreclosure if any default occurred under the original loan, no more grin.

This wonderful deal had just become much more complicated. It actually was not a bad idea and may work under certain circumstances so long as a seller understands the risks. One creative way to sell a home is to use seller “carry-back” financing. As long as the seller can accept the business terms and risks associated with a carry-back, this type of deal could be appealing. In a typical carry-back, the seller agrees to accept a down payment in exchange for the buyer making monthly payments over a period of time at an agreed-upo interest rate. The seller will usually require a final balloon payment at some later date. If payments stop or the buyer otherwise defaults, the seller can foreclose and take back possession.

However, this structure can get complicated. If a seller has loans attached to the home, the seller is responsible to make payments and comply with all loan terms, regardless of who has title of the home. The seller ultimately could face foreclosure for any breach of any loan terms.

Furthermore, most lenders have a “due on sale” requirement that may prohibit or restrict transfer of the home while a loan is still in place (obtaining the lender’s consent may be a solution to this restriction).

If a seller has an existing loan, an intelligent buyer will want to make sure that the lender will get paid as required under the existing loan terms. Even if the buyer makes timely payments, the seller could take the money and jet to Jamaica.

One solution would be to require an escrow agent to make the monthly payments. Instead of making payments directly to the seller, the buyer could pay the escrow agent, who in turn would pay the lender and forward any remaining amounts to the seller. Other scenarios may be possible.

The seller should take all the precautions that a lender takes when deciding whether a prospective buyer is a good risk. This means reviewing tax returns, pay stubs, credit reports, banking accounts, criminal records and so on.

Another idea may be a “lease-purchase” deal by structuring the transaction as a lease with a buyer’s right to purchase the home at a later date. This could work, but the risks need to be understood, such as the seller needing to comply with all laws applicable to landlords, such as the Arizona Residential Landlord and Tenant Act.

All of this takes time and money. Normally, buyers pay these costs as “closing costs” in a typical lender-financed sale. Sellers could require the buyer to pay or reimburse these costs.

But don’t hold your breath. A buyer in dire straits is most likely using every cent to pay the down payment and probably has little left over.

The most important thing to remember is this: Most agents, brokers and title companies are not sufficiently qualified to properly advise the participants regarding all risks and issues.

An attorney experienced with secured real estate transactions should be consulted, especially if you are a seller. The business and legal risks, including an agent’s and broker’s liability, could be enormous if anything goes wrong.

Proceed with caution.

Real estate and business attorney Scott Hyder practices in Phoenix. His Web site is www.scotthyderlaw.com.

 
You can read the article on the Arizona Republic’s website at: 

http://www.azcentral.com/realestate/articles/2008/12/19/20081219biz-re-hyder1220-ON.html

Understand risks in carry-backs


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