In the last year the media has reported heavily on the “real estate bubble” theory, as well as the surge in foreclosures. But foreclosures aren’t the only things that are up. Have you noticed the number of new real estate gurus popping up?
Many of these gurus are simply very good sales people, who know how to push your buttons to extract a tremendous amount of money out of you. But there are other gurus who can actually cause serious harm to you β by teaching you “secret” ways to invest that are not only unethical, but oftentimes illegal (both civilly and criminally).
If you’ve attended one of these super-conferences or seminars, you know the drill:
1. Join a group of a few hundred (or thousand) of your closest friends.
2. Listen to the motivational speakers pump you up with talk of fast, easy, money.
3. Let them tease you with their talk of “secrets” that you must have to succeed.
4. Run to the back of the room with your credit card burning a hole in your pocket.
5. Leave the event excited, with a bunch of books and tapes.
6. Go home, complete the course and have no idea where to start.
7. Call your guru with questions, and be up-sold the next super-conference.
8. Go back to (1-6) and do it again, and again, and again.
9. Get fed up and call your guru demanding a refund.
10. Do a “google search” to see if anyone else has had the same problem.
11. Find your guru listed at Foreclosures.com “Avoid forum” and post your story.
12. Read Foreclosures.com free articles and stay up all night reading in amazement.
Sound familiar? I’m sorry to say, this is how many of our clients find us. This has to stop.
I am glad we have our “Avoid Forums” so clients can post their bad experiences for the world to see. But now I want to do more. That is why one of my New Years Resolutions is to write two books this year:
* The Foreclosures.com Guide to Investing:
Making Huge Profits Investing in Pre-Foreclosures β Without Selling Your Soul
(Wiley, Spring 2007)
* The Foreclosures.com Guide to Investing:
Beating the Pros at Their Own Game β Secrets the Insiders Wish You Didn’t Know
(Wiley, Fall 2007)
My goal for my books is threefold:
1. Catch new investors before they waste a lot of hard earned time and money on real estate “secrets” that simply don’t work.
2. Make sure they learn the right way to invest in foreclosures, by doing no harm and breaking no laws, so they can sleep at night.
3. Protect the countless owners in default from being preyed upon by the many unconscionable scam artists.
Wondering What those “Secrets” Are That Will Make You an Instant Millionaire?
We began reporting in July 2005 in our “Foreclosure Scams Spread Across the Nation” report. Then followed it up in our December 2005 article “Dirty Deeds: Abuses and Fraudulent Practices in the Home Equity Market”. But the list has grown even more.
Here is just a sample of what you can pay top dollar to learn:
#1 β The “Sale-Leaseback” Scheme
This is an “easy deal”. You get the owner to deed you the house for little or no money, with the promise that he can stay in his home and then buy it back in one year. The owner in default gets to keep his house and his embarrassing secret to himself. Sound great? There’s only one problem. His new rent is higher than his old mortgage, which he couldn’t afford to make. That’s not a problem for the investor… because when the owner misses his first months rent, the investor simply evicts him and then sells the house. Easy money, isn’t it great? Not only is it unethical, but it is also illegal in just about every state. Make sure you read “Can Foreclosure Investing be Criminal?”
#2 β The “Predatory Lender” Scheme
Next in line we have the dirty lenders. They love to offer loans to folks who they know have no ability to make a single payment. As long as they have equity, they will strip them dry in exuberant loan fees, usurious interest rates and unconscionable prepayment penalties. Although new laws have been passed to prohibit Predatory Lending (see below) practices, it is not hard to find someone willing to loan an owner in default money. They can’t resist all the money up front, and then they get to own the house and sell it for a big profit. They make money coming and going. They make me sick.
Make sure you read “Progress in the Fight Against Predatory Lending” and “Prohibit Predatory Lending”.
#3 β The “I Stop Foreclosure” (or “Loss Mitigation”) Scheme
Here you get to feel good about what you do and collect a fee at the same time. You offer to help people keep their home for a fee you collect up front. You call their lenders on their behalf and magically get the lenders to do a “loan modification” or “workout plan” so the owner can keep their home. You get paid regardless if you actually get the lender to do the workout with the owner or not. The sad part is, most owners can do this work themselves, but are afraid to call their lenders. Most delinquent borrowers see them as “bill collectors who don’t care” and simply don’t pick up the phone and tell them their story.
Freddie Mac surveyed delinquent borrowers and found that nearly 66% were unaware of their workout options (Read Here). Freddie Mac also has a great article for owners on how to stop foreclosure HERE.
(FYI- If you are in California, CC2945 requires anyone who collects a fee for services from a defaulted owner, to have a Real Estate License and a Surety Bond equal to twice the value of the house. I have yet to meet anyone who has that Surety Bond.
Make sure you read “Prohibitions of the Foreclosure Consultants Law”.
#4 β The “List and Sell or I’ll Buy Your House” Scheme
This one great idea is being sold to real estate agents and brokers, looking for another income stream. You go for a listing presentation to an owner in default, whose auction is 60 days away. You sign a listing agreement and offer them a “guarantee to sell your house, or I’ll buy it”. Sounds great for the owner? Now here’s the kicker. You don’t sell the house and you offer to buy it for substantially less than the list price. Hmm.
Did the agent REALLY try to sell your house? Or did the agent price the house high, knowing it wouldn’t sell, so they can come in and buy it? What was their interest – In getting the house sold, or buying it? It is impossible to prove good faith if you were the agent. What would a jury think? Now you know why I tell my agent clients to wear only one hat when they meet with the owner. You can EITHER help them list and sell their house OR you can refer them to another agent to list and sell, so if they need an investor, you can be there, with no conflict of interest issues to worry about.
Make sure you read “Issues With Having a Real Estate License”.
#5 β The “Bait and Switch Bully” Scheme
This one is all about timing. You show up at the end of the foreclosure process, promising them top dollar to buy their house. It sounds too good to be true, but they fall for it. You drag your escrow on until the very last minute before the auction. Then you hit them with the news. Your original offer was too high; you must pay a lot less for the house. You’ve got him cornered with no where to go. The owner has to accept your offer, or lose the house to auction. You add to that some fear statements like “and the Sheriff is going to be here in just a few days to throw you out”. Of course, that is not true. But you know they don’t know the foreclosure laws. Easy money strikes again.
#6 β The “Hide it in the Contract” Scheme
This one is similar to the “Bait and Switch” Scheme, but instead of waiting until the end to renegotiate your deal, you simply hide your true intentions in your contract. Your contract is big and fat and the owner in default has no idea what he is signing. Nor does he have the resources to go to an attorney for legal advice. At close of escrow he realized all those “repair deductions” you had built into the contract ended up being way more than you had expected. But now you have no time to verify or negotiate these line items. You are stuck, having to close or lose your house to the auction. What sounded like a great offer, ended up giving the owner practically nothing for their equity. All you need is the “secret contracts” for this one.
Now What? We Can Make a Difference.
It may seem overwhelming at first, but what I’ve found is that whenever there is a hint of “easy money” the bad guys will show up in droves. So now you know why I speak of “White Knight Foreclosure Investing”. We are more than investors. We are White Knights here to STOP the bad guys from getting to these poor owners in default. They need us β whether we buy their house or not. And we can make a difference, by turning these scammers into the District Attorneys office.
Make sure you read “Dirty Deeds: Putting these Bandits Out of Business”.
Now go call a few hundred owners in default and see how you can help them first. You’ll be surprised at how great it feels.
Happy New Year!
Alexis 
