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Written by Mark Hankins
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Dec 10, 2008 at 11:40 AM |
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Before you put your faith in a Real Estate Guru, see how he does business himself.
Recently I attended a meeting of real estate entrepreneurs. The featured speaker was a man who had done ten deals during November and he was in the process of climbing the next rung of the real estate investor ladder to cubby guruhood. I was eager to hear his strategies and tactics. But not so eager after I actually heard them.
He started off talking about his bandit/snipe signs. You know, those flimsy hand-lettered corrugated plastic signs on wire frames you see cluttering the roadside. The ones placed without the landowner’s permission and in violation of local codes? He puts out a lot of those. Strike 1.
The snipe signs advertise a home for rent for $850. And although he did indeed have one, the signs served another purpose for him too. He vetted each caller, regardless of whether the rental home was still available or not, to see if they qualified for a “government program” (FHA, which has been around forever) that would allow them to buy a home for what they had been willing to pay in rent. Then he would refer the qualified prospects to a realtor friend who had agreed to kick back some of his commission. So now we had “bait and switch” and illegally sharing of a commission with a non-licensee. Strikes 2 and 3.
So next he talks about the deal he just did “subject to” the existing mortgage. Nearly all mortgages have “due-on-sale” clauses that require the existing mortgage to be paid off when the property changes hands. Historically many deals were done “subject to” the existing mortgage, leaving the seller on the hook in case the buyer didn’t pay, but today “subject to” deals require that measures be taken to deceive the lender regarding the ownership change in the property. Although the question of whether it is mortgage fraud to do so is fairly debatable, what isn’t debatable is that both the seller and the buyer run significant risks when they do “subject to” deals. Strike 4 for duping a seller, Strike 5 for duping a bank.
What wouldn’t this guy do? He wouldn’t talk to any homeowner who had already had a lis pendens filed. That’s because Florida has just enacted tough new laws that make it a crime to do “mortgage rescue” without a lot of disclosures and cancellation rights being carefully explained to the distressed homeowner.
If you have any questions about a real estate guru, John T. Reed maintains a comprehensive list indicating who is good, and who is selling snake oil.
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