Last week I wrote an article about “Lucky”, the wanna-be real estate tycoon (article). The article was meant to be a tongue-in-cheek story, yet many people took it seriously. The fictional character “Lucky” was a composite of many people that I have met over the years. He was portrayed as someone who wanted to get rich quick, yet was too lazy to work for it. He kept looking for short cuts and was certain that getting rich in real estate was easy if only he could get someone to reveal the secret formula.

There are many companies out there that prey on these people. They offer a free seminar that is nothing more than a sales pitch. They look to sell books, tapes, sales courses, boot camps and mentoring programs. They hold themselves out to be experts in the field of real estate investing. What they really are is experts in marketing. When someone buys a program the company is generally looking to upsell them, or get them to buy additional programs.

While there are a lot of trainers who have something valuable to offer, many of these “gurus” have little or no investment experience. The company may target those who are looking for easy money, but regular people get caught as well. People who are legitimately trying to learn something can easily get burned. My character, Lucky, was shown as someone who couldn’t make it as an investor yet claimed to be an expert who could teach others.

The Not So “Lucky” Ones

Like many works of fiction, the story of Lucky does have a factual basis. I know of a couple who got burned by a “Lucky” type guru. They were hard working people who wanted to invest for their future. They had done well on their own home and wanted to try their hand at investing in real estate. The market was flying but they didn’t know where to begin. They wound up going to a “free” seminar where they ended up enrolling in a boot camp program. While they did learn a lot, they were still uncertain. At the boot camp they were convinced to sign up for the mentoring program. It was a lot of money but they were assured that they could make it back on one deal.

This couple was looking to invest in the Las Vegas real estate market when it was very close to the peak. Their so-called mentor coached them through the purchase of a house at a price that wasn’t any better than what they could have done on their own. The idea was to use the property as a rental while they waited for the inevitable appreciation. The rent didn’t come close to paying the mortgage let alone the other costs involved. They were almost $500 in the red every month. They were told not to worry because they would make all of this back and more.

The Sad End

Unfortunately the ending to this story is all too common. The real estate market collapsed and the house dropped to a price that was significantly less than the mortgage balance. They couldn’t keep up with the payments and let the property go into foreclosure. They lost the almost $20,000 for the training and mentoring program as well as the down payment on the house and two years of negative cash flow. The total loss was almost $100,000. To make it worse, a lot of the money had come from a home equity loan on their personal residence.

It turned out that they had no legal recourse because there was no fraud involved. They just followed bad advice from someone that was supposed to be an expert. They were not looking to get rich quick, they just wanted a better life. They were well aware that they didn’t have the proper knowledge and tried to acquire it. Unfortunately they just trusted the wrong person.

Do Your Homework

Before engaging the services of a mentor or enrolling in some course or boot camp, do your homework. Has the person you are looking to learn from actually been a successful investor? Have you checked references before turning over your hard-earned cash? Ask the hard questions and verify the answers. Be careful because “Lucky” is out there.

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Tags: gurus, Learn Real Estate, real estate, Real Estate Fraud, real estate guru, real estate investing, real-estate-scam, training

First came the subprime mortgage crisis; now comes the cases of alleged fraud.

An amazing story Tuesday out of Southern California where the state attorney general has busted an alleged mortgage scam that may have bilked thousands of SOCAL homeowners out of millions of dollars.

And, California Attorney General Jerry Brown told me, in some cases, signatures of homeowners were actually forged on the mortgage documents!

How it worked

According to the attorney general’s office, at least six companies operated by one family enagaged in “predatory lending” by pushing the alleged victims into “illegal and unconscionable loans.”

Brown blames this scheme on the worsening mortgage crisis, which, he says, is creating a number of “fly-by-night” operations.

Brown told me he has never seen anything like this–and the man was even once governor of California, so he’s been around a bit.

The alleged victims were often targeted because they lacked command of English. They were promised one fixed rate on a mortagage but, later in the day, they would be visited by a representative of one of the companies who often had forms with incomplete information.

They would promise that, once signed, the proper numbers would be inserted back at the office, Brown says. If the homeowner declined, says Brown, in some cases their signatures were forged, often with improper spellings of their names.

Many lost homes

Brown says the scheme robbed many homeowners of their homes because they could not afford the paymens.

Growing California Mortgage Scandal?

Brown thinks so. His office says that in the coming weeks, “Brown intends to bring additional legal actions, both civil and criminal, against other mortgage lenders and foreclosure consultants who are taking advantage of homeowners across California.”

Let us know if you have heard of such practices in YOUR state or community.

Tags: california attorney general, edmund brown, jerry brown, mortgage scam, mortgage-fraud, real estate, real-estate-scam

It’s become commonplace to see advertisements of all type promoting some new foreclosure rescue company that is the savior of those in distress and about to lose their home. These companies appear to have all the answers to the distressed homeowners mortgage issues, and for absolutely free, they will save you and get those nasty banks off your back!

Last week I had the great displeasure of learning a bit about the inner workings of such operations, and believe me, they’re not helping anyone but themselves. A client of mine noticed a short sale listing in his neighborhood boasting a price of 130k under the homes tax assessed value, which is pretty incredible. I found it hard to believe the lender had approved that price, since they’re almost certain to do better than that at auction. The home had sold for over one million three years ago and is on the water; it carried 1.3 million in debt, and was listed at just 878k.

My client was very interested in making an offer on this home, so I contacted the agent, and then the foreclosure rescue company (as directed by the agent) that was apparently mediating between the lender and homeowner. I’ve been involved in a few short sales and I’m quite familiar with the process, so I asked the foreclosure co. when the offers would be presented to the lender; I was told, they would not.

He (the company owner) was bold enough to tell me that he would hold all of the offers, and then submit his own offer to the bank for just 500k. Now all of this was being done without the seller’s knowledge, or the listing agents. The foreclosure company was attempting to acquire the property for ½ price, then “accept” an offer from one of the sellers for over 300k more. The idea was apparently to manipulate the escrow company into some type of a dual close with two sets of docs (the lender only seeing one set), which would never happen at an honest escrow company.

Now some of you may even feel this is an ingenious way to make a fortune, and I have to disagree; there are several things that concern me here (aside from the overall dishonesty of it all). Mainly that the seller is being mislead, and believes the offer she accepted and signed is to be presented to the lender, and the listing agent (after I informed him of what is happening) is turning a blind eye to whats going on, and believes that as long as he submits the offer she accepted to escrow, his job is complete. Also, the agents that are spending their time and money showing this property and writing these offers are doing so in the belief their offers will be submitted to the bank, which is exactly what the listing says. That is a lie.

They also lead people to believe the lender has approved the listing price, when in fact they have not (there are of course too many MLS rule violations to even get into for the agents participating in this process).

Then there are the major issues. The seller will be reported to the IRS for capital gains tax purposes by the lender; if you borrow one million, and the lender accepts payment of just 500k, then in the eyes of Uncle Sam, you made 500k on the deal. So that seller may end up on the tax hook for the money that went into the pocket of the “rescue” company. Also, the lender may still pursue the sellers for the money owed, and attach liens to other properties or assets they may have.

Many company’s do make legitimate profit buying homes from lenders at lowball prices, and selling them for profit. Theres not a thing in the world wrong with that. The types of company’s I’ve just described are attempting to play the middle, and use no money of their own. They are creating additional problems for people already in distress and that is wrong.

So if you are involved in this practice, I beg of you to stop preying on people and destroying lives and making the mortgage crises worse (not that you will listen). The lenders are already going broke, and stealing a little more from them isn’t being a business genius, it’s being a thief. Until people stop viewing the theft of money from banks as a victim-less crime, our economy will continue to suffer.

If you’re a seller, in need of a short sale, contact the bank directly. These sales need to have their approval to move forward or you will never close. You can, if you choose, have your agent deal directly with the lender (you must write a letter of authorization) and submit all offers to them.

The lender will pre-approve a listing price, as well as a commission for the agents involved (it’s typically lower than average commissions). Never go to someone and think you can hand them your problem and they will fix it for free, it simply doesn’t happen that way. If you want it done right, you must do it yourself. If not, then your troubles have only just begun. Don’t fall for the farce of foreclosure rescue.

Tags: foreclosure, foreclosure rescue, foreclosure rescue scam, foreclosure scam, real estate, real-estate-scam

Hello Everyone. We wanted to give you an update on a few exciting new things going on here at BiggerPockets®!

New Website Features

1. Meet the Investor
   We’ve begun to interview investors in an attempt to help others learn more about what it takes to be successful. Have a look. Many of our blog readers are already familiar with this feature, but we are looking for more people to interview . . . it’s a great chance to get some free publicity for you and your blog/site!

2. Find County Records
   We’ve assembled a directory of county records offices for every county and parish in the country with a website. Use the directory to locate your local assessor or recorder’s office or to find property records online.

3. Join our National Investor’s Database
   We are building a national real estate investor’s list. The purpose behind the list is to be able to offer exclusive real estate deals to our members that we hear about constantly. Jump on board! It only takes a minute to fill out.

4. Investors Network
   In an attempt at bringing some increased exposure to our members with investor websites and blogs, we’re creating a directory of real estate site. If you’re a wholesaler, rehabber, landlord, or other investor and have a site, let us know and we’ll get you in the directory!

Changes at the Forums

Now With 6,000 Members and Counting!!!
We’ve been adding some new areas to the forums to help organize things a bit. Stop by and check out these new areas:

1. Wholesaling Forum
   Finally! Discuss Wholesaling strategies, learn about different techniques, how to conduct a wholesale deal, making offers, assigning contracts, etc. With some fantastic wholesaling experts on site to help out, this is the place to go for your questions!
   Not sure why we never had one before, but we do now!

2. Ask About a Real Estate Company
   Wondering if a company is a scam or conducting fraud? Heard about a new investment offer?
   Ask about any company doing business in real estate. Discussion topics include: Nouveau Riche, Club Freedom, Pinnacle Development Partners, etc.

3. Home Owner Association (HOA) Issues & Problems Forum
   This area of the site is for the discussion of any questions, issues, or problems that arise with condo or community Home Owner Associations. With little State or Federal governance, these bodies have been a headache for countless investors, realtors, homeowners!

Another small change we recently made on the forums is the addition of birthdays. If you scroll to the bottom of the main forum page, you’ll see members having a birthday (editable on your profile page). Make someone’s day and send them good wishes on their big day!

Ideas & Suggestions for BiggerPockets

We’re always trying to improve the site to better serve you. If you ever have any ideas or suggestions for doing that (no matter how small), please let us know!

We’ve got plenty of other new features coming soon . . . stay tuned!

New Advertising Opportunities

First, I want to thank all of our new sponsors! Our advertisers keep coming back for more . . . a testament to the benefits of sponsoring our site!

We have been testing some new advertising positions around the site and are currently working to fill out ad placements on our forums. You can now sponsor any forum thread category! For as low as $25/month, you can promote your website, company, etc on the forums and focus on your exact target. For more information about this or other advertising opportunities, visit our ad page

Wrap Up

Thanks again to everyone for all of your participation here on BiggerPockets! Our site has really been helpful to so many people and without your participation that wouldn’t be possible. Please keep coming back and share your interest, your knowledge, and your enthusiasm with everyone else!

All my best to everyone and have a great weekend!

Sincerely,

Joshua Reed Dorkin
Founder - BiggerPockets, Inc.

Tags: assessor, bigger pockets, biggerpockets, county-records, HOA, home-owners-association, real estate forums, real estate investing, real estate investing forums, real-estate-scam, recorder, wholesaling

Last week we talked about the emergence of the selfless real estate agent. Today, we’re going to look at a piece of dirt who makes the rest of the agents out there look bad.

A real estate broker in Shakopee, Minnesota was charged with with 15 felony counts of identity theft; in addition, she filed $3 million in fake loans.

According to Freeman, “in one case, she promised to buy a piece of investment property for someone, said ‘Don’t worry. I’ll pay the mortgage and pay the rents and give you your share.’ She collected the rents, didn’t pay the mortgage and didn’t give the person any money.”

This is yet another warning to everyone to be careful out there. There are so many dubious people out there just looking to scam you, that you really need to protect yourselves. With that in mind, anyone considering investing in real estate has got to be sure that they have a real estate attorney handy.

While your lawyer can’t do too much to stop someone from stealing your identity, they can be sure that the deal you’re considering is legit, and serve to protect you by reviewing all of your paperwork. They are your first line of defense!

The part of this whole story that is most astonishing is, because this is what some call a “white collar crime,” she has not been taken into custody. She also still has her real estate license and won’t lose it unless she is convicted.

Looks like another failure of government to step up and do something. Here’s an idea . . . lets temporarily suspend her license . . . no, that would just take too much paperwork . . . we’ll just let her keep serving in a position where she can steal more money and identities.

I’m not sure who I’m more appalled at, the thief, or the authorities who fail to stop her from doing it again.

Tags: fraud, mortgage-fraud, real estate, real estate agent, real-estate-scam