What if Someone Screws you out of a Real Estate Deal?

I asked this question in a very active real estate oriented Facebook Group and it got some significant and emotional attention!

The answer ranged from “let it go”, “move-on”, etc. to a very emotional response from someone that just got screwed out of $350,000.  In real estate, we often have to trust people to do the right thing.  Those that don’t do the right thing gives the rest of us a bad name.  But everyone has their threshold.  

For this man, $350,000 was not something he was going to let slide, and I don’t blame him.  But where do you draw the line?  What is your threshold?

Whether to go through the judicial system for such a violation seems to be extremely expensive to me.  For example, I’m all about “Rehabbing Remotely”.  I do deals all over the country, whether wholesale or rehab, and I utilize the internet for communications, deal making, project management and more.  So if I have someone in Nevada offers me money to find him a buyer that happens to be in California for a house that is in Illinois, and I deliver that buyer, and then he doesn't pay me, what is my recourse?  The answer, not too much.

In any law-suit, the first question is the legal jurisdiction.  The courts are still struggling with the issue of interstate contracts, and there is a lot of money spent in the courts time alone, let alone attorney fees, just to establish a proper jurisdiction to hear a case.  I am not an attorney and don’t have the answer to this question, but if I got screwed out of $10,000, well, I would probably ban this person from any benefits of knowing me, refuse to do business with him in the future, and warn my friends that this incident happened.  Yes, my biggest recourse against someone that screws me is my ability to share my experiences from a position of integrity, because they don’t live up to their promises in my experience and therefore in my opinion.

[Just a side note - there was a time I watched people suffer due to a well known national (who thinks he's the best in the world) guru's lack of follow-through of their promises (I didn't suffer), and I stood up for those people and was immediately bombarded by attorney calls intimidating me to be quiet using terms  like "business disparagement", "unfair competition", and "tortuous interference".  It wasn't really my battle, so I became quiet as they asked, so just to warn people you can't be going off saying things about something that happened to somebody else, even if was true, and even if it was your opinion.  So that brings me to, can I really tell people that person xyz didn't fulfill their end of our agreement in this social media world?  Would that fall in the lines of "business disparagement", even if it was true, and I was hurt by it? Or is it a warning for future victims?  This is a question often asked by those victimized by con-artists.]

So then, if legal jurisdiction is decided (some tens of thousands of dollars later), then the court has to decide which state’s law to adapt to the trying of the case.  

I know this sounds confusing, but if I do business in Illinois, and my counterpart does business in Illinois, even though our companies may both be Nevada corporations, the question of which law applies to govern the case?  This is significant, as the Nevada laws are very protective of corporate representatives, where often times fraud has to be proven in order to penalize in a civil matter such as this.

Which brings me to the question, why do we even bother with paper contracts in situations like wholesale fees?  These contracts will never see the light of day in a courtroom. Anyone seeking judicial remedies will have to reserve at least $50,000 to $100,000 just to be heard in court.  But there is one very good reason in our business, and it’s simple: It becomes a directive to third party that distributes funds.  There is no way someone can get screwed out of a deal where an independent third party is around to administer the transaction.

So get your contracts in writing, not for the eventual courtroom, but to submit to an independent and disinterested third party prior to closing a deal.  Avoid situations where a third party isn't present, or if there is some credible knowledge of a person’s previous deal-making habits.

What would you do?