Real Estate Investing and the "Trust Me" Guy

Several months ago I was "sort of" stuck with a property I really wanted to wholesale to another.  I advertised on Craigslist and other sites, hoping to pass the rehab to another with absolutely NO LUCK!  I got the property at a pretty good price, the comps were pretty solid, yet I had no takers.

Then one day I got a call from a man that claimed he loved to invest in real estate in that area.  He had a big business concentrating on getting end buyers qualified and into homes in that area.  He claimed to be well connected in the area and could help me get this property rehabbed and sold to one if his clients.

The first indication that something wasn't right was that he told me he spent $15,000 a month in advertising.  This may be true, but it seemed like a lot to spend when HE WAS THE ONE CALLING ME.

We continued to discuss the property, the opportunities and what could be done.  He claimed to be very well connected and would give me a turn-key solution to financing and to contractors.  He provided a quote that assured I would get $40k more than the solid comps I already verified, as he already had the buyers with good credit and lenders already in place.  He had a contractor lined up that would be within my budget, and his hard money guy was ready to cash me out of that property.

All I had to do was give him  $6,000 and everything would be handled for me.

I usually go line by line on quotes given to me.  When I went over the quotes with him, he started to get angry.  Several times in the conversation I told him I was trying to get clarification on the expenses and not to get upset.

The second indication - anger when negotiating.  This is a commonly used sales tactic to intimidate people into purchasing a product or service.

I have to admit is was very tempting to go through him and have him solve all my rehabbing issues...however I was concerned about him wanting $6,000 up front with no back-end guarantee.  I questioned a $3k now, $3k later, but it wouldn't work for him.

The third indication - when you feel some sense of relief that someone else will solve all your problems.

Needless to say, I slapped myself and realized that he couldn't answer questions like: "What happens if the contractor finds more problems with the house that shows in this quote?"  And "What if your hard money contact doesn't fit into my budget?"

So I decided to pass.  After I rehabbed the property on my own, I approached him again, since he said he had tons of qualified buyers just to let him know the property was listing soon.  He then claimed that area was saturated with properties and he felt compelled to honor those that stuck with him from the beginning.

I can understand that position, but he originally promised a sales price of $40k more than the solid comps.  When I reminded him of this, he became insulted and refused to discuss anything more with me.

The bottom line:  When you feel some relief during the negotiation process...question yourself.