THE WIZARDS OF REAL ESTATE

A popular myth among new real estate investors and operators is the concept of being a principal in a sale contract simply by signing as a buyer. Let's first see where this folklore started and why there is a flaw in popular assumptions.

Here comes the elixir salesman, a magical potion that turns any metal into gold. Elixirs were compounds or liquids that were mixed by Medieval Wizards that were claimed to give the user unusual powers to cure any illness or accomplish miraculous things such as turning lead into gold. 

The wizardry of deceit is very much with us today, especially in real estate. Before any con artist can launch their ploy to deceive anyone, they must gain the victim's trust.

How does the real estate wizard of today gain the trust of their believers? It's really simple psychology, they first have to sell what they have based on the desire of their mark to overcome some want or need that they have not been able to obtain on their own. 

With the real estate wizard, it's the promise of wealth and success, pretty simple as everyone desires more money and financial security. That is a pretty easy sell.

What is this potion worth that will make me wealthy and successful, the wizard of real estate now has to convince the mark that the method works and give some explanation of why it works, adding to that sales pitch they remind others that using their method can be used by anyone and it's easily accomplished.

The basis of the explanation of why it works must be believable. The wizard also knows that most of the people in the crowd lack knowledge and that they can deceive easily with half truths or misinformation that give logical assumptions as to why their approach works.

The basis claimed by these wizards is often a misrepresentation of law, legal matters are complicated and only the more sophisticated investor may be able to spot twisted logic based in legal concepts.

One popular potion sold by wizards is based on the misconception of what a principal is in a sale contract. It sounds logical to say that if you sign a sale contract as a buyer, you have an equitable interest in the property. Well, this is true, the misleading part is that the sale contract must meet legal standards to be valid. If the contract isn't valid, you have nothing!

But, by this time, the wizard has set their spell of hope and desire to obtain wealth effortlessly. 

The reality is, what you hold as a sale contract is totally dismissed if the legal requirements of the contract are not met.

At the very foundation of contract law is the intent of the parties to the contract. A buyer must have the intent to buy under the written conditions agreed to. While you may claim to have the intent to buy, but if your past actions of never buying are shown your claim will fall on deaf ears. If you do not have the intent to buy, you are not a principal to that contract.

Another hurdle that must be present with a sale contract, you must have the ability to buy, the ability to perform under the stated conditions of that contract. If your contract includes seller financing terms then you may be seen as having an ability to buy. However, if you have no money, no ability to obtain financing, you cannot prove that you have the intent to buy. If you don't have the ability to buy, you are not a principal. 

Another ingredient to the wizard's potion is inventing loopholes for a buyer to evade customary responsibilities of a sale contract. If you can easily evade the contract, you're not a principal to a valid contract. A bilateral contract requires the parties to have an obligation to perform, if the obligations of one party are not enforceable you have no contract. No enforceable contract, no principal relationship. 

Some wizards have even devised contracts, stating they are sale contracts when they are not, they may be a contract but they are not sale contracts. Saying that you have no intent to buy, but to find another buyer isn't a sale contract, it is an agreement to ct as an agent. 

Principals act on their own behalf to do things. Agents act on behalf of others, they act to benefit others and by doing so earn a fee. This is more to Laws of Agency than to specific real estate laws, but real estate laws certainly can apply when there is an agency established specifically or by implication. 

So, the wizards sold their prey on the idea that they have rights to do something as a principal under a contract. The issue is, you are not a principal unless you meet the requirements of being a principal.

Learn real estate and stay away from the wizards selling dream potions. :)