Wholesaling Part Two: The Grouchy Real Estate Investor

If you don't know anything about real estate, the whole venture feels impossible and overwhelming, a sea of single-family homes, duplexes, quads, and real estate gurus trying to get you to buy their thousand-dollar program. Was it even for real? I wondered.  I read a million stories on websites and real estate books, but as far as seeing real investors doing their thing -- I wasn't coming across anyone. I signed up for a real estate investors meeting, but that was still a month away. What was a novice supposed to do in the meantime?  

I opened the local paper and looked up Public Notices. I found Public Notices online, too, which was even better than buying the paper because it was free and fast. Ordinarily, I would just gloss over information about who was being summoned or scan past a Notice of Sale Supreme Court, but this time I took some time to read each notice. After about fifteen minutes, I realized that houses were being auctioned nearly every day at the courthouse. Who knew?

Now, at this point in the game, I have no desire to purchase a foreclosure. While houses can be bought for far below market value, you do need to have a chunk of cash to begin with. Besides, the rules and risks involved in buying foreclosures are too overwhelming for someone just breaking into the game. Still, I thought, my goal for now was to figure out where the investors were hanging out, and if I could actually meet with a real live one.  Did they even exist or were they like some rare orchid?  I vowed to find out. 

I live in a small city in upstate New York, and I happen to live walking distance to the courthouse. I googled the address of the house that was to be auctioned one day last week, and noticed that the house was in a nice neighborhood of an attractive neighboring town. Why would such a nice house have gone into foreclosure? 

I grabbed a notebook and walked to the courthouse. Two guards asked me to put my things in a basket on a conveyer belt and through the x-ray machine, and I was guided through the metal detector. 

"Is there an auction here?" I asked, feeling a little awkward, as if they could tell that I was trying to take a house away from some nice little old lady.  

"It's right over there," one of the guards said, pointing to next room.  I looked over, but all I saw was a few benches in front of an elevator.  But I walked that way anyway, and sat down on a bench facing the elevator.  I figured I'd sit there for a few minutes and try to get myself together, maybe ask someone else where the actual auction would be.  A real auction, where a judge sat with a gavel and people held up little sticks with signs on them with huge numbers, like at Sotheby's. 

But nothing like that happened. A guy in a suit wandered in and sat down.  Then an older woman sat next to me, looking forlorn.  Soon after, a guy in a pair of shorts sat next to the guy in the suit, and a woman in a business suit sat next to him.  The guy in the shorts looked like he was in a terrible mood. 

I said to the forlorn lady next to me, "Are you here for the auction?" 

"It's my house," she said, looking over at me.  "My house is being auctioned."  

"Here?" I said.  "Right here in this waiting room by the elevator?" 

The guy in the suit looked over at me and nodded.  He looked bored.  He returned to his papers.  

The lady sitting next to me looked about seventy. She was small, with delicate hands and sad eyes.  

"Are you one of the buyers?" she asked me.  "Are you one of the people here to take my house?" she asked.  

I panicked.  

"Of course not!" I replied.  "I'm -- I'm a reporter with the Chronicle," I stammered.  "I'm writing a story about the number of…of citizens forced to give up their homes in a down economy," I said, quickly, looking over at the business lady, the guy in the suit, and the other gentleman in shorts.  I felt like a fool. 

"Oh," the lady said.  

"What happened?" I asked her, leaning in and lowering my voice. I figured I may as well try and look the part.   

"I don't want to talk about it," she said.  "It's too upsetting. I'll get all worked up."  

At that moment, the guy in the suit stood up.  He started shuffling some papers around. The man in the shorts looked up from a folder, and the lady took out a pen. 

I wish I could repeat what the suited guy said, but it was all just a bunch of legal stuff related to an address, the address of the lady who was sitting next to me. The guy in the suit read from the paper for about ten full minutes, and then the bidding began.  The lady in the suit said something about "ten dollars," the man in the shorts looked at his folder, and then it was all over.  

Everyone got up, including the woman who had just lost her house for ten dollars.  "Can someone please explain to me what I am supposed to do now?" she said, looking confused.  "Do I go back home or what?" 

The guy in the suit went over to the lady who had lost her house and started talking to her about getting an attorney, and the man in the shorts was making for the door.  For some reason, I followed him. 

"Excuse me," I said.  The guy was walking pretty quickly, and I had to practically run to stay near him as he exited the courthouse and walked across the parking lot.  

"I'm sorry to bother you," I said.  "Are you an attorney?" 

"I'm an investor," he said.  He looked at me for a moment, and then turned away and kept walking.  

"I want to be an investor," I said, hurrying to catch up to him.  

"I thought you were a reporter," he said.  He took out a toothpick out of his back pocket and started chewing on it. He grinned, but not in a nice way. 

"I lied," I said, looking down at my toes.  "I didn't want that poor old lady to think I was trying to take her house."  

The guy stopped walking. "You want to be an investor," he repeated.  He chewed on his toothpick and looked at his watch.  "Look," he said, glancing over my head and into the distance, maybe at his car.  "I don't have time to talk, and I really don't think anyone should get into this business . It's risky, and you could get yourself into a hole in five seconds that will take you the rest of your life to get out of." 

I nodded.  

"But I'll give you three pieces of advice," he went on.  "First, get yourself a good lawyer.  A really good real estate lawyer who will go over everything with you.  My second piece of advice is: if you see a house in foreclosure, whatever it looks like on the outside, that's what it's going to look like on the inside. Yard trashed? The inside will likely be a pit.  Outside look nice?  Manicured lawn?  Neat foundation planting and original fifties doors and windows? Probably the inside has stuff like that, too."  The grumpy investor moved the toothpick to the other side of his mouth and started to walk off.  "Good luck," he said.  

"Wait!" I called after him.  "What about the third thing?" 

"Don't become a real estate investor," he called, from over his shoulder.  "Don't do it."  

Then he got into his car and drove away in a whirl of dust.  

I stood there like an idiot, coughing in the dust.  The guy had been rude, it's true, but he had offered some advice that made sense, too.  Get a lawyer.  Trust the appearance of a house.  

Okay, maybe the third piece of advice not to become an investor wasn't what I was looking for.  But the rest felt like a good start.  And I had met my first actual real estate investor! Just by walking down to the court house! 

I went back home and returned to the Public Notices.  If I had met someone interesting (if grumpy) at the courthouse today, then who would I meet the next day?  Or the next?  

I went back the very next day and met another interesting person in the very same waiting area by the benches and the elevator. This time it was a woman, and she told me something even more valuable than the grumpy real estate investor.  Stay tuned!  And let me know what you think of my story in the comments below.  I love comments!