I had an interesting conversation recently that really made me stop and think. A fellow investor told me they avoid buying from homeowners in foreclosure because they feel it’s “taking advantage of people in crisis.” On the other hand, another investor argued that buying distressed properties helps homeowners by giving them a way out when no one else will. Two completely different perspectives. Same situation. Here’s where it gets tricky: • Some sellers are truly relieved to have a fast, clean exit. • Others feel pressured and walk away feeling like they lost. • And investors, depending on their approach, can either build trust or burn bridges. Some sellers are truly relieved to have a fast, clean exit. Others feel pressured and walk away feeling like they lost. And investors, depending on their approach, can either build trust or burn bridges. So, I’m curious how the community views this: • Do you think buying from distressed homeowners is helping or exploiting? • Have you ever walked away from a deal because it didn’t “feel right”? • Where do you personally draw the ethical line? Do you think buying from distressed homeowners is helping or exploiting? Have you ever walked away from a deal because it didn’t “feel right”? Where do you personally draw the ethical line?

I mean if it’s gone to foreclosure, they’ve already lost. The question is do they lose big or lose small. If pride is an issue, they’ll probably choose to lose big unfortunately.

You make a really good point, Dominic. By the time it reaches foreclosure, the major financial hit has already happened—the real decision often comes down to whether they minimize the damage or let it spiral. Pride definitely plays a big role, and unfortunately, I’ve seen homeowners choose to “lose big” rather than confront the situation early. That’s why having open conversations and offering clear, judgment-free guidance as early as possible is so important. Sometimes just knowing there are options can help people avoid the worst-case scenario.

I couldn’t agree more, Dominic. Understanding the psychology behind these decisions is so important. A lot of homeowners facing foreclosure aren’t just making financial choices — they’re navigating stress, fear, and sometimes pride. When you understand what’s driving their actions, it’s easier to approach situations with empathy and find solutions that work for everyone involved.

Are you saying that you know what's better for the sellers than they do???First, your assumption is arrogant, and that they have told you everything, but in reality they have not. They have things going on in their lives you will never know about.You are not their "Daddy", these are adults and for you to disrespect them and treat them as children will not get you a badge of "Look how good I am"In my lawsuit, the attorney for the other side brought that up as a point against me. I was supposedly being nice to the seller so I could "deceive" them. "No good deed goes unpunished"No, you have to treat them as individuals, follow the law (yes it has become a legal issue recently), have mercy but not capitulation, and realize that it wasn't your actions that put them into their situation. They put themselves there, not you.If you can't keep it at an "arms length transaction", avoid buying from distressed homeowners and send it my way.Successfully buying & teaching how to buy distressed properties, legally for 30 years and receiving "thank you's" from the sellers.

This thread is about buying houses from distressed homeowners in foreclosure and particularly your comment was about the foreclosure rescue laws and I bet most the investors on here have no idea what they are. I don’t want those investors thinking that because of foreclosure rescue laws that they cannot help homeowners who are underwater (owe more than the house is worth) and make money. Yes apples and oranges but short sales are an integral and important process the banks follow. and in over 100 short sales over the past 15 years that I have processed/negotiated, ZERO have had the owner sign a note for the shortfall. Also, 90% have been paid $1500-$3000 at closing by the bank.

Really good topic, @David Litt. I think the ethics come down less to the situation itself and more to how the investor handles it. If you’re transparent, give homeowners options, and make sure they understand what they’re signing, then you’re providing value and a fast solution that often keeps them from going through the stress of foreclosure. In that sense, it’s helping. On the flip side, if someone is pushing, lowballing, or preying on the fact that the seller feels desperate, then it definitely crosses into exploitation. That’s where the bad reputation comes from. Personally, I’ve walked away from deals where it was clear the seller didn’t fully grasp the numbers or just needed more time. I’d rather lose one deal than feel like I took advantage of someone in a vulnerable position. For me, the “ethical line” is simple: would I feel comfortable if my own family member were on the other side of this deal? If the answer is no, then I won’t move forward

Is Helping Homeowners in Foreclosure “Ethical” Investing… or Taking Advantage?

Foreclosures

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Is Helping Homeowners in Foreclosure “Ethical” Investing… or Taking Advantage?

David Litt

Investor · Nationwide Foreclosure Specialist · Member since 2018 · 62 posts · 63 votes

I had an interesting conversation recently that really made me stop and think.

A fellow investor told me they avoid buying from homeowners in foreclosure because they feel it’s “taking advantage of people in crisis.” On the other hand, another investor argued that buying distressed properties helps homeowners by giving them a way out when no one else will.

Two completely different perspectives. Same situation.

Here’s where it gets tricky:

Some sellers are truly relieved to have a fast, clean exit.
Others feel pressured and walk away feeling like they lost.
And investors, depending on their approach, can either build trust or burn bridges.

So, I’m curious how the community views this:

Do you think buying from distressed homeowners is helping or exploiting?
Have you ever walked away from a deal because it didn’t “feel right”?
Where do you personally draw the ethical line?

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Dominic Mazzarella
Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes
1y
Quote from @David Litt:
I had an interesting conversation recently that really made me stop and think.

A fellow investor told me they avoid buying from homeowners in foreclosure because they feel it’s “taking advantage of people in crisis.” On the other hand, another investor argued that buying distressed properties helps homeowners by giving them a way out when no one else will.

Two completely different perspectives. Same situation.

Here’s where it gets tricky:

Some sellers are truly relieved to have a fast, clean exit.

Others feel pressured and walk away feeling like they lost.

And investors, depending on their approach, can either build trust or burn bridges.

So, I’m curious how the community views this:

Do you think buying from distressed homeowners is helping or exploiting?

Have you ever walked away from a deal because it didn’t “feel right”?

Where do you personally draw the ethical line?
I mean if it’s gone to foreclosure, they’ve already lost. The question is do they lose big or lose small. If pride is an issue, they’ll probably choose to lose big unfortunately.
5 Reply
David Litt
OP
Investor · Nationwide Foreclosure Specialist · Member since 2018 · 62 posts · 63 votes
1y
You make a really good point, Dominic. By the time it reaches foreclosure, the major financial hit has already happened—the real decision often comes down to whether they minimize the damage or let it spiral. Pride definitely plays a big role, and unfortunately, I’ve seen homeowners choose to “lose big” rather than confront the situation early.

That’s why having open conversations and offering clear, judgment-free guidance as early as possible is so important. Sometimes just knowing there are options can help people avoid the worst-case scenario.
4 Reply
- Dominic Mazzarella
  Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes
  1y
  Quote from @David Litt:
  
  You make a really good point, Dominic. By the time it reaches foreclosure, the major financial hit has already happened—the real decision often comes down to whether they minimize the damage or let it spiral. Pride definitely plays a big role, and unfortunately, I’ve seen homeowners choose to “lose big” rather than confront the situation early.
  
  That’s why having open conversations and offering clear, judgment-free guidance as early as possible is so important. Sometimes just knowing there are options can help people avoid the worst-case scenario.
  
  I couldn't agree more. I think it's helpful to understand the psychology a little bit that goes into folks making these decisions.
  1 Reply
David Litt
OP
Investor · Nationwide Foreclosure Specialist · Member since 2018 · 62 posts · 63 votes
1y
I couldn’t agree more, Dominic. Understanding the psychology behind these decisions is so important. A lot of homeowners facing foreclosure aren’t just making financial choices — they’re navigating stress, fear, and sometimes pride. When you understand what’s driving their actions, it’s easier to approach situations with empathy and find solutions that work for everyone involved.
3 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
1y
Quote from @David Litt:
I had an interesting conversation recently that really made me stop and think.

A fellow investor told me they avoid buying from homeowners in foreclosure because they feel it’s “taking advantage of people in crisis.” On the other hand, another investor argued that buying distressed properties helps homeowners by giving them a way out when no one else will.

Two completely different perspectives. Same situation.

Here’s where it gets tricky:

Some sellers are truly relieved to have a fast, clean exit.

Others feel pressured and walk away feeling like they lost.

And investors, depending on their approach, can either build trust or burn bridges.

So, I’m curious how the community views this:

Do you think buying from distressed homeowners is helping or exploiting?

Have you ever walked away from a deal because it didn’t “feel right”?

Where do you personally draw the ethical line?
Is Hospitals / emergency clinics taking advantage of treating sick people???
2 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
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- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  1y
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  
  In many states now you MUST be a licensed foreclosure consultant. But Chris I could not agree more.. this is just another wholesaling method. I am not being a hypocrite as I had a business prior to the laws changing in OR CA WA with pre foreclosure rescue and I did hundreds of them.. But lets not confuse those that do this with some do gooder agenda this is all about making money full stop. It takes a lot of work and money to track these down and get a chance to sit down and talk to someone in foreclosure.. Who does all that work and expense just for social good. Maybe some non profits but certainly NO ONE on BP does it for those reasons its all about getting a good deal.. Lets be honest here.
  
  Now since I have personally sat with well over 100 homeowners that were in foreclosure to discuss their situations and to acquire their property ( that was the mission after all) Folks get into this jam for all sorts of reasons its just the human condition and a basic issue of many Americans cant control their spending or budget their money. Their are health issues of course and lost jobs.. but there is also the KIDS STOLE the money. 200k forth of cars boats RVs in the driveway with massive payments etc etc. Gambling addictions drugs ..
  
  What I did run into though was some foreclosure rescue person gets there ahead of me and just lies through their teeth to try to get a deal.. I have seen folks deed over a house and not understand what that meant. ( I helped them unwind that one ) Also as noted bad lenders who promise the moon and cant come through and leave the folks NO choice but to file BK to save their equity.. But many times letting it go to sale and collecting the overage is the smart move for them NOT selling to a pre foreclosure buyer. Although that route does have risk as there could be collusion at the court house steps and the property does not get bid up like it would have if the local good ole boys and girls were not colluding to keep the bid very low.. ( ie paying walk off money)..
  
  Yup no offense to anyone but post like this are totally self serving and most folks just dont know the realities of this side of the business I know Chris lives it everyday.. I have decades of experience real world with it with 100s of pre foreclosure transactions done and in the books.
  
  As another stated the financial and credit damage is done going to sale barely moves the needle in that regard so its just BS that there is some credit help happening.. One of the main motivators for folks to stay in their home IE foreclosure rescue lease back is to keep kiddos in their school. Foreclosure rescue lease back is ILLEGAL in many states but of course no one ever mentions that part :)
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  1 Reply
- J CastroBusiness Member
  Lender · Florida · Member since 2025 · 698 posts · 253 votes
  1y
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  For investors, the ethics of helping homeowners in foreclosure depend on the intentions and methods used. When done transparently and with genuine concern for a homeowner's
  welfare, it can be an ethical investment strategy that provides a much-needed solution. However, the same situation can become predatory if the investor's sole focus is on taking advantage of a desperate seller for maximum profit.
  
  - An ethical investor aims to solve the homeowner's problem while still earning a fair return. This can involve helping a family facing a major crisis, potentially saving them from financial ruin and a damaged credit score.
  
  - Unethical investors, sometimes called "rescue artists," exploit a homeowner's vulnerable position. Their actions can leave the homeowner in a worse financial situation than before.
  
  In general, if an investor's actions increase the homeowner's options and control over the situation, it is more likely to be ethical. However, if an investor uses pressure, deception, and complicated paperwork to reduce a homeowner's choices, it is a sign they are being
  taken advantage of.
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- David RandolphPro Member
  Investor · St. Louis Missouri · Member since 2023 · 38 posts · 9 votes
  1y
  Quote from @J Castro:
  
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  For investors, the ethics of helping homeowners in foreclosure depend on the intentions and methods used. When done transparently and with genuine concern for a homeowner's
  welfare, it can be an ethical investment strategy that provides a much-needed solution. However, the same situation can become predatory if the investor's sole focus is on taking advantage of a desperate seller for maximum profit.
  
  - An ethical investor aims to solve the homeowner's problem while still earning a fair return. This can involve helping a family facing a major crisis, potentially saving them from financial ruin and a damaged credit score.
  
  - Unethical investors, sometimes called "rescue artists," exploit a homeowner's vulnerable position. Their actions can leave the homeowner in a worse financial situation than before.
  
  In general, if an investor's actions increase the homeowner's options and control over the situation, it is more likely to be ethical. However, if an investor uses pressure, deception, and complicated paperwork to reduce a homeowner's choices, it is a sign they are being
  taken advantage of.
  J Castro, well said about Actions. It is like a loaded gun, it can used to target practice, it can be used to hunt for food or it can be used to rob people.
  [email protected]636-685-2990
  0 Reply
- David RandolphPro Member
  Investor · St. Louis Missouri · Member since 2023 · 38 posts · 9 votes
  1y
  Quote from @Jay Hinrichs:
  
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  
  In many states now you MUST be a licensed foreclosure consultant. But Chris I could not agree more.. this is just another wholesaling method. I am not being a hypocrite as I had a business prior to the laws changing in OR CA WA with pre foreclosure rescue and I did hundreds of them.. But lets not confuse those that do this with some do gooder agenda this is all about making money full stop. It takes a lot of work and money to track these down and get a chance to sit down and talk to someone in foreclosure.. Who does all that work and expense just for social good. Maybe some non profits but certainly NO ONE on BP does it for those reasons its all about getting a good deal.. Lets be honest here.
  
  Now since I have personally sat with well over 100 homeowners that were in foreclosure to discuss their situations and to acquire their property ( that was the mission after all) Folks get into this jam for all sorts of reasons its just the human condition and a basic issue of many Americans cant control their spending or budget their money. Their are health issues of course and lost jobs.. but there is also the KIDS STOLE the money. 200k forth of cars boats RVs in the driveway with massive payments etc etc. Gambling addictions drugs ..
  
  What I did run into though was some foreclosure rescue person gets there ahead of me and just lies through their teeth to try to get a deal.. I have seen folks deed over a house and not understand what that meant. ( I helped them unwind that one ) Also as noted bad lenders who promise the moon and cant come through and leave the folks NO choice but to file BK to save their equity.. But many times letting it go to sale and collecting the overage is the smart move for them NOT selling to a pre foreclosure buyer. Although that route does have risk as there could be collusion at the court house steps and the property does not get bid up like it would have if the local good ole boys and girls were not colluding to keep the bid very low.. ( ie paying walk off money)..
  
  Yup no offense to anyone but post like this are totally self serving and most folks just dont know the realities of this side of the business I know Chris lives it everyday.. I have decades of experience real world with it with 100s of pre foreclosure transactions done and in the books.
  
  As another stated the financial and credit damage is done going to sale barely moves the needle in that regard so its just BS that there is some credit help happening.. One of the main motivators for folks to stay in their home IE foreclosure rescue lease back is to keep kiddos in their school. Foreclosure rescue lease back is ILLEGAL in many states but of course no one ever mentions that part :)
  Jay, While the states with foreclosure rescue laws are a serious matter, I think many investors fail to step in and help those home owners / borrowers who are underwater and can’t sell the house to pay off the loan. Very few of us are there to help them with all their other options that they don’t know about and certainly don’t understand the detailed short sale process. Yet , for an investor these short sales are some of the most profitable deals you can make.
  [email protected]636-685-2990
  0 Reply
- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  1y
  Quote from @David Randolph:
  
  Quote from @Jay Hinrichs:
  
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  
  In many states now you MUST be a licensed foreclosure consultant. But Chris I could not agree more.. this is just another wholesaling method. I am not being a hypocrite as I had a business prior to the laws changing in OR CA WA with pre foreclosure rescue and I did hundreds of them.. But lets not confuse those that do this with some do gooder agenda this is all about making money full stop. It takes a lot of work and money to track these down and get a chance to sit down and talk to someone in foreclosure.. Who does all that work and expense just for social good. Maybe some non profits but certainly NO ONE on BP does it for those reasons its all about getting a good deal.. Lets be honest here.
  
  Now since I have personally sat with well over 100 homeowners that were in foreclosure to discuss their situations and to acquire their property ( that was the mission after all) Folks get into this jam for all sorts of reasons its just the human condition and a basic issue of many Americans cant control their spending or budget their money. Their are health issues of course and lost jobs.. but there is also the KIDS STOLE the money. 200k forth of cars boats RVs in the driveway with massive payments etc etc. Gambling addictions drugs ..
  
  What I did run into though was some foreclosure rescue person gets there ahead of me and just lies through their teeth to try to get a deal.. I have seen folks deed over a house and not understand what that meant. ( I helped them unwind that one ) Also as noted bad lenders who promise the moon and cant come through and leave the folks NO choice but to file BK to save their equity.. But many times letting it go to sale and collecting the overage is the smart move for them NOT selling to a pre foreclosure buyer. Although that route does have risk as there could be collusion at the court house steps and the property does not get bid up like it would have if the local good ole boys and girls were not colluding to keep the bid very low.. ( ie paying walk off money)..
  
  Yup no offense to anyone but post like this are totally self serving and most folks just dont know the realities of this side of the business I know Chris lives it everyday.. I have decades of experience real world with it with 100s of pre foreclosure transactions done and in the books.
  
  As another stated the financial and credit damage is done going to sale barely moves the needle in that regard so its just BS that there is some credit help happening.. One of the main motivators for folks to stay in their home IE foreclosure rescue lease back is to keep kiddos in their school. Foreclosure rescue lease back is ILLEGAL in many states but of course no one ever mentions that part :)
  Jay, While the states with foreclosure rescue laws are a serious matter, I think many investors fail to step in and help those home owners / borrowers who are underwater and can’t sell the house to pay off the loan. Very few of us are there to help them with all their other options that they don’t know about and certainly don’t understand the detailed short sale process. Yet , for an investor these short sales are some of the most profitable deals you can make.
  
  short sales are very different from what foreclosure rescue folks do or are attempting to do which is to say most if not all are looking to close and capture the owner whose losing the properties equity.
  
  Short sale takes a lot of effort from the person losing the home to get the bank to allow one.. so when you do a short sale you earn it. And the lender generally does not want to see any money at all going to the owner and in fact many times is trying to get the owner to sign a note for the short fall.. apples and oranges in my mind when it comes to what the thread is talking about
  Podcast Guest on Show #222
  JLH Capital Partners51 Review
  Website View Page
  1 Reply
- David RandolphPro Member
  Investor · St. Louis Missouri · Member since 2023 · 38 posts · 9 votes
  1y
  Quote from @Jay Hinrichs:
  
  Quote from @David Randolph:
  
  Quote from @Jay Hinrichs:
  
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  
  In many states now you MUST be a licensed foreclosure consultant. But Chris I could not agree more.. this is just another wholesaling method. I am not being a hypocrite as I had a business prior to the laws changing in OR CA WA with pre foreclosure rescue and I did hundreds of them.. But lets not confuse those that do this with some do gooder agenda this is all about making money full stop. It takes a lot of work and money to track these down and get a chance to sit down and talk to someone in foreclosure.. Who does all that work and expense just for social good. Maybe some non profits but certainly NO ONE on BP does it for those reasons its all about getting a good deal.. Lets be honest here.
  
  Now since I have personally sat with well over 100 homeowners that were in foreclosure to discuss their situations and to acquire their property ( that was the mission after all) Folks get into this jam for all sorts of reasons its just the human condition and a basic issue of many Americans cant control their spending or budget their money. Their are health issues of course and lost jobs.. but there is also the KIDS STOLE the money. 200k forth of cars boats RVs in the driveway with massive payments etc etc. Gambling addictions drugs ..
  
  What I did run into though was some foreclosure rescue person gets there ahead of me and just lies through their teeth to try to get a deal.. I have seen folks deed over a house and not understand what that meant. ( I helped them unwind that one ) Also as noted bad lenders who promise the moon and cant come through and leave the folks NO choice but to file BK to save their equity.. But many times letting it go to sale and collecting the overage is the smart move for them NOT selling to a pre foreclosure buyer. Although that route does have risk as there could be collusion at the court house steps and the property does not get bid up like it would have if the local good ole boys and girls were not colluding to keep the bid very low.. ( ie paying walk off money)..
  
  Yup no offense to anyone but post like this are totally self serving and most folks just dont know the realities of this side of the business I know Chris lives it everyday.. I have decades of experience real world with it with 100s of pre foreclosure transactions done and in the books.
  
  As another stated the financial and credit damage is done going to sale barely moves the needle in that regard so its just BS that there is some credit help happening.. One of the main motivators for folks to stay in their home IE foreclosure rescue lease back is to keep kiddos in their school. Foreclosure rescue lease back is ILLEGAL in many states but of course no one ever mentions that part :)
  Jay, While the states with foreclosure rescue laws are a serious matter, I think many investors fail to step in and help those home owners / borrowers who are underwater and can’t sell the house to pay off the loan. Very few of us are there to help them with all their other options that they don’t know about and certainly don’t understand the detailed short sale process. Yet , for an investor these short sales are some of the most profitable deals you can make.
  
  short sales are very different from what foreclosure rescue folks do or are attempting to do which is to say most if not all are looking to close and capture the owner whose losing the properties equity.
  
  Short sale takes a lot of effort from the person losing the home to get the bank to allow one.. so when you do a short sale you earn it. And the lender generally does not want to see any money at all going to the owner and in fact many times is trying to get the owner to sign a note for the short fall.. apples and oranges in my mind when it comes to what the thread is talking about
  
  This thread is about buying houses from distressed homeowners in foreclosure and particularly your comment was about the foreclosure rescue laws and I bet most the investors on here have no idea what they are.
  I don’t want those investors thinking that because of foreclosure rescue laws that they cannot help homeowners who are underwater (owe more than the house is worth) and make money. Yes apples and oranges but short sales are an integral and important process the banks follow.
  and in over 100 short sales over the past 15 years that I have processed/negotiated, ZERO have had the owner sign a note for the shortfall. Also, 90% have been paid $1500-$3000 at closing by the bank.
  [email protected]636-685-2990
  1 Reply
- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  1y
  Quote from @David Randolph:
  
  Quote from @Jay Hinrichs:
  
  Quote from @David Randolph:
  
  Quote from @Jay Hinrichs:
  
  Quote from @Chris Seveney:
  I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.
  
  In many states now you MUST be a licensed foreclosure consultant. But Chris I could not agree more.. this is just another wholesaling method. I am not being a hypocrite as I had a business prior to the laws changing in OR CA WA with pre foreclosure rescue and I did hundreds of them.. But lets not confuse those that do this with some do gooder agenda this is all about making money full stop. It takes a lot of work and money to track these down and get a chance to sit down and talk to someone in foreclosure.. Who does all that work and expense just for social good. Maybe some non profits but certainly NO ONE on BP does it for those reasons its all about getting a good deal.. Lets be honest here.
  
  Now since I have personally sat with well over 100 homeowners that were in foreclosure to discuss their situations and to acquire their property ( that was the mission after all) Folks get into this jam for all sorts of reasons its just the human condition and a basic issue of many Americans cant control their spending or budget their money. Their are health issues of course and lost jobs.. but there is also the KIDS STOLE the money. 200k forth of cars boats RVs in the driveway with massive payments etc etc. Gambling addictions drugs ..
  
  What I did run into though was some foreclosure rescue person gets there ahead of me and just lies through their teeth to try to get a deal.. I have seen folks deed over a house and not understand what that meant. ( I helped them unwind that one ) Also as noted bad lenders who promise the moon and cant come through and leave the folks NO choice but to file BK to save their equity.. But many times letting it go to sale and collecting the overage is the smart move for them NOT selling to a pre foreclosure buyer. Although that route does have risk as there could be collusion at the court house steps and the property does not get bid up like it would have if the local good ole boys and girls were not colluding to keep the bid very low.. ( ie paying walk off money)..
  
  Yup no offense to anyone but post like this are totally self serving and most folks just dont know the realities of this side of the business I know Chris lives it everyday.. I have decades of experience real world with it with 100s of pre foreclosure transactions done and in the books.
  
  As another stated the financial and credit damage is done going to sale barely moves the needle in that regard so its just BS that there is some credit help happening.. One of the main motivators for folks to stay in their home IE foreclosure rescue lease back is to keep kiddos in their school. Foreclosure rescue lease back is ILLEGAL in many states but of course no one ever mentions that part :)
  Jay, While the states with foreclosure rescue laws are a serious matter, I think many investors fail to step in and help those home owners / borrowers who are underwater and can’t sell the house to pay off the loan. Very few of us are there to help them with all their other options that they don’t know about and certainly don’t understand the detailed short sale process. Yet , for an investor these short sales are some of the most profitable deals you can make.
  
  short sales are very different from what foreclosure rescue folks do or are attempting to do which is to say most if not all are looking to close and capture the owner whose losing the properties equity.
  
  Short sale takes a lot of effort from the person losing the home to get the bank to allow one.. so when you do a short sale you earn it. And the lender generally does not want to see any money at all going to the owner and in fact many times is trying to get the owner to sign a note for the short fall.. apples and oranges in my mind when it comes to what the thread is talking about
  
  This thread is about buying houses from distressed homeowners in foreclosure and particularly your comment was about the foreclosure rescue laws and I bet most the investors on here have no idea what they are.
  I don’t want those investors thinking that because of foreclosure rescue laws that they cannot help homeowners who are underwater (owe more than the house is worth) and make money. Yes apples and oranges but short sales are an integral and important process the banks follow.
  and in over 100 short sales over the past 15 years that I have processed/negotiated, ZERO have had the owner sign a note for the shortfall. Also, 90% have been paid $1500-$3000 at closing by the bank.
  I suspect the market U work is far different than the west coast markets that I have experience at.. but will admit I am not a short sale expert .. but my wife has brokered a lot of them and banks asking for notes was very common out this way. Although I agree that most folks dont have any money and could not pay anyway.. but not all.. I bought a 5 mil dollar home that was amount owed from a basketball player ( NBA ) that wells fargo was hammering, it was a massive short sale we got it for about 2.7 but paid cash and closed on it before the end of a reporting quarter less than 2 weeks from contract to close. We were able to help this NBA player walk from any PG on the loan. although his 7 baby momma's who had child support liens all got some money to release their liens.
  
  Most all my foreclosure rescue or actually all of it the homes had equity other wise I would not fool with them..
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Benjamin Louie
Property Manager · Erie & Millscreek PA | Maggie Valley & Haywood County NC · Member since 2024 · 264 posts · 118 votes
1y
Really good topic, @David Litt. I think the ethics come down less to the situation itself and more to how the investor handles it.

If you’re transparent, give homeowners options, and make sure they understand what they’re signing, then you’re providing value and a fast solution that often keeps them from going through the stress of foreclosure. In that sense, it’s helping.

On the flip side, if someone is pushing, lowballing, or preying on the fact that the seller feels desperate, then it definitely crosses into exploitation. That’s where the bad reputation comes from.

Personally, I’ve walked away from deals where it was clear the seller didn’t fully grasp the numbers or just needed more time. I’d rather lose one deal than feel like I took advantage of someone in a vulnerable position.

For me, the “ethical line” is simple: would I feel comfortable if my own family member were on the other side of this deal? If the answer is no, then I won’t move forward
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Seth McGatheyBusiness Member
Real Estate Agent · Milwaukee WI · Member since 2024 · 321 posts · 254 votes
1y
I think the questions are:

1. Intent, are you trying to take advantage of them or are you trying to make the most of a bad situation?

2. Would they be better off not selling to you?

If they would be better off not selling to you, then you likely are taking advantage of them. And if your intent is purely just lowball them to get the best deal for you and the worst deal for them, then you are probably taking advantage of them. But you can simply see the advantages to both of you, and create a mutually benefitical outcome. They get to take some benefit out of the property they have been paying for and you get to grab a property for below market rather than letting the bank take that profit.
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Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
1y
Quote from @David Litt:
I had an interesting conversation recently that really made me stop and think.

A fellow investor told me they avoid buying from homeowners in foreclosure because they feel it’s “taking advantage of people in crisis.” On the other hand, another investor argued that buying distressed properties helps homeowners by giving them a way out when no one else will.

Two completely different perspectives. Same situation.

Here’s where it gets tricky:

Some sellers are truly relieved to have a fast, clean exit.

Others feel pressured and walk away feeling like they lost.

And investors, depending on their approach, can either build trust or burn bridges.

So, I’m curious how the community views this:

Do you think buying from distressed homeowners is helping or exploiting?

Have you ever walked away from a deal because it didn’t “feel right”?

Where do you personally draw the ethical line?
Are you saying that you know what's better for the sellers than they do???

First, your assumption is arrogant, and that they have told you everything, but in reality they have not. They have things going on in their lives you will never know about.

You are not their "Daddy", these are adults and for you to disrespect them and treat them as children will not get you a badge of "Look how good I am"
In my lawsuit, the attorney for the other side brought that up as a point against me. I was supposedly being nice to the seller so I could "deceive" them.
"No good deed goes unpunished"

No, you have to treat them as individuals, follow the law (yes it has become a legal issue recently), have mercy but not capitulation, and realize that it wasn't your actions that put them into their situation. They put themselves there, not you.

If you can't keep it at an "arms length transaction", avoid buying from distressed homeowners and send it my way.

Successfully buying & teaching how to buy distressed properties, legally for 30 years and receiving "thank you's" from the sellers.
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Eric N.
Member since 2024 · 153 posts · 67 votes
1y
In some states you will get yourself into serious trouble for going after properties in foreclosure. I would not touch those with seven feet pole. In others, it's legal. But they way I look at it is this: don't ever say or pretend that you are there to help them out and keep them in their homes. Few months back I did DM and one of the few sellers I have got was in foreclosure. I didn't target him because he was in foreclosure. I just sent eight thousand mail pieces to all the absentee owners or owners of distressed properties with high equity. I found out from him that he was in FC. He was surprised that I didn't know. I was surprised that he was in FC. Anyhow, long story short, at some point when I told him what his property is worth to me as an investor and that my MAO would be such and such (otherwise I would do disservice to myself), he exclaimed "But how about me? You only talk about your bottom line, what is there for me?". I honestly told him that his situation was his, that I was in no position or place to help him with his FC. I advised him to use all means necessary to keep his home (by the time he called me he exhausted all the options , he did two loan modifications and twice defaulted on those , unable to keep up payments). I ended up walking out and I in retrospective I am glad that I did. I would never want to give him an impression that I was there to help him out when my sole objective was to acquire his property for the investment purposes.
As someone mentioned to OP, there are many cases where getting that property off the shoulders of home owner is a blessing to owner who avoids complete foreclosure on his property. In most of those cases owner would loose his home anyway, but having the property sold by trustee on auction would simply add that outcome to his records and make it even harder to buy another home to live in for the next few years. But if there is such positive outcome I will only mention it in passing, never emphasizing the benefits of selling to me and never giving a comfort or a sense that I am there to help or serve home owner.
Sometimes your good intentions (supposing you are sincere in your desire to help and not just blowing smoke to deceive home owner) can get you in a lot of trouble with law and regulations. Stay out of it and keep your communication with home owner professional. Here I am, I evaluated your property as an investment opportunity and here is my MAO, take it or leave it. The moment they reject your offer just walk out. They will call and reach out to you if they want to accept your offer.
As to ethical side of it, they made a contract with the bank who bought the house for them (paid for it on their behalf). They owe the bank what bank paid for it, simple and clear. They breached that contract and bank now will reposes the house through foreclosure. Whether you, as an investor, buy it from them or a third party buys it at the auction, the outcome is essentially the same: they will loose that house and will be forced out of it. They same would happen to me if I stopped paying my mortgage.
Yes, it's possible that they would get more in proceeds if they let it go through auction, but opposite can happen as well. If there is a deficiency and no one buys it for what they owe, they will be on a hook to pay it back after they loose their home. At the end of the day it's a matter of what someone out there offers (or is willing to bid) on the house, whether it's you or someone who comes to court steps , pays deposit and buys it at the auction.
But beware of legal ramifications and claims that you were deceiving the home owner to steal their equity. Never ever let your conversation cross the professional line. Talk to them like an investor out to look for his own interests, make them MAO and walk out if they reject it. Let someone else buy their troubles.
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Is Helping Homeowners in Foreclosure “Ethical” Investing… or Taking Advantage?

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