Deal stolen by potential partner - how do I prevent this!

Real Estate Professional · Austin, TX · Member since 2016 · 9 posts · 6 votes

Hey BP family,

I hope everyone had a great 4th weekend!

I had found a deal here in Austin, TX and was talking to a private lender/partner about the deal (not on BP to my knowledge). This person ended up going around me and buying the deal for himself. I made the mistake of giving him the address of the property and naively trusted him because he was referred to me by someone I trust very much.

My question is when presenting a potential deal to an investor how can you both present all of the necessary information about the house and protect your interest in the deal? I know it may be as simple as DON'T GIVE IT AWAY IDIOT but at some point the investor has to know it is a real property.

Thanks in advance!

Dillon

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

10y

@Dillon Randolph, you said you got this person's name from someone you do trust very much. Have you gone back to them and let them know what happened?

Also, take their name, and burn it into your brain as someone to not ever do business with again.

You've already been told multiple times to have it under contract first, so I'll just chuck another vote on that pile, too.

There will be other deals. Better to lose what sounded like a fairly small deal in the scope of things and find out their true colors at a low cost, than to have wasted any time building a relationship with someone who is not trustworthy.

But definitely let your friend know so they stop recommending this person.

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Paul Trujillo
San Jose, CA · Member since 2016 · 10 posts · 2 votes
10y
I'm a newbie but my Spider Senses tell me to put it under "contract" first then tell away! Things like this happen in business you learn and grow. This person will spontaneously combust or get mowed down by an unmanned Zamboni.
0 Reply
Stan Sugarman
Investor · Decatur, GA · Member since 2015 · 313 posts · 207 votes
10y
When people approach me about funding a deal I only will look at it if is under control(contract or own). I would take this as a lesson learned and move on i.e. don't shop for money until you have control.
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Nick Boullion
Carencro, LA · Member since 2016 · 14 posts · 3 votes
10y
I don't bring any direct information to anyone until I have the property under contract. At that point if he did sneak behind you depending on the laws in your area you can have your contract recorded on title and have your permission needed for future sale or the property. At that point you can present your fee for the back stabbing. Good luck at least you've learned something.
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Paul Timmins
Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
10y
@Dillon Randolph
Steal from me once shame on you steal from me twice shame on you. If the person realizes this is merely the first of many deals they are less likely to steal from you Make sure you pass along to your local REIA's
Paul
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
This is a relationship business. You need to have a good relationship with your lender. It sounds like here you did not. I have zero fear of anyone I do business with stealing a deal from me because I have relationships with everyone I do business with.
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Josh Caldwell
Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
10y
@Dillon Randolph Rookie mistake, but it can be prevented. Sadly in the real estate world there are a lot of less than ethical people out there. Lawyers might be the worst. Yes, lawyers will steal your deals also.
The way that you protect yourself from this happening in the future is to get the property under contract, and then register the contract or rather a notice of contract at your county court house. This puts everyone on notice that you have a contractual rights on this property. It also clouds a title so that anyone trying to do a deal on this property will have to pay you to clear you off or pay a lawyer to do a quiet title action.
That notice of contract also serves as the basis for a "tortious (sp?)" interference with a contract law suit if party #2 tries to go around you.
The form itself is simple, it shouldn't disclose the details of your contract, just that you have one, and how to contact you.
Each state has their rules for what that notice has to say, so consult your local RE lawyer, and have them make you a form that jives with all of your local laws.
You can now go back to doing deals without the fear of being screwed.
2 Reply
Rick H.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
Having dome bonehead "bike your deal" from you is frustrating, not just from a money standpoint but his it can mess with your psyche and affect confidence.
Early in my career my mentor, Mike Q., was out ill and unable to help me. It was suggested that I contact his former partner, a local woman who was also a hard money broker. I had the deal, the borrower and the escrow all synced up. I'd even had borrower sign my loan docs, at escrow.
Then, to my horror, I learned that this unscrupulous woman tried to get my borrower to sign her docs, cutting my commission out and putting an irrevocable amendment into escrow.
I got the word and was outraged. What a shorted-sided idiot she was! I certainly got the wire out, too.
Escrow and mentor helped me navigate around the bad-broker. I completed MY deal and found the money elsewhere.
Then, I got serious about my business education. A friend encouraged me to read Robert J. Ringer's book 'Winning thorough Intimidation' which is really a book about how not to be intimidated by others.
This lead to my Jay Abraham Mastermind education which in turn changed the way I do business. I learned to create strategic alliances and now I am the largest investor in my primary competitor's business (not the bad broker, of course). This has yet, again, dramatically increased my income and net worth.
Part of the learning curve is knowing how to pick partners that you can trust and protect yourself from those who would steal from you because they are too lazy to do their own marketing.
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Tim G.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
10y
I'm sorry this happened to you. Like Rick mentioned a lot has to do with WHO you chose to work with and it sounds so weird but intuition and checking their credibility is important. If there are any red flags you move on. Working with someone who has a reputation that is too valuable to tarnish is another wise move. A few grand isn't worth the reputation to those folks.
I'll also add this, I've made more money by trusting people and sharing valuable information than I've ever lost. My first year in this biz I went nowhere as I was terrified to share an address or ask for guidance from anyone.
As a more experienced wholesaler I've been lucky to be trusted by many a newbie to help get a deal across the finish line and I've always made sure they got paid. Operating on faith and intuition can be scary but I'd be several $100,000 poorer if I'd been scared to show my hand from time to time.
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
10y
@Dillon Randolph, you said you got this person's name from someone you do trust very much. Have you gone back to them and let them know what happened?
Also, take their name, and burn it into your brain as someone to not ever do business with again.
You've already been told multiple times to have it under contract first, so I'll just chuck another vote on that pile, too.
There will be other deals. Better to lose what sounded like a fairly small deal in the scope of things and find out their true colors at a low cost, than to have wasted any time building a relationship with someone who is not trustworthy.
But definitely let your friend know so they stop recommending this person.
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5 Reply
Justin B.
Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
10y
The vast majority of people will not screw you like that. Consider it a lesson learned on that person. Never deal with them again and consider yourself lucky that he just stole a potential deal as opposed to running away with money or something worse. Some people are just ********. There is about a 1% chance that person will be successful. If he did it to you, he will do it to others and eventually no one will work with them.
With that being said, it's a real simple solution to protect yourself. Have them sign a document which says they agree to not purchase any properties you send to him as potential deals without you. And if he does, 50% of the profits will come to you. People sign stuff like that in business (not just real estate) all the time. It can also contain things like, you won't steal my employees/customers and I won't steal yours, etc. It's a standard partnering agreement that I see all the time.
4 Reply
Chris WoodPro Member
Contractor · Greenwood, IN · Member since 2014 · 200 posts · 33 votes
10y
I too am sorry that you had this experience. I have dealt with something similar and quickly found out that not everyone was this way. Don't let it affect you, realize that some people have to make their money by taking from others and some do it with ethics. I have found that the ones with ethics often circle back in a different deal or situation. The more I work with them the more I quickly realize that they can trusted. Good luck, make sure to use this as motivation to keep working harder.
317-775-8133
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Dillon Randolph
OP
Real Estate Professional · Austin, TX · Member since 2016 · 9 posts · 6 votes
10y
Thank you so much everyone for your advice and encouragement. I figured that most wouldn't behave in such a way, but it does make sense to get it under contract first to lock it down. I was over excited and put the cart before the horse.
The silver lining is that I found a great deal and the experience has been extremely motivating - not discouraging!
Again, thank you and best of luck with your businesses! If anyone is interested in Austin be on the lookout because I know I'll have another one soon.
Dillon
@Paul Trujillo @Stan Sugarman @Nick Boullion @Paul Timmins @Russell Brazil @Josh Caldwell @Rick H. @Tim G.
4 Reply
Shannon Wright
Escrow Officer · Temecula, Ca. · Member since 2016 · 418 posts · 152 votes
10y
Originally posted by @Josh Caldwell:

@Dillon Randolph Rookie mistake, but it can be prevented. Sadly in the real estate world there are a lot of less than ethical people out there. Lawyers might be the worst. Yes, lawyers will steal your deals also.
The way that you protect yourself from this happening in the future is to get the property under contract, and then register the contract or rather a notice of contract at your county court house. This puts everyone on notice that you have a contractual rights on this property. It also clouds a title so that anyone trying to do a deal on this property will have to pay you to clear you off or pay a lawyer to do a quiet title action.
That notice of contract also serves as the basis for a "tortious (sp?)" interference with a contract law suit if party #2 tries to go around you.
The form itself is simple, it shouldn't disclose the details of your contract, just that you have one, and how to contact you.
Each state has their rules for what that notice has to say, so consult your local RE lawyer, and have them make you a form that jives with all of your local laws.
You can now go back to doing deals without the fear of being screwed.
Wonder how a "notice of contract" would go over in Ca!? Whew, people would be mad. Interesting how states are so different.
0 Reply
Josh Caldwell
Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
10y
Shannon This is not a PA thing, I learned to do this from a FL investor, It works in all states under one form or another. You just need to find out what it is called in CA, and you can use it too. The people who try to screw you will get mad, but they were trying to screw you, so you really shouldn't care about how they feel.
To your success
Josh
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Shannon Wright agreed.. don't like that at all.. Your a wholesaler worried about your own money and you bugger up some poor sellers title... don't like that at all..
what happens if you have a 90 days escrow.. you get hit in the cross walk and expire.. now the poor seller has a dead buyer and they can't clear title for 80 days... LOL... lots of other issue in this.
As for the OP as stated.. just move on deals are like street cars there is one on every corner.
I Have gotten that as a lender for years.. I usually cracks me up frankly.. or even on BP some local dude here in PDX think he has this ultra hot deal but does not want to share the address.. and he wants to go have drinks and meet and all this crap.. I said I don't need any friends I have plenty of those if you don't want to share the address then how am I going to help you.
as a Mortgage banker if we start stealing deals from our clients how long are we going to last.. the internet is awesome in the good it can do and powerful in the way of outing folks
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John CasmonPro Member
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
10y
@Dillon Randolph As others stated, you need to control a deal before you take it to investors/lenders, unless you're using it for illustration purposes.

Did you speak with this potential lender/partner about the structure of your proposed relationship? Most private lenders/partners wouldn't buy a property themselves or they wouldn't be lending or partnering. Also, was this on MLS? If so, there are many investors who consider it fair game, even if someone else first notified them of the property. Either way, clearly this person had no intentions of lending or partnering with you as you were telling them about the deal.
0 Reply
David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
Could be worse ... imagine what would've happened if they didn't take the deal and you would've partnered with this person. Looking at it that way, you probably got off easy and received a valuable lesson on community college tuition.
0 Reply
Rick H.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
Neither a "Notice of Contract" or "Memorandum of Option" is sufficient did to interfere with title. I've had this exact conversation with head attorney of a major title company that I used to split pitches with at Bar Assoc meetings.
Nope, you've got to do better to bulletproof.
Joe Kaiser, are you reading these forums?
1 Reply
Dillon Randolph
OP
Real Estate Professional · Austin, TX · Member since 2016 · 9 posts · 6 votes
10y
@John Casmon I did speak to him about structure. He is a flipper himself but flips some of his deals with his own money and this would have been one of them. The home was not on MLS. Very true, he clearly wasn't but in the end this is a valuable yet hard lesson learned early.
@David Faulkner Very true! I hadn't thought it that way - thanks for the encouragement.
@Rick H. Good to know, thank you!
0 Reply
Anh Truong
Investor · Georgia, GA · Member since 2015 · 29 posts · 21 votes
10y
In business there is always competition. My mindset is every investor whom i cross path with is a competitor. I'm in it for myself, and i don't need a partner.
0 Reply
Robert Nason
Lowell, MA · Member since 2014 · 260 posts · 99 votes
10y
Tough lesson learned. It's not yours until you have it under contract. Until then it's fair game for anyone. I would recommend strongly vetting people you going to do business with beforehand.
0 Reply
Herve Sika
Cary, NC · Member since 2016 · 6 posts · 0 votes
10y
Sorry this happens to you in the future try to Put the deal under "contract" first using a one page contract form. Thank you
0 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
@Dillon Randolph this would probably lead me to end my relationship with the person I trust. At a minimum I would tell the trusted person it was poor judgement to recommend that guy and I would tell them it reflects poorly on them. There are lots of people who will screw you over for a few dollars.
I have never done this in real estate, but in my business we use non-disclosure forms before we share information. Still if you cannot trust someone, I am not sure I would want to work with them even with a contract.
You could ask someone before you give them the address - will you go around me? They could lie but it may make them think twice if they view their word being worth anything.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Rick H. as it relates to that terrible advice about clouding some sellers title or attempting to.
I had someone do that to me once here in Oregon.. the other party got a lawyer and they were huffing and puffing.. My lawyer says we are going to sue.. and the other side says fine we are judgment proof.. My lawyer says no we are not going to sue them we are going to SUE you Mr. Lawyer ... that ended that conversation and the item was removed.
there are remedies for breach of contract.
And I think its one thing that wholesalers need to understand if they are really just selling RE without a license then there are risks.. they have a very week standing in the transaction.. they get all puffed up about ethics etc. and they themselves are the ones that are skating around the laws of the land.. talk about the pot calling the kettle black..
If wholesalers actually could close there would not be this paranoia of losing deals.
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Rick H.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
10y
@Jay Hinrichs Can't agree more.
The OP may never really have had the deal buttoned up; we don't know.
Clearly, this thread is about trust and breach of trust by another. Once broken, it's pretty hard to resolve. Most just move on, learning what we can from the situation.
Truth be told, a wholesaler is a speculator trying to exploit an opportunity. It's an attempt to be an unlicensed, paid intermediary who hopes to profit in the margin gap between contract acquisition price and retail ARV value.
The service that an effective wholesaler provides is the ability to solve a problem or multiple problems that may not be able to be resolved by agents or others.
Some Sellers don't trust agents. Some don't trust attorneys. Some don't trust their friends and family. Or the government.
The wholesalers that I respect the most have the ability to perform and close, and merely use wholesaling as a way to profit from opportunities that do not fit their own portfolio criteria.
Ok, playtime over. Gonna go and close another escrow this am and work on closing some others that are ripening.
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