BE HONEST AND OPERATE WITH INTEGRITY!!

8 Replies

BE HONEST AND OPERATE WITH INTEGRITY!!

Last year a wholesaler represented themselves as a "Cash Buyer Investor", locked up a property and the homeowners didn't know any better, they had the contract saying the "Cash Buyer" was going to buy their home and close in 30 days. So they purchased another home and moved prior to closing.

Closing date came and they hadn't heard from the "Cash Buyer", so they called and were told there was an issue with the title, and it may be a couple weeks. So, the homeowner paid the mortgage payment on both homes. 2 weeks go by, still nothing. Call again, and are told any day now. Another week, now they are told because of the title delay, the "Cash Buyers" had to redo some paperwork with the bank, and it caused a funding delay. So the homeowner pays two mortgages again that month....

These delays go one for 90 days with the homeowner paying two mortgages and the "cash buyers" kept delaying, saying they had funding issues, inspection expired, etc... Finally, the homeowner had enough and called the title company that they were told was being used. The title company said they've never heard of the "Cash Buyers", and didn't have any contracts on their property!!

Homeowner calls the "Cash Buyer" back furious. Is told, we thought we could sell it for you, but we couldn't, so we're going to have to cancel the contract!!

Fast forward 3 more months, and the homeowners were getting behind trying to maintain two mortgages, and were facing possibly losing the home and destroying their credit. BAD BAD situation...

They called me off an ad, and luckily I was able to go meet with the bank with them, and purchased the house before foreclosure. I was just happy to be able to help them. Then was able to turn around and help a single mom into buying the home after she had ruined her credit going through a divorce. I sold it to her and carried the note over 10 years.

The homeowners, and the new buyer have referred me many additional clients since this all happened.

I call that a WIN - WIN - WIN - WIN!! The homeowner got out from the very bad situation, the bank got paid in full without having to foreclose, the new owner got help getting out of renting and buying a home, and I'll make some decent money on the deal over time. These are the deals that remind me to be PROUD of what we do. Its a service that helps people if you're in it for the right reason.

Moral of the story...BE HONEST AND OPERATE WITH INTEGRITY!!

Wow, that's just ridiculous.  These are the type of people who bring a bad name to every investor/wholesaler out there..

@Jay Hinrichs

Jay, I don't think not having the money is the problem. It's a lack of honesty and communication. I didn't have 120k cash for my first deal so I told the seller that I needed to use someone else's money and need a couple days to find that person. They were completely fine with that and understanding. Most people need to use OPM to get deals done which sellers understand. You just have to be upfront and communicate that!!

@Jeff Filali It’s a shame ,but I can’t help but think the seller should have taken a few steps to avoid this and practice their own due diligence before purchasing another home further complicating things . There needs to be tighter restrictions on these wholesalers Pretending to be something they are not . It blows my mind somebody would borrow a few hundred grand pretend to be a cash buyer get the deal under contract then scramble to find somebody else to buy before the closing date . Insane ..risky ..unethical ...are words that come to mind !

@Jeff Filali   This is the kind of crap that makes people like me despise the entire wholesale/contract flipping enterprise - and especially the gurus who make money teaching this garbage.

The homeowners were seriously abused throughout this and they suffered very real damage.

As to the sellers doing more due diligence, sure.  It would have helped, but most "civilians" just don't know what they don't know.  They get sold a bill of good by a wholesaler, rely on his promises and on his contract, not having any reason to know that they're dealing with an unethical snake.

If you're still in contact with those sellers, I'd suggest that they talk to a local attorney and see if they can sue the wholesaler for fraud and potentially recover some of their losses.

@Charlie MacPherson exactly.  I get so tired of hearing the gurus teaching "you can wholesale with none of your own money".  Sure you can, but that's not what wholesaling was meant to be, and in my opinion if you do not have the intent or ability to close, you're brokering without a license and breaking the law.  They teach people to use "escape clauses", those clauses were meant for situations to protect both parties, not so someone could try to broker without a license and just walk away if they can't find a buyer.  The average homeowner only buys or sales 2 homes in their lifetime total, they trust the person to be an ethical advisor as they're representing themselves as an expert in the business.  I would not have an issue if there were stricter laws put into place and enforced.  There's a place for wholesaling, but there's more and more dishonest people doing it, which is leaving a bad name to those who do it correctly.  The homeowners need to be protected from those situations similar to the one I described.

Originally posted by @Dennis M. :
@Jeff Filali

It’s a shame ,but I can’t help but think the seller should have taken a few steps to avoid this and practice their own due diligence before purchasing another home further complicating things . 

You have to understand though, the average homeowner only buys 2 homes in their lifetime. They are trusting the "cash buyers" to be legitimate and go through with their word and contract. I talk to homeowners all the time who say, bring me a check and a quitclaim deed. I have to explain what the title company is, and why we use it to protect both parties.

Seriously, I've been a sales guru most of my adult life, and if not for being honest and having integrity, I could get 99% of adults to sign a blank contract, then tear it up and tell them how stupid that was, and why they should never do that, then 15 minutes later I could get them to do it again... That's why there's so many people get away with scams, and Ponzi schemes.  The general public doesn't know better, and thinks it will never happen to them.  Most people trust people to be honest.

Originally posted by @Pratik P. :

Wow, that's just ridiculous.  These are the type of people who bring a bad name to every investor/wholesaler out there..

@Jay Hinrichs

Jay, I don't think not having the money is the problem. It's a lack of honesty and communication. I didn't have 120k cash for my first deal so I told the seller that I needed to use someone else's money and need a couple days to find that person. They were completely fine with that and understanding. Most people need to use OPM to get deals done which sellers understand. You just have to be upfront and communicate that!!

 I understand we all have to walk before we run.. but in this case I suspect the wholesalers ONLY option was to resell to someone else.

I doubt seriously that he put a contingency in the contract IE this contract closing is CONTINGENT on me finding another willing and able buyer.. Just like you have financing contingencies in contracts that agents right. you know right up until the day it closes the bank could change their mind.. so when you make another offer you make it contingent as well.  But when you have a wholesaler who says I am paying cash and puts up tiny EM and then walks when he cant find said buyer.. that's the problem and like you said lack of disclosure.

So maybe what the states need to do is come out with a state mandated disclosure for contract flipping so the sellers are aware what's happening like you guys have already said our not their fiduciary your ONLY looking out for your best interests.. but you bring value you say somehow.. LOL> But we all know that most wholesalers would never get into contract if their contracts were sub too  and fully disclosed I suspect.. 

@Jay Hinrichs And the disclosure should be required to state:

1. I am a "wholesaler" and have no intention of actually buying this property, even though our contract says that I will.  

2. I intend to find another buyer to whom I will assign the purchase contract at a higher price than I'm paying you, and I will keep the difference as my profit.

3. If I cannot find another buyer, you are entitled to keep my deposit and I am going to walk away and violate the contract we signed.  If you have relied on my promises to your own detriment, you will have to sue me to recover any damages you suffered. 

However, I have set my business up in an LLC/S-Corp and I will ensure that there are no assets for you to collect even if you win a judgment against me.

4. You will likely get a much higher price by listing your property on MLS with or without a real estate agent involved than you will from me. You (the seller) acknowledge that you are accepting a much lower price for your property in exchange for speed and/or convenience in executing this sale.

5. What I am doing is illegal in this state because I am practicing real estate without a license.

I'd have a whole lot less antipathy to the unethical contract flippers if this kind of disclosure were mandated and actually done on every transaction.

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