Investors are evil.
Title catch your attention? Good, because this is the (incorrect) message my mind has been bombarded with for the past couple of weeks. I'll give you a bit of context to work with: I am currently taking the mandatory 7 week course to become certified to trade real estate as a realtor in my province, Alberta, Canada. I originally wanted to take the course just to get a nice rounded knowledge of the funadmentals of everything real estate, and get MLS access so I could hit the ground running with my new investment business. Keep in mind, RECA, the Real Estate Council of Alberta, has recently upgraded all of the rules regulating the realtors, and they have become quite strict with disclosures, being careful not to exercise undue power and influence over a seller if you're licenced, etc.
This course has proved to be more exciting than I expected, however. I've been able to see first hand how contrasting the mindset of a successful investor and a "work for every dollar I make" realtor can be. I am going to make some generalizations here, and they are going to be sweeping, don't take offense if you fit into some other category. It seems to me there are two different types of people working in the real estate industry:
1)The wealthy - the investors, the leveragers, the negotiators, the business owners, the creative types who CREATE wealth. These people have the freedom to retire on a whim because their investments work FOR them.
2) The poor - the realtors, the painters, the drywallers, the contractos, the stagers, the type who believe that money is scarce, difficult to acquire, and that they must work hard day-in and day-out to become rich. These people may even become relatively rich one day, but will never be able to sustain any lifestyle without going back to work eventually, because they did not create wealth.
The speakers I have been listening to over the past couple weeks of my real estate course have all been heavily biased towards the realtor mentality, they have what I consider to be “the poor person's†mindset, as they see artificial caps on the amount of money a person could possibly make, and limit themselves to only doing what has been done before. This is fine. They can do what they want with their lives, I realize that. I may feel bad for them or their families because they never had the chance to be enlightened in the ways of wealth creation, but that's neither here nor there.
On multiple occasions, different speakers have somehow stumbled onto the topic of investors, flipping houses, “we buy houses†signs, and the like. Always with serious disgust and opposition. I'll break down a few of the events for you:
The first time, we were simply discussing the fiduciary duties of realtors to their clients, and the possible benefits of using a realtor over just FSBO'ing your home. The speaker exclaimed that there were predatory investors out there that make their living by STEALING peoples homes when they are in a bad situation. Further, that there were entire courses and clubs dedicated to teaching these criminals how to con you out of your house, your money, and your first born child and run away before you knew what hit you. The class was gasping and chattering about how awful this was. I raised an eye-brow and let it slide. The dude is like 70 and I'm sure just has some really solidified beliefs about money and the world.
The second time their prejudices came up was the result of one little bullet point on the power-point that almost went by unnoticed. It said something to the effect of, “As a licensed industry member who is representing the seller of a property, if you knew that the buyer intended to subdivide the property and sell it for a profit, you must disclose this to your seller.†That's wonderful, I like it, as a realtor, it is your fiduciary duty to disclose things that will assist in getting your clients best interests met. Great! So I pop in a quick question to the speaker, “But if a transaction was occurring between two people privately, neither of them licensed to practice real estate, this type of disclosure would not be necessary prior to purchase, correct?â€
His answer just about made me flip a ****, he said yes, if you plan on buying a property from anyone and plan to profit off of it, you must disclose this to them before you buy it or they are allowed to take you to court afterwards and are likely able to claim all of your profits. He went so far as to say HE HAD SEEN THIS DONE. This to me seems absolutely unfathomable. This is not communism, no one forced them to sign the sale contract, how do they have any right to take you to court just because you didn't give them an in-depth financial education and professional advice before making a transaction??? Is this guy just off his rocker? There is no way this can be true in a free-market economy. That's like taking starbucks to court because they sold you a coffee for 6 bucks and didn't tell you that if you just bought your own coffee beans and made it at home it would have cost you 30 cents...silly. I discussed this on the break with another woman who is in the course for much the same reasons I am, to be an investor. In fact she owns a mobile home park and a few other multi-family units, and we both agreed th at this was just a load of bollocks. It's like an apple farmer selling his apples to a grocery store, and then whining when the grocery store sells the apple for 5 times more than the farmer got. The logical explanation is that the grocery store invested money, time, and expertise into the transportation, display, and sale of the apples, and therefore deserves the extra money...man this stresses me out...
The next time this came up was with a different speaker. We were talking about the legalities of certain types of advertisements and inducements and incentives used by realtors in the industry. Another person in the class said, “I have seen these signs in town that say “WE BUY HOUSESâ€, what are these? Who is this person trying to buy houses?â€
The speaker put her game face on and prepared to tell us of this terrible evil that has been plaguing the world. Tension rises and everyone becomes quiet as she informs us in a solemn voice of the atrocities these investors have been committing, outright STEALING homes from people who are down on their luck.
Now come on, it doesn't take a genius to critically think your way out of this one, the investors are not physically breaking down the front door, stealing the house keys and forcing families out onto the street as she seemed to imply...no one is forcing the people to sign the purchase and sale agreement contract...if they didn't WANT to sell for below market value, THEY DIDNT HAVE TO. Am I right? She then goes on to tell an anecdote of a small part of a city she once knew of that consisted of a very tight nit group of italians that all immigrated their together at one point in time. They had apparently purchased their homes for about 5k each when they first moved. Current FMV for the homes was approx 50k. A group of licensed industry members (realtors) who were also investors went door to door offering them 25k cash each. This, being more money than the italians had ever seen, was perfectly acceptable, and the investors bought up most of the houses. Yes, with greater financial education the italians could have known that their properties were worth more, and would be in a better position for it. But they did not bother to take finance classes, and therefore lost money to their own ignorance. The realtors/investors were fined and thrown in jail. What the hell. Let's put the morals aside for a second and just concentrate on the law. I don't have any information other than what was provided in her anecdote, but it seems as though they did not disclose their status as licensed industry members, and possibly it could be argued that they had undue influence and power over the italians because of that...this is wildly concerning to me, so I posed a question to the speaker:
“If I fully disclose that I am a realtor, and the potential implications this will have on our transactions, and put a clause in the purchase and sale contract that I am authorized to sell my newly acquired properties at any time and make a profit, and put another clause that says it is up to the seller to determine the true value of the property and it is not up to me to disclose my plans to profit, am I covering my bases?†and she sternly said, “I wouldn't stand up for you for a second if you tried to do that. Go ahead, go down that road, I'll see you in the big house (JAIL.).â€
Another member of the class went so far as to approach me in the hallway and say, “Ha, you're a pretty interesting guy, I think it's fun to explore the DARK SIDE of real estate sometimes, you know, just to talk about it...that type of thing could get you into a lot of trouble.†Are these people just financial losers?
Guys, what is going on here...do I even want to become a licensed realtor? It seems as though they are held at such a high standing by the courts that every time I turn around as an investor I'm going to get sued. It's either that, or these speakers don't know their *** from sunday and I just need to talk to a lawyer to get it all cleared up.
I FEEL like the speakers are just so fervently passionate about socialism and the well-being of the poor and being a realtor who works for a living that they can't accept the sheer power involved in the investment strategies we talk about here on BP. And I know for a fact that many investors actually have sellers THANK them for solving their problem. Many here on BP preach that all deals should be WIN-WIN and I agree that it is possible and the best way to go about it. Are there perhaps two types of investors in this world, the ones who get all the media attention for being evil, and then the ones who solve real problems while building wealth?
I recently read a book by Donald Trump that he wrote back in the 80's I think, and I don't think he ever bought a single property for market price. And he's not the only example, look at the tons of successful investors on here, none of them buy property at FMV. So are these speakers just frustrated realtors who are jealous of the wealth investors are creating while they sit around and yip about morality, or am I missing something?
And I repeat, I am making sweeping generalizations with this post, and I'm sure many people do not fit into the stereotypes I have created here, but I'm trying to get my thoughts across as clearly as possible. Feel free to PM me if you want to discuss anything privately regarding my post.
Post a reply to discuss this issue with me and others. There seems to be a strongly negative perception of investors, at least where I am from. Why is this?