All Forum Posts by: Daniel Hennek

12% with 6 month term and 90 day minimum is harder money than most hard money loans these days.  A good mortgage broker can set you up with some way better hard money financing.  Lots of private money is doing 12 month terms around 8-10% these days.  2 points is still pretty standard in hard money.  I just attended a conference in Vegas where there were all sorts of new hard money lenders I'm looking at signing broker agreements with because they are starting to really open the box and compete these days.

You should NOT be getting tax advice from an internet forum on your specific tax needs.  You need to stop trying to do it the cheap way and consult with an actual tax adviser such as an attorney or CPA.

Greg,

I was referencing "duties to the public" not to clients who have an agency relationship.

I also didn't make assumptions. I made statements and asked questions because I don't have all the facts; the OP is free to clear all this up with more explanation and that is what I was hoping for.  I never stated that anything was done unethically I merely suggested that it looked that way.  You're right that the context matters.  In this case if Jean Paul put himself out there as an expert on value to the seller that's an issue and I find it hard to believe that didn't happen in some way.  I find it hard to believe that someone would sell their home for $100k when they could sell it lightning quick for $150k to another investor. 

Why put yourself out there as a Realtor if not to gain credibility from the association? Am I to believe that Jean Paul went door knocking and didn't tell all those people he was a Realtor? You don't have to be a Realtor to have your own license and buy and sell your own real estate. People become Realtors because of the credibility gained with the association to NAR.

Again, I'm simply asking questions that could easily be cleared up by any professional with the right answers...and though the answer might depict a legal transaction it still might not make it ethically sound...

Also, your reference to paying sellers too much speaks about your character and that you find it objectionable to take someone's hard earned equity.  I certainly agree with you on that point.  In this case that would suggest you'd have given them more for the house than $100k especially if you knew you could subdivide it and "create" value by filing some comparatively inexpensive paperwork with planning and zoning. We all have our lines to draw and cross or not cross.  I'm suggesting it's highly likely that this deal wasn't fair to the seller/s, whether the investors were Realtors or not.  I'm open to hearing why it was fair...

Listen to Mike and James.  Everyone has a sad story to tell and if you don't listen to your lawyer you might have your own soon.

"Industry Standards" usually amount to whatever people can get away with; that's a lot different than something we should all accept on it's face as good and ethical practice.  Incentives get things done for better and for worse.  I don't see why PMs can't manage their business structure well enough to have operating costs built into their standard fees.  Having these add-ons for common property management tasks represents to me someone that could learn to sharpen their pencil better and offer their clients a more simplified fee structure that is also profitable.

It's your job to negotiate with these people business to business.  If you're unhappy or you think something isn't right then find another PM; there are lots of them out there willing to compete for business and negotiate fees.  If you are in a small market where there aren't other reputable PMs then you might be stuck with using who you've got or learning to manage things on your own.  If that's the case maybe there is room in the market for another PM firm; start your own!  If you are a fairly large client then you're going to get much more flexibility with a PM.  You have to understand where you fit in the marketplace and make moves accordingly.

The bottom line is that it's a negotiation and you'll get what you can get out of them.

Red flags all around...

You've lucked out big time finding an investor willing to use their own money and split profit with you 50/50.  No way I'm putting my money into some inexperienced persons deal so they can split the profit while I take all the risk.  Maybe if I got to know someone I'd give them a small part of the deal for finding it and setting it up but it's a fool that would cut you in as a full partner when you have no skin in the game other than sweat equity door knocking. 

If you put $50k into it and suddenly it's worth $250k then that was actually almost a $200k property in the first place that you got for $100k. Do you think that is ethical practice?

If your parents owned that house would you have given them only $100k for it then sold it for $250k after only $50k renovations?  Is this how you plan on treating people as a realtor?  Offering everybody 50% of what their house is worth until you find someone that's desperate enough to take you up on your offer?  

I would suggest you read your Realtor Code of Ethics again in detail. Deals like this usually happen because the homeowners are distressed and uneducated about the market not because you're some stellar salesperson. As a Realtor it is your job to educate them about the value of the property, not take advantage of their ignorance of it. If you are a member of NAR then you also signed a code of ethics vowing to not do certain things.

When you formed an opinion of value for the sellers of the home did you inform them of your personal financial interest in the property?  Did you give them one opinion of value while you gave your investor buddy another?  

You are required as a member of NAR to disclose your conflict of interest and it seems unlikely you informed them that you were going to put in $50k and sell for $250k because then it is reasonably foreseeable that they wouldn't have done the deal and instead would have opted to list the property for substantially more than a $100k.

I'm wondering how this all went down without something unethical taking place...

For your reference and anyone else's here, NAR Code of Ethics states:

When an opinion of value is formed for a member of the public the opinion shall include the following:

1. -identification of the subject property
2. -date prepared
3. -defined value or price
4. -limiting conditions, including statements of purpose(s) and intended user(s)
5. -any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
6. -basis for the opinion, including applicable market data
7. -if the opinion is not an appraisal, a statement to that effect
8. -disclosure of whether and when a physical inspection of the property's exterior was conducted
9. -disclosure of whether and when a physical inspection of the property's interior was conducted
10. -disclosure of whether the REALTOR® has any conflicts of interest (Amended 1/14)

Also "REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations."

If you really painted a truthful picture of the value for the seller that matched the opinion of value you created for your investor then how did you get this deal done?  You just convinced a seller to give you that equity?

This all smells funny and I'm not eating it; I'm surprised you've convinced so many others of your "prowess".  But I would enjoy a response to explain to everyone here how this all went down while you were operating in good faith...

As mentioned above, it is your intent at the time the contract is consummated that matters, however...

If it is your belief that a job transfer out of state in the very near future is more likely than not you're entering some grey territory right there.  Be 100% sure that you are operating in good faith and being honest about material facts.  If your lender asks you questions answer them honestly, and if you think something is relevant it is up to you to discuss the issue with your loan officer.  Not knowing if you're getting an internal transfer is different from you having another job offer from a different company that you fully intend on taking in 6 months.  When everything about a transaction is know by both sides you don't run into any issues.  When something is misrepresented by one party then you're talking about trouble.  Not misrepresenting anything is the best way to protect yourself

You've come up with an awfully specific "hypothetical" situation which makes me wonder how far along you are on these what ifs...

Mortgage fraud is a crime.  If you think you're doing something wrong I suggest asking the person your working with instead of an online forum where we don't have all the facts and context of the situation.