How Much Is Your Reputation Worth? (aka KARMA BABY!)

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A few months ago, we were negotiating for a house to buy, renovate, and sell.  It needed a ton of work and was in a borderline neighborhood.  My team negotiated the deal to the point where it made sense for us to go and look ourselves.  

It was a family house that became a rental without any rent coming in.  Hence the tenants did not take good care of the property.  Worse yet, the tenants thought they knew about construction.  The man walking us around was so proud of the work he had done thus far, which included removing a load bearing wall without adding any supports!  It was so bad it was scary!  It would have been better if he just left it alone!  

Worse than that, he (tenant & contractor extraordinaire) was so intoxicated that just being near him, smelling his breath, made me have a blood alcohol level well past the legal limit!!  It was pretty bad!  I was staring to understand why everything was so crooked in the house.  I am pretty sure it looked level to him!  I really wanted to give him a Tic-Tac!  But I digress.

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Is The Money You Pocket Worth Your Reputation?

After many weeks of negotiating, things were not going well.  The family selling to us was not very forthcoming.  Why do people that have liens on their properties, think that if they don’t mention it, we will never find out?  Amazing!  More and more liens kept popping up.  The sellers agreed to bring money to the table to sell the house to us, so we stayed in the game.  At this point we decided to wholesale the house instead of rehab it.  We found our buyer.   At the end, days before closing, we found out that another lien was actually days away from foreclosing on the house.  

The buyer we found for the wholesale was very clever.  He and his attorney realized it was going to foreclosure so they dragged the closing out in order to cut us out of the deal, even after all of our time, lien clearing, negotiating, and energy.   You know how we found out?  We showed up at the foreclosure auction prepared to buy the home and then resell it to our buyer.  Well guess who we met there?  You guessed it, the buyers attorney!  It took a lot of conversation to even discover who she was.  When we figured it out, we knew they were there to cut us out of the deal and pocket a few thousand.  If that was their intention they should have been up front and not just drag out the closing to cut us out.  In my opinion, that’s a bad reputation to have in our industry.  

People think they can save a few thousand, but do they?  What they don’t realize is that that money is far more costly in the long run.  People will get to know very quickly that you are not one to be trusted.  We were very polite at the courthouse.  The funny part is that the auctioneer never showed up so we had plenty of time to talk.  I wished them well and much success on their property.  After all, what was I going to do?  Be nasty and let him know how slimy I think they were for doing this to us?  That’s just not my style.  I believe strongly that what goes around, comes around.  I put it behind me and never thought about it again.  I figured it was just not meant to be.  I even sent the attorney a card and let her know it was nice to meet her and to let me know if any deals crossed her desk.  When people operate in this manner, they are not thinking long term.  They are usually one or two hit wonders in our world of investing.  So I make all the friends I can along the way because I want people know that we are here for the long haul.

Karma Baby!

Last week a tornado hit our town.  We live in Upstate NY, where we have snowstorms, NOT tornados!!  This was a shock to all of us.  It was not as bad as the ones in Oklahoma, but for us it was pretty intense.  It was a mile wide and traveled for 17 miles, leaving behind a lot of damage in it’s path.  It was literally less than a quarter mile from our home.  For the first time in my life I was in the basement with my family during a storm.

I was speaking to our roofer the next day.  He said, “Glenn did you see the house that you had me look at a while back?  It was hit by a tree and the roof was destroyed!”  I said, “Really?  I will do a drive by!”  Here is what I found.

photo

Sure enough, the tornado ripped out hundreds of trees and this was one of them.  All I could think was, Thank God I did not purchase this house!!  I have no idea if this investor had insurance or not, but I couldn’t help but think two words … Karma Baby!  Please understand, I wish no one any ill will, nor was I happy a tree fell on the 100 year old slate roof.  Again, it’s just a philosophy I live by … What Goes Around, Comes Around.  I’m glad this is not my problem.  We have 8 houses that were in the path of the tornado.  The worst that happened to us was a tree fell down that destroyed an above ground pool on a renovation we are working on.  Since pools are a pain anyways, it was a blessing!  Good Karma coming back to us?  I would like to think so.

Deep Thoughts by Jack Handy

 
(Am I dating myself with that reference?)

The next time you have a situation where you could save money but you know it is not right, ask yourself how much your reputation is worth.  Last week in Sharon Vornholt’s post, a comment was made by Tom Phelan who said he paid over $45,000 to fix a sewer line AFTER the house was sold, even though it wasn’t his fault.  I was very impressed (and a little stunned) and know that many good deals will come his way for that decision.  In my opinion, no amount of money is worth your reputation.  Do the right thing all the time, even when it hurts.  Actually, ESPECIALLY when it hurts!

Tell me some of your war stories. Were you ever cut out of a deal?  Lied to by another investor?  How much money have you lost doing the right thing? More importantly, how much have you gained from doing the right thing?  I would love to hear your comments.

About Author

Glenn Schworm

Glenn and his wife Amber are the owners of Signature Home Buyers , located in upstate New York. They have bought and sold over 100 houses and counting since beginning in 2008. They are also the proud parents of 3 amazing kids and love to travel the globe, scuba dive, skydive and basically live life to the fullest!

14 Comments

  1. I love jack handy! Hilarious stuff.

    It is funny how investors will try to save a few thousand and in the process alienate people who may exclude them from future deals worth tens of thousands. I see it here with a couple investors who have lost their real estate license due to their previous actions. No other investors want to deal with them or help them out in any way. Not to mention everyone has an eye on them to see if they try anything fishy. You bet they will be turned into the authorities if anyone thinks there is cause.

    • Glenn Schworm

      Mark, my opinion is it is just not worth it. You just never know when you will meet up with that person again in the future. You just never know!! I see you have a lot of comments and would like to see you have your avatar set up…Just saying! 🙂 Thanks for the comments!

  2. Glenn –

    I’m with you. When people do business that way, it comes back to bite you in the butt every time. You only have one reputation in this business. It takes a long time to build a good one, but it can be ruined with one act like this. There is no way I would do business with either one of these people in the future. Next….

    Sharon

    • Glenn Schworm

      Thanks Sharon,

      I always try to take the high road, though I can’t say I am perfect there. 🙂 Even if someone is not ethical or up front, I still try not to burn that bridge. Any future deals with them, I keep my eyes wide open. My theory is like my older post, I don’t mind losing the battle to win the war. These people can still find deals and no doubt will have a tough time finding money (no one will lend to them, imagine that!) so I can be there to buy it from them. Again I keep them at arms length but I still keep them close enough so I can find more deals or connections. Believe me, I am not hanging out with them, but I try to stay on the high road, maybe it will rub off on them! Maybe you have to be around for a while to see how it is done right and with integrity. Time is a wonderful teacher, and the more we are investing, the more we see the value of our reputation and take much greater care of it. Sometimes when we are first getting started we are so scared about losing money we beat everyone up! Anyways sorry for the long comment! Just my humble opinion. Have a great rest of the week Sharon!

  3. Glenn:
    How great that you were able to see the rewards of your good energy.

    It doesn’t matter what your beliefs, physical laws are real and every action creates a reaction – yin and yang – reap and sow – karma, baby.

    We so often walk away, shake the dust off our feet, and know that we save ourselves future problems by refusing to create ones today.

    Thanks for your post and so glad you came out of the tornadoes unscathed.

    • Glenn Schworm

      Thanks Karen, me too!! I am a big believer in all that you stated in your comment. It is so important to always remember that, isn’t it? Wish I could say I ALWAYS remember but most of the time I do. Practice makes perfect! Hopefully! 🙂 Thanks for the comment. Have a great week!

  4. Steve Johnson on

    I had a seasoned wholesaler, whom I’m thinking is now a one hit wonder now that deals are harder to find, who proposed to me that we could close on multiple deals using my credit, another investor to do rehab work, and for teaching me the ropes would collect on top of the profit. I was also told I could quit my job within months from the income on these properties.

    Now, I’m starting to come rethink the ‘if its too good to be true’ mentality, but in this situation I was dumbfounded by how this was even a possibility. I presume that I made the right decision in not moving forward because in no way could I make numbers work out for me to that extent. It would be wonderful and I’d love to know more, but unfortunately I’ve heard of this gals reputation and it isn’t very becoming. Therefore, I have yet to move forward and don’t feel comfortable moving forward. Reputation is a very powerful thing!

  5. Good article. I think another part of this philosophy comes into play when deciding what you should fix in your rehabs. I refuse to allow myself to wake up one day and see a flip of mine on TV because some family got hurt so that I could make a few extra dollars by not fixing something that I should have. It’s easy to go overboard on that and fix things that you don’t need to, but safety of future buyers is extremely important.

    • Glenn Schworm

      Thanks Sean,

      Yes none of us want that to happen! It can be a fine line sometimes between making money and not over doing or even caving in to unrealistic demands. We just have to trust our gut and keep moving forward!

      • There is a big difference between fixing safety issues, doing work to code and providing quality workmanship for all work performed and “over rehabbing “.
        I feel we have a fiduciary duty to provide a safe quality product.
        I don’t think we are obligated to put in granite, hardwood, central air and other big ticket or expensive finishes in low end properties.

  6. Its all about your reputation Glenn. I like the saying keep your friends close and your enemies closer. I have been in some situations where I felt I should of unleashed my feelings but I held back. You certainly took the high road not sure if I could of went as far as you by sending a card and …….. I was in a tough situation several months ago that I was inaccurately accused by a former selectman in town of buying a property illegally. Bottom line it took me over 18 months to finally win and clear it up. I stood by my buyers and let them rent for half current rent market and said I would stop at nothing to get them the house. I made a promise and wasn’t going to break it. It cost me over $30,000 when the easy thing to do would’ve been to tell them I couldn’t sell them the house because of the legal process to clear it and then just rent it out for twice the money and just let my attorney clear it up for a lot less money than having to deal with town politics and so forth. It was hard for me because I was pegged as the bad guy by a few jealous, ignorant people in town who just hate what investors do. I took it personally because it was my reputation I was so worried about. I read the book the 4 agreements and that helped a lot. In the end the buyer got the house and I was so happy for them to fulfill their dream of homeownership as i promised. I didn’t even care about the money end of it as much as the vicious attacks I got. Funny thing fast forward I am doing just fine and the other’s that attacked me not so well in their political agenda. I have been blessed with so much progress since then and just now chaulk it up as another lesson in real estate. Hope I didn’t bore you with that but you asked. LOL

    • Glenn Schworm

      LOL, no bore at all. I totally understand. I love the book the four agreements, apples to so much of our lives. The less we take personal the better things just seem to flow. Now if we could just apply those to our spouses!! 🙂 Not always as easy. Thanks for the comment Mike, always appreciated.

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