The Real Estate Investor | The New Scourge of 2010

The Real Estate Investor | The New Scourge of 2010

It was about a year ago that we started to get phone calls from people who called themselves real estate investors and they all sang me a variation of the same song:

(Hum along to the tune of Fiddler on the Roof's If I were a rich man) 

I'm a very well-to-do real estate investor and I'm looking for opportunities in the area. In exchange for giving me names of people you know, I'll make it very worth your while. Then we'll push these homes through foreclosure or a short sale and both of us will be very wealthy. 

WTH?

The first few calls didn't go very well because I wasn't fully grasping what these people wanted from me. Now, these calls don't go very well because I fully understand what these vultures want from me. They want to take advantage of a homeowner's financial distress and turn it into a financial windfall for themselves.

These investors are all cut from the same cloth and they are the same people who jump from money-making gimmick to money-making gimmick. Whatever is being infomercialized and marketed as the path to financial freedom is the direction they are following. And, their expertise is based on a seminar, which is normally taught by an ex-con who's figured-out that the seminar gig can payoff big. 

The Tenets of the Scam

The investor tells the distressed homeowner that they can solve all of their financial problems and stop the foreclosure process. Sounds philanthropic and generous, right? Actually, the goal is to get ownership of the home and then sell it for a profit. Even if they don't get ownership, they'll put their name on title and claim ownership, and then they'll proceed to negotiate with lenders to whip-out the debt at pennies on the dollar. At the end of the day, the only way the foreclosure is stopped is through the investor's involvement in the sale of the home. 

How to spot the scam

There are several tale tells that have quickly become the investors costume of choice including:

• They have a website that includes the words stop and foreclosure in the URL
• Their car has stop foreclosure information on the back window and bumper
• They actually call themselves a real estate investors
• They belong to an investment group
• They've perviously sold some sort of product online (weight loss, Himalayan berry juice, a patented rack or doohickey 
• Promises that never materialize and deadlines that are missed, and missed and missed
• They advertise on Craigslist and for sale by owner websites. They don't want to involve Realtors or anyone else who will question ownership of the property
• And the number one thing red flag, they have little or no experience in real estate

There are exceptions to everything

Of course, there are exceptions to everything I've said and I'm sure there are many compassionate, honest real estate investors who will take exception to this journal entry. If you are an honest investor who would like the opportunity to provide your side of the story, I'd love to talk with you. 

Unlicensed and unregulated

Many real estate investors do whatever they can to reach the prize, the money that's hidden in a foreclosed home. There are no regulations, no rules (that they follow) no oversite, and no required training or licensing—it's the wild west out there. 

What should you do if your home is headed into foreclosure

If you're already to the point where you're reaching out to an investor, odds are pretty good that you're going to lose your home. As mentioned, investors are investing their time (and sometimes money) that they can get you out of your home and take a portion of the home's final proceeds. 

If your goal is to keep your home, you need to be talking with your lender. If you DO NEED to sell, most banks/lenders will work with you through a short sale transaction, and even hold off from pursuing the foreclosure while your property is actively listed with a Realtor.

What is a Real Real Estate investor?

My definition, which may very from many others, sees a true real estate investor as being a person or group who buy residential or income properties for their long term investment opportunity/strategy. The difference here is that they are not trying to steal the home through games and manipulation, they are business people who are working with agents to purchase real property that adds to their real estate portfolio.