| I thought I'd heard it all when it comes to real estate | | | | she hounded me and hounded me to try to get the |
| investing stories until I heard this one! | | | | house back. Of course, that just wasn't going to |
| I was speaking with one of my real estate investing | | | | happen. Finally, after the new buyer had been in the |
| student's the other day and he told me a frightening | | | | property for a couple of months, the seller came |
| story. Here it is, in his own words: | | | | knocking on the front door while the new buyer was |
| "When I began investing in real estate he was | | | | having dinner with her family from out of |
| somewhat clueless! Granted, I had definitely done my | | | | town.....showing off her new house! |
| homework by researching everything related to real | | | | OUCH! |
| estate that I could get my hands on, but I was still | | | | So the seller and buyer decided that I must have |
| desperate to do deals with little real world | | | | done something illegal since the deed wasn't actually |
| experience. The only thing I really knew was what I | | | | in my name and yet I was "selling" the house to |
| had read in the books and heard on the Guru courses | | | | someone already. They ended up going down to the |
| I had listened to. A lot of this information is pretty | | | | police department and talking to a detective who |
| good. As a matter of fact, most of it is pretty good. | | | | sided with them. The detective called me and told |
| However, some of it needs to be taken with a grain | | | | me that if I didn't refund the down payment and |
| of salt. | | | | walk away from the deal then the seller and buyer |
| For example, one of the first deals I ever did was a | | | | were going to press charges on me. |
| preforeclosure deal and I tried to apply one of the | | | | WHAT? I hadn't done anything wrong! I had a legal |
| techniques I had learned from a pretty famous Guru. | | | | option to purchase the property and if/when the |
| I will leave his name out, because it is unimportant. | | | | buyer went to refinance the house I was going to |
| Before we go any further with the story, let me just | | | | exercise my option. Legally this should be fine. |
| say that most of what I have learned about this | | | | However, the detective thought different. To make |
| technique before I tried to use it as well as after I | | | | matters worse, the new buyer went and got an |
| used it point to the fact that it probably is not illegal. | | | | attorney, Pro Bono (free). |
| If it is illegal in any way, it is possibly a civil | | | | At this point I decided it just wasn't worth it. I took |
| situation.....certainly not criminal! However, what counts | | | | some money I had from other deals I had done and |
| is that the detective who looked at the case did in | | | | refunded the buyers money. She then ended up |
| fact think it was criminal. | | | | buying the house from the owner at a HIGHER price |
| So, here goes...... | | | | than she would have with me. |
| The deal went something like this: I found a | | | | WOW...smart move! Oh well, you win some, you lose |
| motivated seller from one of my marketing campaign | | | | some. I certainly learned a couple of valuable lessons |
| who was in foreclosure. The seller had a little bit of | | | | from this experience. |
| equity but was 2 months behind on their mortgage | | | | First, you should never do anything without disclosing |
| payments. The only way I could see to make a deal | | | | it to everyone. |
| out of this (remember, I was very new to investing) | | | | Second, you should question everything you learn |
| was to find a way to get control of this property | | | | from Guru's or anyone else for that matter. |
| and keep the loan in their name. So, using one of the | | | | Third, you should always protect yourself and |
| techniques I learned from a Guru course, I talked the | | | | everyone else involved in creative deals like this one |
| seller into giving me a lease on the property with an | | | | by having a valid and proven exit strategy. |
| option to purchase it anytime I wanted within the | | | | While what I did was probably not illegal (criminally), it |
| next 2 years. I agreed to use my money to reinstate | | | | could have turned into a pretty big mess. Let's say I |
| the loan if she would consider that money the option | | | | didn't get thrown in jail because the detective was |
| deposit. | | | | wrong.....I still would have ended up getting sued. |
| The next thing I did was rush right out and start | | | | Anyone can sue anyone for anything these days. |
| advertising that I had a house for sale and I would | | | | Plus, if the buyer would have forced the issue and |
| offer owner financing on it if someone had $7000 to | | | | tried to refinance the house, I wouldn't have been |
| put down. With that 7k, the monthly payment was | | | | able to uphold my end of the bargain. I didn't have |
| going to be around $1300 or so per month. In other | | | | the cash to close my end of the deal at the time and |
| words, the buyers down payment got them in and | | | | even if I would have, there would have been a chain |
| their payments kept them in. That was it, no credit | | | | of title issue which would have caused the deal to fall |
| check or job verification required. | | | | apart. In other words, the underwriter doing the loan |
| As you can imagine, my phone started ring right | | | | for the new buyer would have seen that I only |
| away with people who wanted to buy this house. So | | | | legally owned the house for a few minutes and they |
| the first person to show up with 7k plus the first | | | | wouldn't have funded the deal." |
| months payment got the house. I gave them a | | | | So, the moral to this story is, of course, be very |
| contract for deed, which is basically owner financing | | | | careful who you take your advice from and always |
| without formally transferring the deed into the | | | | do your due-diligence before you go jumping into |
| buyers name, and then I took 2k from the buyers | | | | your first deal. Get a teacher you know you can |
| down payment and reinstated the loan. The | | | | trust and your investing career should be in good |
| paperwork said that the buyer had to refinance | | | | shape. |
| within 18 months or they lose the house. | | | | Keep your eyes open for my next email. I will share |
| This worked great for the first few months. | | | | some more fun and exciting real estate lessons that |
| Here's the short version of the rest of the story.....the | | | | will hopefully help you toward a successful career as |
| loan got reinstated by me and then the original seller | | | | an investor. |
| decided she wanted her house and equity back. So | | | | |