What Lures People Into an Online Scam
So you want to get rich in Real Estate. You don’t have much money, but you heard all the stories of how people broke the system and made it rich in Real Estate. The Internet is full of Real Estate Scams with one intent…. to quickly part a fool and the little money they have. Not only are these scam artists using the Internet, they have enough guts to hold seminars in major cities to collect more money. I can tell you —- beyond any doubt —- the only thing these people know about Real Estate is their scripted plan to suck money out of victims with high hopes and dreams of making it out of this depressed economy we seem stuck in. Let me show you how it works.
How Online Real Estate Scams Work
Charges begin at the very beginning. After a free introduction online or at a local meeting which consists of NO USEFUL information —- ONLY a load of hype, people fall for these plans like an unsuspecting fish goes for a shinny lure. Things look so good, fees seem like a small investment. Let me tell you what you are investing in. There is a scripted system you are investing in. This scripted system is not designed to make any money for you! It is a system to put money in the pockets of this carefully formed network of thieves. The first charge is a set of lessons, either online or a condensed live seminar. They will tell you about some secret list of foreclosed properties. Here is the hook. They tell you only certain Real Estate Agents get this list! Any suggestion of a separate list is against local MLS rules and agreements all Real Estate Agents share. Every licensed Real Estate Agent must sign an agreement to share all their listings with all other Agents on the local MLS. There is no secret foreclosure list. These people are trying to impress you will false information. Some of them are trying to get you to work with agents they hand pick, but this is very rare. It doesn’t take much effort to gather a list of new, inexperienced agents eager to make their first sale. All these people need to do is check public records to find newly licensed Agents, who may not know what they are falling into.
The next step is to provide you with a pre-approval letter or proof of funds letter. Boy — Do these people look like an answer to prayer. After paying a fee, you get a letter and these people promise to give you money to invest in their system without checking your credit. This is too good to be true! That’s because it is not true! There is a world of difference between a letter and cold hard cash. Of course there is a fee for the letter, and a fee for a credit check, another fee for an appraisal, another fee because they feel like sucking more from you. That’s the system you are buying into. All the money flows one way!
If you happen to have funds, you can elevate to their next level of scams. You get the gold script!!! This is what they will tell you. They will tell you how to bid. Of course you have to get an offer accepted. They will tell you about their plan that never fails —- and it sounds good. But of course will never work in the end. Here is their plan. Over bid on the property. The way they explain it makes sense. After all they are trusting you with their money…. all they are asking for is your trust in return. WHAT A SCAM! You have not seen a dime from them and they are pulling the TRUST ME CARD. By this point you paid them thousands and received nothing but promises. And now you are paying for some of the worst advice I have ever heard. Of course the best properties receive multiple bids and you have to find a way of getting your offer accepted. They tell you once you over bid and get the contact, which they tell you is a legal binding contract…. which is about the only truthful matter they will tell you, the Seller and you are bound by the contract. What they fail to tell you is, asset managers seldom negotiate price after you sign a contract. There is nothing in the contract saying the Seller has to deal on the price. When you fall for this scam, you missed one very important point! The Seller has a group of cash buyers waiting in the wings who can close in a hurry. The Seller can tell you to take a walk. In the mean time, you lost more money on the scam. They tell you they have a network of inspectors to look over the property, give you a report and instruct you on how to use their report to negotiate. Two problems here. Number one, you pay them for the inspection. More money for them. Number 2 – they DO NOT use state licensed inspectors. The contracts I use in Wisconsin states: A State Licensed Inspector must be used. You just wasted your money. Any Listing Agent with a year of experience will take one look at that report and know it is a fake. When I see this, I call the so called inspector and ask for his state license number. Guess, what… the house of cards immediately folds. Next on the scripted plan to part you from your money is the fake contractors. More money out of your pocket, more in theirs. Now here is the real heart break for innocent buyers like yourself. According to the contract you have 10 days or so for an inspection. If you don’t have a good agent, that time disappears. You lost that contingency to back out of the contract and get your earnest money deposit back. The worst part of this scam is the time it takes. Before you know it, time runs out, you fail to close and find yourself in a position to loose your earnest money deposit. Notice how you are the one putting up all the money…. and they are the ones making the money? When time runs out, you are in what is known as breach of contract. You failed to fulfill your part of the agreement. Some Sellers are insisting they keep the earnest money. At this time it appears to be the only way to combat this scam. Most of the time Buyers will get their earnest money returned but when Sellers see this scam, they may not be so lenient. Collecting earnest money is a long process most Sellers will not want to go through, but one Seller instructed me to go through the long drawn out process. In the end the Buyer lost the earnest money. The whole process is nothing but a waste of time for everyone involved and a waste of money for the Buyer.
Beware the Bite
There are other details the scam artists share to appear they are looking out for you. They show you how to alter standard contracts. They want to create the appearance they have your interests at heart, but make no mistake, these scam artists are looking out for themselves. Here is a short list for you to copy and paste. If you ever attend any of these scam artist’s meetings, you can go down this list with a smile on your face and your money in your pocket.
- They charge fees. Every experienced Real Estate Agent has worked with successful investors and is willing to share information for free.
- Look out for useless hype.
- Look out for facts and figures from outside the market area you want to invest in.
- Look out for a system insisting one size fits all.
- Look out for secret lists and inside information only a few people have.
- Look out for networks they may claim to have.
- If you did pay fees for training…. get out the first time you see a fee they forgot to mention.
- Shy away from advice on how to alter state approved contracts.
- Avoid systems which suggest negotiations after signing a legal binding contract.
- Avoid systems telling you to over bid without providing you with current market conditions.
- Avoid systems based on national statistics.
- Avoid systems which teach you how to use an inspection to renegotiate purchase price.
- Run from all inspectors, contractors, and LENDERS who cannot produce proof of a state license.
The only system that works involves a few simple steps.
- Invest in an area you know and are comfortable with.
- Get a list of market reports for the area and know the current trend.
- Know market prices for both REO purchases and resale prices for turn key properties.
- Work with a reliable, licensed general contractor if you are not capable of doing all the repairs yourself.
- Get a little background on local ordinances for vacant properties and building codes
- Have your own team in place including a licensed Real Estate Agent, Lender, Inspector, and contractors. Form your organization.
- Keep expectations realistic…. the current market will do more to determine your success than any other detail.