Internet Safety Frequently Asked Questions

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.

Unexpected Fees

  • 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.

  1. Invest in an area you know and are comfortable with.
  2. Get a list of market reports for the area and know the current trend.
  3. Know market prices for both REO purchases and resale prices for turn key properties.
  4. Work with a reliable, licensed general contractor if you are not capable of doing all the repairs yourself.
  5. Get a little background on local ordinances for vacant properties and building codes
  6. Have your own team in place including a licensed Real Estate Agent, Lender, Inspector, and contractors. Form your organization.
  7. Keep expectations realistic…. the current market will do more to determine your success than any other detail.
Investor Fequently Asked Questions

Real Estate Investing with Bank Funds

It may seem like using bank funds is the right choice to begin your investment carrier. You can walk into the bank, talk to people face to face, and do business the old fashion way. But wait. Remember all those old movies when the bank moved in to take over the widow’s property? Does that really happen? It can and it will if you don’t make those payments. Let me ask a question. Do you really understand the terminology in the multi-page agreement? There may be more in those papers than you expected. You may want to have a Real Estate attorney look over those loan papers before you use bank funds to begin your investment carrier.

In many cases bank funds are great for real estate investors. Bank funds have been used for years and have funded some of the largest real estate investments in the world. Which brings up a point. Why is there one standard loan agreement for the little guy, and a host of others for large investor? Of course the large real estate investor will bring in a lawyer. Or a team of lawyers. That is common sense. Then why does the small investor skip that step? How do people skip important steps and expect to make it big in real estate investing?

There may be too many factors in real estate investing with bank funds to cover in one short article on the Internet. But there are a few details to consider before you begin signing contracts and agreements.

You are in the bank. This is your first loan for your first real estate investment. You have one loan and one property. Simple. You remodel the property, resell the property, the loan is paid off, and everyone is happy. But what happens as you grow? Do you get one loan for each property? What happens when your bank offers a blanket loan? That depends on the actual agreement. In exchange for the money, the bank holds the deed to the property as collateral. That makes sense. But what if 2 or more properties are involved? Will the bank release the deed for the one property you want to sell? If that sale will pay off the loan, no problem. If you don’t have enough to payoff the entire loan, you are at the bank’s mercy.

You shouldn’t see that problem if you are buying and selling properties one at a time. Investors more often than not see that scenario when they begin accumulating rental properties. The story usually goes like this.

You decide to buy an investment property. You go to the bank you have been doing business with for years. You sit down, talk to a loan officer, they collect information, and you are qualified for X amount of dollars to buy a duplex. In most cases you will need 20% down. You have to put up some of your own cash. You find a good property. The purchase closes. You get the deed, and the bank is on there because they supplied the money. Business as usual.

You did your homework. Your investment is making money and you are trying your hardest to avoid giving the majority of the profits to the tax man. You set aside a nest egg, and decide to buy another duplex. Over the years you accumulate a few more duplexes. Your system is running smooth. Real Estate prices sky rocket and you figure out you can make more money by selling off one or two of your properties. Your accountant has a great plan that will protect you from paying a ton of taxes. Then you suddenly get a bomb dropped on you.

That’s about the time most investors find out the bank talked you into a blanket loan. All your properties are under one loan. That is when you find out if your bank is as friendly as you thought they were. The bank has to release the lien on the deed so you can sell a property. You don’t just owe the original purchase price on the property you want to sell, you owe all the purchase prices for all your properties. Either the bank will release the lien on a single property for one large payment, or you are stuck with those properties until you come up with enough money to pay off the entire loan.

The bank makes money from interest. Which is part of your monthly payment. That’s what the bank is in business for. It is like you are paying rent on the money you borrowed. You make all of your payments on time and the bank looks at you as one of their best tenants. You are stuck.

Now you know why it is a good idea to talk to an attorney before signing the papers. There are good bank loans, and loans that can place you between a rock and a hard spot. A wise real estate investor will find ways of staying in control. Every bit of control you give to someone else can come back to bite you someday.

If you think you are working with a great Real Estate Agent helping you build your business, they better be having discussions with you during every showing. They should be asking you questions and helping you put your business plan together. Also sending you information on the local market. And every good Real Estate Agent knows the best Real Estate Attorneys. Consultation with a Real Estate Attorney is one of the most important steps you don’t want to skip.

It may seem like using bank funds is the right choice to begin your investment carrier. You can walk into the bank, talk to people face to face, and do business the old fashion way. But wait. Remember all those old movies when the bank moved in to take over the widow’s property? Does that really happen? It can and it will if you don’t make those payments. Let me ask a question. Do you really understand the terminology in the multi-page agreement? There may be more in those papers than you expected. You may want to have a Real Estate attorney look over those loan papers before you use bank funds to begin your investment carrier.

In many cases bank funds are great for real estate investors. Bank funds have been used for years and have funded some of the largest real estate investments in the world. Which brings up a point. Why is there one standard loan agreement for the little guy, and a host of others for large investor? Of course the large real estate investor will bring in a lawyer. Or a team of lawyers. That is common sense. Then why does the small investor skip that step? How do people skip important steps and expect to make it big in real estate investing?

There may be too many factors in real estate investing with bank funds to cover in one short article on the Internet. But there are a few details to consider before you begin signing contracts and agreements.

You are in the bank. This is your first loan for your first real estate investment. You have one loan and one property. Simple. You remodel the property, resell the property, the loan is paid off, and everyone is happy. But what happens as you grow? Do you get one loan for each property? What happens when your bank offers a blanket loan? That depends on the actual agreement. In exchange for the money, the bank holds the deed to the property as collateral. That makes sense. But what if 2 or more properties are involved? Will the bank release the deed for the one property you want to sell? If that sale will pay off the loan, no problem. If you don’t have enough to payoff the entire loan, you are at the bank’s mercy.

You shouldn’t see that problem if you are buying and selling properties one at a time. Investors more often than not see that scenario when they begin accumulating rental properties. The story usually goes like this.

You decide to buy an investment property. You go to the bank you have been doing business with for years. You sit down, talk to a loan officer, they collect information, and you are qualified for X amount of dollars to buy a duplex. In most cases you will need 20% down. You have to put up some of your own cash. You find a good property. The purchase closes. You get the deed, and the bank is on there because they supplied the money. Business as usual.

You did your homework. Your investment is making money and you are trying your hardest to avoid giving the majority of the profits to the tax man. You set aside a nest egg, and decide to buy another duplex. Over the years you accumulate a few more duplexes. Your system is running smooth. Real Estate prices sky rocket and you figure out you can make more money by selling off one or two of your properties. Your accountant has a great plan that will protect you from paying a ton of taxes. Then you suddenly get a bomb dropped on you.

That’s about the time most investors find out the bank talked you into a blanket loan. All your properties are under one loan. That is when you find out if your bank is as friendly as you thought they were. The bank has to release the lien on the deed so you can sell a property. You don’t just owe the original purchase price on the property you want to sell, you owe all the purchase prices for all your properties. Either the bank will release the lien on a single property for one large payment, or you are stuck with those properties until you come up with enough money to pay off the entire loan.

The bank makes money from interest. Which is part of your monthly payment. That’s what the bank is in business for. It is like you are paying rent on the money you borrowed. You make all of your payments on time and the bank looks at you as one of their best tenants. You are stuck.

Now you know why it is a good idea to talk to an attorney before signing the papers. There are good bank loans, and loans that can place you between a rock and a hard spot. A wise real estate investor will find ways of staying in control. Every bit of control you give to someone else can come back to bite you someday.

If you think you are working with a great Real Estate Agent helping you build your business, they better be having discussions with you during every showing. They should be asking you questions and helping you put your business plan together. Also sending you information on the local market. And every good Real Estate Agent knows the best Real Estate Attorneys. Consultation with a Real Estate Attorney is one of the most important steps you don’t want to skip.