How To Avoid Looking Like A Real Estate Scammer

Real estate scammer at a computer.By Tarek El Moussa

If you’ve watched any episodes of our show, Flip or Flop, then you know that Christina and I have been in the house flipping business since the real estate crash in 2008. While I think it’s pretty clear from our show, our blogs, and our work that we’re the real deal, that hasn’t stopped some people from calling us scammers. I was talking with Christina about that the other day, and it got me thinking about how important reputation is. In addition to learning how to flip houses to make extra money with no scams tripping you up, you also need to learn how to conduct yourself so that buyers, sellers, and other legitimate real estate professionals won’t think you’re a scammer.

The problem is, there are a lot of real estate scams out there. People are so used to running into scammers on the Internet (and in real life) that they tend to be suspicious when they see a good deal. So how can you put people at ease and let them know that you’re a legitimate, honest real estate investor? Here are a few tips that have helped me and Christina over the years.

Don’t Make Your Pitches Sound Too Good to Be True

First, whether you’re talking to a motivated seller, a private investor, a contractor, or a buyer, don’t make your pitches sound too good to be true. Basically, if you promise more than you can deliver, the person you’re pitching to is going to know it. They’re going to start looking for the catch, and they’re probably going to find it pretty quickly. Or they’re going to just say no and walk away without looking further into your offer.

Fortunately, it’s pretty easy to avoid this. Just stick to the truth. Yes, you want to make every deal sound as good as possible, and you want to highlight the benefits of investing in your project, buying your house, or selling a house to you, but don’t bend the truth when you do this. Always have concrete evidence to back up your numbers, and always have great work to show your buyers.

Always Do Great Work

Speaking of which, thanks to a few bad apples, people tend to be suspicious of house flippers. They think that you’re going to do poor work and make cheap updates to your properties because you want to make the most profit possible. The more people in the industry do great work on their rehabs, the more we can dispel that myth. Plus, when prospective buyers ask about your work, you can point to all of your quality projects, and you can even get your previous buyers to act as references.

Know Your Scams

This helpful article from Forbes detailing “Three Real Estate Scams and How to Avoid Them” is a great place to start, but you should stay up to date on all of the latest scams out there. Knowing what real estate scammers are doing will not only help you avoid getting scammed yourself, but it’ll also help you avoid sounding like you’re pulling the same kind of scam.

With our Success Path Education workshops, Christina and I show new real estate investors how to change their careers and make extra money with no scams. To do that, we go a long way to show that we’re really who we say we are and that we make our money fixing and flipping houses. You can do the same, but you’re going to have to make sure that you look and sound as legitimate as you are.

How Real Estate Investors Can Protect Themselves From Scams

Avoid scams.By Tarek El Moussa

To any hard working member of the real estate business community, the “scam” revelations, especially over the last few years, are shocking and very sad. Unfortunately they don’t seem like they’re going away any time soon either.

While Christina and I believe most real estate businesses are legitimate, there’s no denying scams continue to be a big problem in our industry, running the gamut from somewhat shady to outright fraudulent. Con artists prey on anyone from older folks all the way to desperate families trying to avoid foreclosure. And then, there are the real estate hucksters offering get-rich-quick workshops and elaborate property purchase schemes. This category of real estate scams in particular make us especially angry. I realize addressing this issue is a gutsy topic to write about. Especially because my business is real estate coaching and mentoring with Success Path. But in our view, you don’t run from controversy, you hit it head on.

Let’s look at the most common real estate scams you might run across when you’re looking to buy a house, renting a house, or purchasing a rental property.

“Renting” Empty Houses

This real estate scam is, unfortunately, becoming more and more common. Here, a con artist will look for a home that’s been standing empty for an extended period of time. Maybe it’s someone’s vacation home, or it’s tied up in divorce proceedings, is the subject of probate, or is an “ugly home” that’s been neglected by its owner. Then they post a listing for the home online (often on Craigslist.com) and they’ll claim to be the homeowner or an authorized rental agent. Sometimes these con artists will break into the homes and change the locks, other times they’ll get access by finding the spare key that’s been hidden on the property. It also isn’t that uncommon for these criminals to sweet talk a locksmith and convince them they’re the real owner (disturbing, but true). The con artist will pull together some official-looking rental documents for the renter to sign, take a security deposit from them and continue collecting the rent until the actual homeowners return or the scam is uncovered. Meanwhile, the poor renter is left substantially out-of-pocket, red-faced and homeless. Always verify ownership of rental properties through county records. It pays to do your homework.

“Renting” Houses in Foreclosure

This scam can work a couple of different ways. Sometimes the con artist is the homeowner himself, who is facing foreclosure, and in a desperate bid to get money, rents his house to an unsuspecting family while the bank continues with foreclosure proceedings. When the eviction date arrives, the poor family is literally turned out on the street.

Another way this can work is that scam real estate investors, who are in negotiations with the banks on a foreclosure, rent the property out to an unsuspecting family. Taken to another extreme, this real estate scam can even involve a fake real estate agent who gains access to a house in foreclosure (usually by breaking in) and taking the family on a tour of the home. The purchase price is offered at substantially lower than market value. Once the buyer decides to move forward, the fake agent collects a deposit and disappears for good. Sometimes fake agents will take deposits from multiple buyers. It’s a heart-breaking situation — especially as many of these home buyers can be first-time home buyers or have saved up their deposit over a number of years.

Loan Modification Scams

At a recent AARP conference in May, an attendee came over and shared an unfortunate tale of financial woe. A fake company, masquerading as a government-affiliated housing agency, had swindled the unsuspecting homeowner out of $10,000, amid promises to modify the mortgage. After coming up with the cash for phony “processing fees”, the poor victim was left many thousands of dollars poorer with no mortgage relief in sight. With millions of Americans still facing foreclosure and another nearly 10 million still upside-down on their mortgages, loan modification scams are among the most common, and may include: fake foreclosure counseling, phony forensic loan auditing, bait-and-switch tactics, leaseback programs, fraudulent “government” modification programs and reverse mortgage offers. Many typically start with a cold call from a company, promising help in the form of a foreclosure-related service. NeighborWorks America, the nonprofit organization behind the Loan Modification Scam Alert campaign, is an excellent resource to help protect you or your loved ones from loan modification scams.

Real Estate Workshop Scams

This is a big one and, as we are real estate coaches who mentor thousands of students every year, it makes me very angry to see the good name of our industry dragged through the mud by those few unscrupulous real estate “gurus” who take your money and run, and make millions in the process themselves.

So how can you tell a good real estate workshop from a scam one?

Here are some tips. First, do your homework on the presenters. Who are they, what is their background in real estate investing and — most tellingly — how many actual real estate deals do they do a year? As an example, Christina and I have been real estate professionals for over a decade and average at least 50 deals a year. One of our colleagues, Doug Hopkins, has done over 10,000 real estate deals in his career. That’s impressive by anyone’s standards! Call the number up on the marketing piece you received and interrogate the person who answers. What you want to know in particular is — is this real estate investor someone who did some deals five or six years ago (when the market was hopping and you only had to fog a mirror to be successful), and is now teaching out-dated strategies? Or does this guy (or gal) look like the real deal?

Next, whatever first step you take — whether it’s attending a preview workshop (like we offer through Success Path) or some other kind or workshop — don’t go if they’re asking you to pay money before you know what they’re offering. Do your homework first. Get to the event if it looks like it might be interesting, take a notepad and pen and review the content of the workshop. Keep an open mind. Good real estate workshops are valuable. How many strategies do they share? Do they provide real examples of recent deals they’ve done? Take the addresses if you can, and look these deals up by searching county records. You can do it on your iPhone while the workshop is underway. If the company offered you a free gift to get you there, do they make good on their word and give it to you? Or do they “mysteriously forget” about it? What kind of a guarantee do they offer if you want to take the next step and attend a more intensive workshop? At Success Path, we offer a triple guarantee on our three-day workshop. If they don’t offer a guarantee, then they clearly aren’t prepared to stand behind the education they provide you with. If that’s the case, then run, don’t walk away from the seminar, and take your checkbook with you.

Just one final word of advice — when doing your research on your real estate mentor, look for trends. Does this mentor, on balance, seem like a good guy or a bad guy? With the social media explosion these days, it’s virtually impossible to please everyone, so just because you find one or two negative reviews doesn’t mean you should automatically rule them out. Even people like Warren Buffet get occasional bad press. They might not know it, but those negative reviews are like a stake to my heart. Christina and I take them very, very seriously. We deeply care about the feedback, experience and success of our students.

To sum up — protecting yourself from a real estate scam is simple: do your homework, trust your gut instinct, and remember that if it sounds too good to be true, then it probably is.

Everything You Need to Know About Foreclosure Rescue Scams

By Tarek El Moussa

Christina and I have been doing a lot of work lately on Success Path Education, and scams are on our minds. Scammers not only take people’s money and leave them with nothing to show for it, but they can also do a lot of damage to good people in honest businesses, too. That’s why I feel like our clients should be aware of the different kinds of real estate scams out there, and not only the ones aimed at you and your business but also the ones aimed at your sellers and the other people you work with as you invest in real estate.

Foreclosure rescue scams are a huge problem for a lot of motivated sellers, and the fear of falling for one of these scams can make them think that their best bet is just to let their home go into foreclosure and avoid any more trouble. If you know about these scams and how they work, you’ll be able to show your sellers that you’re honest and that you’ll actually help them get out from under their house without foreclosure or bankruptcy.

According to Nolo.com, there are basically three kinds of foreclosure rescue scams. Unfortunately, like most scams, each of these can seem like a legitimate deal at the start, which is why you should be aware of them and learn how to differentiate yourself and your business.

The Lease or Buy-Back Scam

Basically, the scammer offers to buy the house and take care of the mortgage. In return, the seller gets to stay in the house and rent it from the buyer. Once the seller is back on their feet financially, they can then buy the house back. However, when you look closely at the details of the rental agreement and what it would take to buy the house back, the seller will often never be able to afford to get their house back.

It used to be pretty common for investors buying and holding a property to agree to a lease with their sellers. Unfortunately, this scam is really killing that option, and a lot of times it’s just better for the seller to get out and move on with their life in a new house that they can afford.

Charging for “Foreclosure Help”

This scam is really bad. Most of the time, the scammers actually claim to be protecting the seller against foreclosure scams. They’ll charge a pretty steep upfront fee for foreclosure protection services that the seller could have done themselves and/or that do nothing at all to actually protect against foreclosure. In the end, the seller still gets foreclosed on, and they lose a large chunk of cash, too.

Stealing the House

Finally, in this scam, the “foreclosure consultant” will talk a lot about getting the mortgage up to date for the homeowner. Before they know it, the homeowner will have signed a bunch of contracts that don’t make a lot of sense, and they’ll have just unknowingly signed over their house. The house gets sold at a really low price to the scammer, and the homeowner has to leave or agree to pay incredibly high rental rates to stay.

Get familiar with these real estate scams so that you can show your motivated sellers that you want to do fair, honest business. Scammers talk a lot about “helping” and “rescuing” the people that they’re stealing from, but if you know how their scams work, you can show your sellers that you’re the real deal. Want to learn more? Sign up for a workshop with Success Path Education. Scams like these are all too common, but you can learn how to help your motivated sellers avoid them by working with you instead.

How To Avoid Scams When Filling Your Lead Funnel

By Christina

Tarek and I talk a lot about keeping your lead funnel full and always looking for great deals on foreclosures, short sales, and other distressed properties. Unfortunately, a lot of scammers know that real estate investors are always looking for great leads, and that can be a big problem for your business. Let’s take a look at a few ways to avoid real estate scams as you look for motivated sellers and great flip properties.

How Lead-Finding Scams Work

First of all, there are a lot of different real estate scams out there, and it’s easy to get caught if you aren’t careful. For example, if someone claims to be an expert bird dog, they’re going to promise to find you a ton of leads on great deals. This can be a legitimate offer, or it can be a huge scam.

A lot of house flippers use bird dogs to keep their lead funnels full, and there’s nothing wrong with that. Getting someone else to find you leads while you follow up on them is a great business plan, but be careful. Don’t ever pay someone upfront to go find your leads. This is a classic bird dog scam, and it won’t do anything but empty your wallet.
Another lead-finding scam is a little bit more involved than a simple upfront fee. In this instance, your “bird dog” actually finds you a lead on a house that isn’t for sale. They’ll direct you to people who do not own the property who will then “sell” you a worthless deed.

Find Your Own Leads Instead

So how can you avoid these kinds of real estate scams? First of all, if you have the time, you can find your own leads. I’ve talked about doing this in other blog posts. And, if you watch Flip or Flop, you’ve seen me pull over on the side of the road with Taylor in the car with me when I saw a potentially profitable flip house.

Hire People You Trust

Of course, as your business grows, you won’t be able to do every single task yourself anymore. You’ll have to do some delegating, and that can mean delegating the task of finding leads. Instead of contracting with a bird dog, though, why not hire an intern or a less experienced flipper to help with your business?

As you mentor them, they’ll learn about the business and take over more of the tasks you don’t have time for, like finding leads. If you pay them based on commissions, they’ll not only be motivated to find leads, but they’ll also be motivated to get really involved with your flips and turn them into really profitable sales.

Talk to Other Real Estate Investors in Your Area

Finally, if you’re going to contract with a bird dog, talk to other real estate investors in your area about who they use and who to avoid. This can yield some very valuable information about the best people to work with to avoid a scam. And, of course, never pay a bird dog upfront and always get a written contract for the commission you agree to pay them once a deal goes through.

There are a lot of real estate scams out there, but with a little bit of attention and education, you can avoid them. For more information on how to avoid crooked bird dogs and other real estate scams, check out a Success Path Education seminar near you. Tarek and I love helping new investors learn the ins and outs of this industry, and we especially love helping people avoid pitfalls like these kinds of scams.

Sources:

http://www.biggerpockets.com/renewsblog/2013/07/19/real-estate-bird-dog-scam/

http://realtormag.realtor.org/law-and-ethics/law/article/2010/08/5-real-estate-scams-you-need-know-about

http://www.scamsites.com/

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