THE PORTER CASE: What went wrong? - Posted by Deb

Posted by GL(ON) on July 14, 2002 at 15:05:16:

At last we agree on something. I have no problem with creative real estate deals, as long as the people doing them are on the up and up, and will do everything in their power to keep their word and protect their customers.

It is stories like this that hurt, give creative real estate a bad name and make it harder to do legitimate deals.

This is a good and honorable business. You can do a lot of good for yourself, your family and community without hurting anybody. I wish that everyone that got into it saw it that way.

THE PORTER CASE: What went wrong? - Posted by Deb

Posted by Deb on July 13, 2002 at 09:30:45:

I’ve seen a few posts here and there on the Porter Case in Ohio. Seems she took many houses “Subject to” since 1999 and has at least 20 or more lawsuits against her now. Wow, talk about making a newbie skittish…How could she have prevented this from happening? Did this many tenants default on paying rent? This should be important to any investor who L/O.

The Crux of the Matter. - Posted by bill gatten

Posted by bill gatten on July 14, 2002 at 16:08:45:

I have read all the articles on Porter and have spoken in some depth with her ex-husband. My take on her is that she is an aggressive work-a-holic who found a niche that worked, and she was willing to stick with her model even when the going got rough. Maybe she just tried too hard to live a little too well too soon (I find myself with that same inclination at times).

Did she do wrong? The newspaper says so, and her ex says so…but ask yourself this question: What if she were to have taken, say, $1,000 from of the offering plate at church in full view of everyone in order to leverage it in a absolutely positive and safe "sure thing,? wioth a promise to replace it the next day with more: and then had replaced it with $5,000? Did she do wrong? Maybe…but would the press and her ex-husband and her pastor have been real tough on her for having done that? But what if in the same scenario everything had worked-out perfectly, but she were to have been robbed on the way back to the church?

In my opinion, the long and the short of it is simply that she made a decision to fly higher than she was capable of falling without injury, and she didn?t take along a parachute. A very bad move. Everyone I know (and know of) who has faced this kind of press and/or jail time seem to me to have been good people overall, who, instead of just collecting the golden eggs when they dropped, decided to squeeze their goose once too often (as it were). A couple too many Heimlichs on a goose like that will obviously cause it to start excreting more than just eggs.

No money down IS entirely possible. No credit qualifying is possible. Minimal (but never “no”) risk is completely possible. Getting rich consistently over a relatively brief period of time is possible (and feels real good). Making money off of other people’s problems is an excellent way to make a living?assuming that the service you provide is equal to the problems you’re resolving: unless, of course you think heart surgeons, firemen, policemen, proctologists…and attorneys?are all crooks (OK, 4 out of 5 isn’t bad).

My advice is this: Never fly any higher than you will be willing to fall, if you ever have to; and never fly any faster than the time it takes to get you to where you need to be.

Maybe Porter ?is? a good Christian after all…she died on the cross me: that’s for sure! Because of her errors in judgment, I’ll being trying like h… not to repeat her mistakes!

Bill Gatten

Heard she got the death penalty. - Posted by $Cash$

Posted by $Cash$ on July 13, 2002 at 15:47:09:


Glad to meet you.

Bet you are really skittish now. Here is how I did it, from day one.

I use a Licensed and Bonded Loan Servicing Company “company” to collect mortgage payments from my buyers. The company then sends the payments to the underlying mortgage holders. I do not collect the mortgage payments myself.

I established a reserve “Trust Account”. The money in this account was used when a buyer of mine did not make their payment on time. I instructed the company to make the payment if my buyer didn’t. This also protects the person you purchased the property from of not having a ding show up on their credit as a late payment.

I took at least one month’s mortgage payment from the down payment of the property I sold and put it in the Trust Account. Naturally the Trust Account builds up over time as you sell your properties which then gives you a nice back up of money incase you run into a problem.

Articles like you have pointed out do give our industry a black eye, but if you have a prospective client that is skittish, have them call your company and see how you handle the problem, makes you look good.


The Porter case: Here is what went wrong. - Posted by GL(ON)

Posted by GL(ON) on July 13, 2002 at 14:49:41:

You probably know about the Porter case. If not, there is a link in M Lee’s post that will take you to an article about it.

Mrs. Porter took over 40 houses on land contracts or subject to, and resold them. This was over a period of 3 or 4 years.

Now she is in trouble for not paying the mortgage payments that she promised to pay.

Evidently she took the payments from the people who bought from her, put them in her pocket and spent the money.

Now the banks are foreclosing on houses that the owners moved out of as far back as 1999, and people who made their payments faithfully are losing their homes. It is a terrible legal mess.

The question is, why didn’t she make the payments like she promised? My guess it she wanted to keep the money. She kept it, she spent it, now she can’t pay up.

The only other question is, was she a fool or was this a con game from the start?

The article says she started many different companies to do business. This looks to me like a plan to put up various “fronts” in order to keep the game going and evade getting caught, so I suspect she knew what she was doing. However there is always the chance that she “meant” to pay back the money and started the companies on an ad hoc basis to buy time.

The real wonder to me is that something like this hasn’t happened before.

Every time I see an ad or a post telling some newbie that you can start with no money, bad credit, no experience and no training beyond a $200 mail order course I get a bad feeling.

Think about it. We are talking about a business built entirely on the trustworthiness of one person. The person we are proposing to put in charge has a bad record of not paying his or her debts, no money, no experience running a business. What do you expect to happen?

The real problem for the rest of us is that this kind of thing gets around and makes it harder to do creative deals for the rest of us. And it is exactly the kind of case that makes politicians pass bone headed laws putting us out of business.

Accidental Real Estate Ponzi schemes - Posted by John Behle

Posted by John Behle on July 13, 2002 at 14:46:17:

There are some very apparent problems with this case. In some ways it is what happens to MANY newbie real estate investors. I don’t care how many properties she bought, based on results - she is still a newbie, naive and poorly trained.

I use the term “Ponzi” because that is effectively what he operation seems to have become. A Ponzi scheme doesn’t generally involve profit or enough to keep up with expenses. Sometimes the difference between one company’s success and another becoming a Ponzi can be whether it is profitable.

I say “Accidental” because it doesn’t seem like there is any scammer type intent here - just errors. Ms. Porter may be a wonderful person that does happen to be naive.

It’s easy to buy real estate. Anybody can learn that. One “Guru” proved he could buy nearly a million dollars in property in a couple days for no down payment. Then - under analysis - most of it was rejected because it wasn’t profitable. He illustrated the point, that it is easy to buy and that’s where the focus was. He also was smart enough to reject some of the deals a few days later when “due-diligence” showed things were not as thought or represented.

It’s easy to learn to buy real estate. It’s whole different step to learn how to buy it safely. And another to learn how to buy it profitably.

In this case, it looks like some proper “due diligence” could have presented big losses. It states that sellers mis-represented things and buyers didn’t follow through. Anyone surprised by that has NO BUSINESS being in this business.

In real estate school something like a hundred years ago, one of the few things I remember is the instructor saying “Buyers are Liars - and Sellers too”. You have to assume - if you want to be safe - that you are going to be lied to in this world. It’s sad, but true. Anyone who believes a seller, buyer, salesman or anyone else’s representations that is trying to get you to buy or sell something is setting themselves up for failure and even severe financial and personal problems.

So, she seems to have failed in doing her “due-diligence” - checking out the properties, home inspections, plumbing, heating, structure, electical, etc. What I read in the article is she was too busy buying to follow through on buying safely or possibly just too naive.

Next - and this is a big one - she didn’t appear to buy profitably. A deal that is too skinny can have the profit eaten up in vacancies, repairs, etc. If I were to describe a “Risky” business venture as a case for a business class - I would diagram what Ms. Porter did.

1- Profits too skinny
2- Unknown risks (by not doing proper or enough Due Diligence.
3- Very poor credit risks
4- Improper capitalization.

Let’s look at number 4. I think it is foolish to attempt what happened here without some ability to follow through. To put yourself in the middle of a transaction where if someone doesn’t pay you, you can’t pay others is risky. To top that off by choosing as your clientele people with a proven track record of not being able or willing to pay their debts is brilliant.

Where are the reserves? Where is the ability to hold it together when a few people don’t pay? Where is the profitability to be able to fund marketing, employees and what appears to be an extravagant lifestyle?

Not only is there not money for contingencies, but little ability to fund overhead. So she bought 60-100 properties (she doesn’t even know how many) - big deal. If she is making only a thosand or two per property, there is very little cushin there. Her overhead has to eat half that at least. Her lifestyle has to eat the rest and just a few people not paying, evictions, legal fees, vacancies and she is done for.

Profitability doesn’t always come in doing more and more deals. It’s like the joke about “we’re losing money on each deal - but we’ll make it up in volume.”

The lawsuits obviously were one of the contingencies that weren’t planned for. Look at who you are dealing with - desperate sellers and desperate buyers. If something goes wrong, you can be there will be lawsuits. I won’t go into the psychology of it right now, but both of these groups are victims and anyone trying to save or help them will many times end up portrayed as the next “victimizer” who took advantage of them. It’s amazing how they can be on your doorstep begging you to save them and their property one week and on their attorney’s doorstep the next complaining you stole it. We don’t know Ms. Porter’s ethics or her thinking. It’s possible she did the best she could - under the circumstances. It is the circumstances that have a high probability of failure.

The cure???

It’s not enough to learn to buy properties for little or no down. Many “no down” deals should send you running and a naive investor sometimes says “yippee” - only to inherit the previous owner’s problems. I wrote an article back in 1878, probably my first, titled “Ten ways to become a Don’t Wanter” or “Don’t-Wanter-Itis can be contageous” detailing this very thing. I’d find it and re-publish if it wasn’t on the old smoke damaged TRS80 in my basement.

You need to buy properties safely. If you are not able or trained to do the “Due diligence” that is necessary, then hire someone who can. Even when and if you become a pro at it, it can still be cheaper to have someone else. Have a checklist, make every property subject to a thorough interior and exterior inspection and then follow through. Sometimes new investors almost want to run from investigating a deal that they’ve just signed up like they just shoplifted something.

MAKE YOUR DEALS PROFITABLE! It is possible to make as much on one or a couple deals as most real estate investors make on 60-100 without anywhere near the kind of effort. It is about education - NOT SYSTEMS. Newbies are drawn to the “Step one, Step two - Here’s all you need” type pitches and courses. That MAY be good as a start, but keep it up.

True and long term profits in real estate comes from learning all you can and being a problem solver with a large toolbox of techniques, strategies and profitable methods. When you know more solutions to problems, you recognize and can solve more problems. Deals you turn down now make make you tens of thousands. Deals you are accepting may become too tiny for your future. If there’s a book you haven’t read on real estate, read it. If there is an article here you haven’t read, the read it. Take off the blinders and consider that you might not be using or doing the best, safest or most profitable techniques. Sometimes the simplest sounding techniques - or easiest to sell to customers - do not make for the safest or best long term strategy.

Anyway, that’s today’s rambling from me.

Subject To Gone Bad Article- Link - Posted by M Lee

Posted by M Lee on July 13, 2002 at 11:04:35:

I am an advocate of Subject To’s…Just happend to have the article…

Re: THE PORTER CASE: What went wrong? - Posted by jeff

Posted by jeff on July 13, 2002 at 09:33:30:

i have never heard of the porter case. what are the details? does it have a link somewhere?

What went right . . . - Posted by William Bronchick

Posted by William Bronchick on July 14, 2002 at 18:00:44:

We’ll never know what went wrong with the Porter case because we don’t know enought facts. I don’t really care why she defaulted, because defaulting on an obligation is not a crime unless you enter the obligation with the intent of not paying, in which case you deserve to go to jail. The papers insuated that she did, but the facts suggest that she didn’t default until a year or so later.

Sometimes people do dumb deals - it’s human nature. Sometimes people get in over their head and the market turns - that’s the breaks. What was her case? I could care less.

But, what we DO know is that the process she used is not flawed just because she failed. The “we” I am speaking of is you, me and everyone reading this that have done it successfully, ethically and profitably. Only a fool would argue, “don’t buy kitchen knifes because they can be used to kill someone.” Hey, if your kid finds his way into the knife drawer and stabs his little sister, whose fault is that, the knife company?

What we (the same “we” aforementioned) need to let other people reading this board know is that you shouldn’t get all bent out of shape when a newspaper reporter writes a negative story about real estate investing (or, even worse, someone posts a word of mouth story about how an investor got into trouble using a creative financing technique). People who are not experts get scared and confused when they hear “chicken little” stories, like:

“Don’t ever eat hamburgers because of e-coli”


“Flipping Properties is illegal”


“Lawyers are all scheisters” (ok, maybe that one’s true)

Every day, the news media reports outlandish stories about a daycare center that lost a kid, so every Mom gets worried sick and wants to ttake her kid out of daycare. Hey, what about the other 99.9% of daycare centers that work just fine?

Every morning, the Today show presents medical experts to tell you all about a new study or disease. I don’t know any better, so I believe most of this cra*p. But, my wife, a nurse with 10 years experience, often laughs at the wild excagerations in these stories (in fact, one event that was reported happend at her hospital; she personally witnessed the event and the media wrote their own version of the “facts”).

Folks (I am speaking to those who are not experts in creative real estate . . . YET), don’t get scared away from this business because you hear a story from a friend-of-a-friend, a closed-minded real estate broker, a dopey lawyer or a newspaper reporter. Chances are, those outlandish cases are a result of some investor that lied, cheated, stole or downright mislead people he did business with. That happens in every business, but it doesn’t make the business itself “suspect.”

Read past the story - challenge the “truth” and educate yourself.

And, most importanly, don’t use the kitchen knife to stab people (metaphorically speaking, that is).

Re: Heard she got the death penalty. - Posted by osirus

Posted by osirus on July 14, 2002 at 01:41:01:

“”"“I use a Licensed and Bonded Loan Servicing Company “company” to collect mortgage payments from my buyers. “””"

I have been searching for a payment collection service. Would you mind giving me the contact info of the company you use?

Re: Heard she got the death penalty. - Posted by Deb

Posted by Deb on July 13, 2002 at 18:09:18:

The death penalty!!!I’ll be sure to stay out of Ohio, he, he, he…You’re wise to put at least 1 month mtg payment into a separate account…I know B.Gatten recommends 3 months + security when doing a pactrust. Porter must’ve had a dominoe effect of tenant/buyers defaulting. What a shame, all that work to wind up with nothing!!
Thanks Cash,

Re: The Porter case: Here is what went wrong. - Posted by JohnBoy

Posted by JohnBoy on July 13, 2002 at 20:18:56:

“Evidently she took the payments from the people who bought from her, put them in her pocket and spent the money.”

What basis do you have to support that she evidently just took the money and spent it? It may be POSSIBLE that is what she did, but it isn’t evident that she did.

“Now the banks are foreclosing on houses that the owners moved out of as far back as 1999, and people who made their payments faithfully are losing their homes. It is a terrible legal mess.”

Really? And just what facts do you have to know that all these people she purchased their homes from had made all their payments faithfully??? If all these people were faithfully making their payments then she would have been the last person these people would have needed to sell their homes to! Most people that sell this way sell because they are MOTIVATED because of having financial hardships where they can’t faithfully make their payments. Many of them are behind on payments by the time investors enter the picture. In SOME cases their are sellers that sell this way where all their payments have been made, but they are about to fall behind on the payments as to why they sell this way. They can’t get the property sold and if they don’t do something they will fall behind on the payments! In few cases, a seller is just relocating and will sell this way to get a fast sale so they can just move on without having to worry about the property any longer, but these are far and few between on deals of this type. So my guess is that MOST of these sellers were already having financial problems when she purchased their homes. Only know that SHE defaulted, for whatever the reasons were, these people are crying how they are victims in this when the fact is they are no worse off then they were had she not come along in the first place. Her coming along only delayed what would have happened to these people had she not come along when she did. They would have lost their homes to foreclosure at that time! She is just their escape goat to blame it all on!

“The question is, why didn’t she make the payments like she promised? My guess it she wanted to keep the money. She kept it, she spent it, now she can’t pay up.”

While this may only be your guess, my guess is different from yours. And I don’t think it was some con game either. My guess is she meant well and planned to perform on her obligations and promises, but things got bad to where she just couldn’t pay.

My theory is that she obviously did not have enough reserves set aside. She probably took any up front money she got from her buyers as down payment money or option money and spent that on other things. That money was her money to do with as she wanted, but instead of putting that money away for reserves she used it for other things leaving herself without enough cash set aside for reserves. I don’t think that had anything to do with being a con, but just being foolish for assuming everything will work out where she would never run into any hard times where she may get stuck with mutiple tenants defaulting.

There are also court cases she was involved as the PLAINTIFF where she was getting people out of properties for nonpayment!

If I remember correctly I also think that article said something about her going through a divorce where she ended up with a lot of properties her husband did deals on that she got from the divorce settlement. So that could have something to do with putting her short on reserves also. She could have ended up with a number of properties from the divorce where she just took them over where she didn’t get any up front money from the buyers to put away for reserves leaving her with a handful of properties stuck with banking on the buyers to make payments without reserves to cover anything should any of them stop paying.

So my theory is that somewhere along the line she ended up with multiple non-paying buyers and/or vacancies. Got stuck with a lot of legal expense trying to get any buyers out while having to make the mortgage payments. Then along the line she couldn’t cover all the mortgage payments to where she was robbing from one property to pay another property’s mortgage payment, then eventually she fell into a domino effect to where she was behind on many mortgages to where she couldn’t catch up again before lenders starting foreclosing. Then after several of these deals going bad some of the sellers started crying to attorneys to where the media got ahold of this story and once that got out, a lot more of her sellers got wind of this and a lot of them started jumping the gun in fear of them being affected by this. She also filed a chapter 13 which appears to have been an attempt to work things out to get back on track again. Only she may have gotten so far behind to where even the chapter 13 wasn’t enough to bail her out to where she could get things on track again.

This is only my theory.

But the truth of the matter is, none of us really KNOWS what the story is as to how or why she ended up this way. The ONLY thing we do know is that she is in the mess she is in because she did not make the payments on time on a number of these properties. But we don’t KNOW what the reason behind all this really is. Anything any of us give an opinion on is just that, an OPINION with NO facts to back anything up on what we have to say!

Like Bronchick said, we only read a STORY which was written by some newspaper reporter based on what she was told by only one side of this!

We may never know the other side to this story! And anything we say is just a GUESS, an ASSUMPTION, and just THEORY based on not knowing all the FACTS!

But my GUESS is that she probably meant well by everything. She probably ended up with multiple defaults and/or vacancies where she didn’t have enough reserves set aside for this. Then ended up using money from one property to cover a payment on another in an attempt to keep from falling to far behind on any one property to avoid foreclosure. Hoping to get tenants in the properties that weren’t performing to get things back on track. But meanwhile everything she had ended up falling like a stack of cards to where she ended up to deep to where she couldn’t climb back out again before lenders started foreclosing on a number of properties.

So was it all a con? I don’t “think” it was. I think was all from not having enough reserves set aside. So foolish, yes. Stupid, maybe. a con, I don’t think so.

And just because she had several companies she was using certainly doesn’t mean she was trying to con people! That is just plain silly! Although some people may use multiple companies for the purpose of coning people, I don’t think that was her reason for using multiple companies. She done around 100 deals or more. So using multiple companies was the one thing she may have done that was smart! You don’t want ALL your eggs sitting in just one basket! I would prefer to use a seperate entity for EACH deal myself! Does that mean I’m trying to con people??? Of course not! I’m only trying to shelter each property from one another so they don’t all end up being tied up in a lawsuit from one property! Not only is that smart, but it also adds some protection to each of the sellers! Imagine having all your properties tied up in some lawsuit over something caused by one particular incident? What would that potentially do to ALL those sellers??? Now if EACH property was owned by a seperate entity then each property would be protected from being attached from any other property that ended up being involved in some lawsuit! That is only SMART business practices. Not some con!

One more thing… - Posted by GL(ON)

Posted by GL(ON) on July 13, 2002 at 15:00:54:

There is another angle on this case that I hesitate to mention.I don’t want to make everyone mad at me.

What the heck, I guess I can’t get any more unpopular than I already am.

Here it is. Whenever anyone hollers about what a great Christian they are I know they are going to try to screw me, ten times out of ten.

As my grandmother used to say “If you want a dirty deal get in with a church man”.

This does not go for sincere Christians (and others) who practise their faith quietly and try to be honorable without yapping about it.

I mean the ones like Mrs. Porter.

Re: Accidental Real Estate Ponzi schemes - Posted by Travis (Dallas)

Posted by Travis (Dallas) on July 13, 2002 at 19:23:30:

I enjoy hearing from those with experience over time…I try to listen and keep out of trouble.

Re: Subject To Gone Bad Article- Link - Posted by Deb

Posted by Deb on July 13, 2002 at 13:00:20:

Hi, thanks for the link to article. That’s something…wooo…have you had any similar problem with your subj2? Is there anything she could’ve done to prevent this? I mean setting the contracts up differently? I feel bad for her, the investor…all that work put in since 1999. If anyone has any preventative posts please post it!

Re: THE PORTER CASE: What went wrong? - Posted by Deb

Posted by Deb on July 13, 2002 at 17:53:36:

Link is in above thread-posted by Lee.

Re: THE PORTER CASE: What went wrong? - Posted by Deb

Posted by Deb on July 13, 2002 at 10:29:21:

You can find some info at Bill Gatten’s discussion group, A REPRINT OF ANOTHER THREAD…DANGER WILL ROBINSON

Re: What went right . . . - Posted by bill gatten

Posted by bill gatten on July 14, 2002 at 18:39:28:

I definitely second that!

What people ‘think’ they know is usually what someone thought they knew when someone esle who got it all screwed up, told them what they though THEY knew…about something they didn’t know anything about at all (except for what they thought they did).

Or, at least that’s what I’ve been told (by someone who ought’a know…and who is pretty sure they do, given the information they have to work with).


Re: Heard she got the death penalty. - Posted by $Cash$

Posted by $Cash$ on July 14, 2002 at 09:55:20:


Glad to meet you.

If you give me permission to e-mail directly, I will gladly give you the information.

Because of the editorial policy of this board if I post this information it would be considered advertising.


Re: The Porter case: Here is what went wrong. - Posted by GL(ON)

Posted by GL(ON) on July 14, 2002 at 07:04:56:

When you get a lot of non paying customers in any business you do something about it or go bankrupt. You don’t go on doing the same thing over and over, losing money for 4 years.

All I have to go on is the newspaper story and it says that people who made their payments to Porter are now losing their houses because she did not make the payments she agreed to make.