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

ahhaha - Posted by waynepdx

Posted by waynepdx on July 13, 2002 at 19:28:18:

That comment has me laughing my a$$ off.

About a month ago there was a big news story about a guy that owned a car lot in Spokane, WA that said he would charge Atheists 10k more per car than christians.

I never did hear them do a follow up on it.

Re: One more thing… - Posted by William Bronchick

Posted by William Bronchick on July 13, 2002 at 16:38:11:

Funny, GL, we have more in common than I thought. One, we speak what’s our mind, even if it p*sses people off. Two, we both agree that people who use religion as a voucher for their credibility are not to be trusted. It’s one thing to say “I owe my success to my faith in God;” it’s another thing to say, “trust in me because I go to church.”

Another group of people I don’t trust are reporters. They excagerate the truth, ignore the facts and print whatever appeals to their readers. A recent article in the Denver Post about how foreclosure investors “take advantage of poor homeowners” was a perfect example - the author of the article ignored 7 points of law that I correct him on, and kept on writing. I have been interviewed by numerous magazines, newspapers and other media, few of which had the first clue about how real estate transactions work, much less creative ones.

Bear in mind that we should not read too much into this Porter story, since, after it is a STORY. It was written by a newspaper reporter who got most of her facts from the attorneys representing the parties suing Porter - that’s like getting the truth about OJ Simpson from interviewing Johnny Cochran.

Porter may be a complete criminal. On the other hand, she may have done a lot of bad deals. Or, maybe her mother had cancer and she spent all of the money on hospital bills rather than paying the mortgages. Or, maybe (probably) the market in Akron went South and she simply defaulted on a lot of loans (like thousands of real estate investors did in the 1980’s).

Truth is, we cannot really learn much from this story, because we don’t know all the facts.

Amen GL! nt - Posted by Chris (TX)

Posted by Chris (TX) on July 13, 2002 at 16:28:30:


Grandma told me… - Posted by $Cash$

Posted by $Cash$ on July 13, 2002 at 15:09:43:


Never discuss Religion or Politics with anyone, let alone the responses you may get from this post.

I know you only said what you were thinking and meant not to offend anyone.

It’s good to talk to you again.


Re: Subject To Gone Bad Article- Link - Posted by Frank Chin

Posted by Frank Chin on July 13, 2002 at 13:52:56:

Hi Deb:

There’s been extensive threads discussing this, plus an earlier one by a poster going buy the name “John Doe” who messed up one subject 2, and is sued by both buyer and seller. The difference with the Porter case is she’s sued by the dozens.

Setting up contracts would not help. Having reserve cash does.

The problem is subject 2 is promoted as a way for thos with no $$$ to go into real estate. After getting the deed, you hope to get a tenant buyer with the cash to make the payments.

The problem comes up when the tenant buyer comes up short, and you cannot make payments on the underlying mortgage.

So the bottom line is you’ll have to have cash in reserve to do subject 2’s.

Frank Chin

Re: THE PORTER CASE: What went wrong? - Posted by Scott Ewing SW Mich

Posted by Scott Ewing SW Mich on July 13, 2002 at 11:39:54:

went to landtrust but could not get search to work. Do you have the URL for that posting? Thanks Scott

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

Posted by JohnBoy on July 14, 2002 at 08:21:02:

No GL! The newspaper story does NOT say anything about people that MADE payments TO Porter are now losing their homes. The story only talks about people she PURCHASED homes from.

There is ONE mention of ONE buyer that says he paid LATE and he was served notice that he was being EVICTED because his contract was up and he couldn’t get a loan to pay off Porter, which was according to the terms of his contract. He cries the house was in bad condition and had wiring problems. Yet he obviously didn’t have a problem with that when he agreed to buy the house as is when it wanted it so badly! Naturally because of Porter’s problems this guy is feeding off her to make excuses for his own F$%^k ups! Bottom line. That guy BREACHED his contract! He paid LATE which is breach of contract. He couldn’t get a loan when his contract came due, which is BREACH of his contract! The story said nothing at all about any BUYERS that were losing their homes they purchased from her that made their payments. Go read the story again.

When you get a lot of non paying customers, of course you do something about it or go bankrupt. The question is, did she TRY to do something about or not??? YOU don’t know that. I don’t don’t know that. How do YOU know she kept doing the same thing over and over? How do YOU know she didn’t try to do other things to try to get herself out of this mess? Sh*t happens sometimes and no matter what you try to do may not be enough. We just don’t know what happened, why it happened, how it happened, whether she just allowed to happen, or whether she tried to prevent it from happening or what.

But if I had to GUESS on this, and based on what that story did say, it obviously appears that she DID at least TRY to do something about it! According to the story she filed a chapter 13 in order to buy time to sell off a bunch of properties so she COULD pay off $800k in mortgage debts! That cewrtainly looks like she TRIED to do something about it to me!

Now don’t get me wrong. I’m not defending what she did here. In my OPINION I think she messed up big time for not making sure she had plenty of reserves set aside to carry herself through any bad times she may hit along the way. But we don’t even know this just from reading one side of some newspaper story slanted towards one side and written to make Porter out to be some con! But that story sais she ended up with one of those companies from a divorce settlement. Maybe that had something to do with what cause all this to start a domino effect to where everything started to come crashing down on here. That divorce ordeal happened in 1997 which seems to be within the time frame from where all her problems started to develope. So maybe it did have something to do with this. Maybe it didn’t. We just don’t know any of the facts pertaining to this case. And to pass judgement based on one slanted newspaper story is just plain silly.

So all you or I or anyone else really knows from just reading that story is NOTHING! We only know what some reporter wrote which nothing but hearsay with NO facts to back up her story with! You can’t base anything off that without knowing all the FACTS.

Re: One more thing… - Posted by Hank

Posted by Hank on July 13, 2002 at 19:29:18:

The scoop on her is that she did marginal/bad deals and couldn’t get help on the count of all the bridges she burned.

Re: One more thing… - Posted by Deb

Posted by Deb on July 13, 2002 at 18:19:56:

You’re right Bill, we may never know the “real deal”. But I think it’s safe to say if you’re going to do these types of re deals, have a cash reserve to cover yourself in case the tenant/buyer doesn’t pay…at least enough to cover vacancy and eviction.

Here’s another point everyone forgets . . . - Posted by William Bronchick

Posted by William Bronchick on July 13, 2002 at 17:16:12:

Funny, but everyone says “hey, watch out for subject-to transactions because if you don’t have cash, you can’t pay the former owner’s mortgage and that leaves him in a bind.”

Consider this . . . what if you buy a property, take out a loan in your name name and can’t pay it? Point is, wether you buy subect-to the existing loan or with your own financing, you need to have cash reserves to deal with vacancies on the non-payment of your buyer. I’ve always said you should not buy rental properties without a cash reserve, even if it looks like positive cash flow on paper.

The reason I like subject-to transactions is that IF the sh*t really hit the fan, the real estate market went in to toilet and I got stuck with 20 vacant properties, I would be better off defaulting in YOUR loan than my own. It’s not fraud or illegal to default on an obligation - it’s breach of contract. If my corporation agreed to make your loan payments and then defaulted a year later, you’d have no case against me. You’d have to sue my corporation for breach of contract and that’s as far as you would get. I’m not sure Porter committed fraud, that will be up to a Court to decide. But, despite the newspaper headlines, my bet is that these former owners get a judgment against an asset-less corporation.

Let’s be clear, because I don’t want anyone misquoting me here:


However, if push came to shove, I’d rather answer to a former owner’s lawsuit than a lawsuit against me from a large financial institution for a deficiency judgment. Believe me, I’ve seen a hundred examples of this from the last real estate crash. I spend countless hours in court trying to ward off creditors of my clients that signed personally for millions of dollars of mortgage loans. They all told me over and over, “don’t sign personally.” I got the message loud and clear,

Doing business in corporate entities and taking houses subject-to existing financing to protect yourself from loss is not “evil”, “unethical” or “fraudulent.” It’s smart business.

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

Posted by GL(ON) on July 14, 2002 at 09:02:30:

All right. If she purchased homes from people, then did not make the payments, and the banks are going after the sellers, what happens to the buyers? Will the bank let them stay? Will the sellers let them stay? Will they get credit for the money they paid Porter even though she never paid the bank or the sellers? The H— they will.

I believe those people are in a serious situation, in danger of losing the house and losing the money they paid. The bank can certainly foreclose if they are not paid, and they can call the whole mortgage balance due and payable under the due on sale clause.

The seller could pay off (or refinance)a house they don’t want don’t need and thought they sold long ago. They could then sell it or rent it to the buyers, who they don’t know and have no legal obligation toward. That would be nice, and it would be the nicest solution. But how often is that going to happen?

This puts the onus on the buyer if they wish to keep the property, that is why they must suddenly pay off the mortgage or get a new one, and most of them can’t. That is why they are losing their homes, even if they lived up to their deal with Porter and never missed a payment.

The article states this clearly.

The article also states that she has been involved in 27 lawsuits in Summit County alone since 1999. This is before the bankruptcy mess even started.

This and other facts given in the article spell out a pattern of shady dealing going right back to the start.

If she were honest she would have cleaned up her mistakes long ago and not repeated them. Instead we have a pattern of lies cheating and evasion.

Maybe the story is a phoney. I can’t prove it isn’t. All I know about the case is what was in the paper.

Reading the article as a whole I get the impression of someone who was scamming everyone in sight (including her “trustees”, one of whom was in a nursing home and never saw the documents she signed with their name).

Actual Case in Point . . . - Posted by William Bronchick

Posted by William Bronchick on July 13, 2002 at 22:29:28:

FYI, an investor offered me 25 properties to take subject to that he had bought and financed in his own name. He was an honest guy that was in a bad situation because the market went South and the properties were running in bad negative cash flow. These properties, coincidentally, were in the Akron/Canton area, Porter’s backyard.

He offered me these properties for FREE. That’s right - take 25 deeds and no money down . . .

After a few calls to friends in the area, I got the word that the Akron market was in the toilet, so I declined the offer for the properties. I think the investor still has them and is renting them for negative cash flow, but he was inclined to walk away from them. He already contact several of the lenders to accept short sales so he could sell them quickly, but none of the banks would do so. He’s in a real pickle!

Now, which do you think is better in this situation - having 25 properties with negative cash flow with someone else’s mortgage or your own?

(That’s not a trick question)

Re: Here’s another point everyone forgets . . . - Posted by Frank Chin

Posted by Frank Chin on July 14, 2002 at 07:18:02:

Hi Bill:

In following the story, it seems Porter used a variety a names under which she operated. Not knowing all the details, it wouldn’t surprise me if she took the properties over via LLC’s.

If she defaulted on all 40 of these under the LLC’s, wouldn’t the authorities be able to go after her under some racketeering statute??. Wouldn’t a large pattern of defaults prove that she’s out to defraud?

After all, her victims would all be able to go to court and claim that they dealt with Porter to solve their problems, not this or that entity.

There’s a news story about a local businessman who made it a habit of buying a company, drain it dry, file bankruptcy, go to buy the next one, and do the same thing. Each bankruptcy by itself only showed bad business judgment, i.e. he took out too much money. But the authorities are looking into a pattern of it. The bankrupties leave in its wake people who spent their whole lives at the company now out on the street with no pension, and too old to get a similar decent job.

Looking at it another way, if I were to take on sub 2’s and rake in tons of money when things go right, and walk away ruining everyones credit when things go wrong, it sound awfully like “heads I win, and tails YOU LOSE” scenario. If this is the attitude, then those of us in the CREI business deserve a bad name.

With all the problems reported in the papers on Enron, Worldcom, etc., its a bad time for Porter to come out say claim that its not her fault, she only made a few mistakes. Looks like those smart folks at Enron, Worldcom are all claiming the same defense.

Frank Chin

Re: Here’s another point everyone forgets . . . - Posted by Deb

Posted by Deb on July 13, 2002 at 17:51:12:

This is a good case for all newbies. I have your AREF course Bill and you are right, you warn against doing rentals unless once has the cash reserves to fill in for vacancies, evictions etc…
I know you mentioned using a corporation in your post for protection; would an LLC provide the same protection ? Meaning , wouldn’t the seller have to sue the LLC? I think so…

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

Posted by JohnBoy on July 14, 2002 at 09:36:28:

Go back and READ the article again! The article does NOT clearly say this. In fact, it does not say anything to this affect at all! Go READ it again.

As far as what about the people in the homes where she isn’t paying the mortgages? GL, how do you KNOW that the homes she wasn’t paying the mortgages on actually have people living in them??? How do you KNOW that all the homes she hasn’t made the payments on are homes that are either VACANT or homes where the buyers living in them stopped paying their RENT to Porter??? You don’t KNOW!

As far as being involved in 27 lawsuits in Summit Count alone since 1999…did you go and look those lawsuits up to see what they were about? I did! MOST of all the lawsuits she was involved in were lawsuits that PORTER was the PLAINTIFF filing the lawsuits to get her tenants OUT of the property because they did not PAY as agreed! In fact, the ONLY lawsuits that I seen that involved Porter being sued as the defendant over not paying any mortgages payments were by the people that were mentioned in that newspaper article. I didn’t see 27 sellers mentioned in that article. Only a few names and those lawsuits were recent!

Do you see how slanted and misleading this newspaper story is??? You only read the one story written by some reporter and you just ASSUME all those lawsuits involved people suing PORTER over not making payments! But the FACTS are that many of those lawsuits were filed by PORTER suing her tenants for nonpayment of rents or breach of contract!

Now if you take into consideration that she had a lot of lawsuits that SHE had to file, adding in all that expense to get the property back from her nonpaying tenants, added with the fact that those tenants were not paying her the rent as promised. adding in the fact that left her with a bunch of mortgage payments to cover since no rent was coming in to cover those mortgage payments, adding in the fact she must not have had enough reserves set aside to cover this problem,…is it any wonder she ended up in the situation she is in today???

You are only ASSUMING things based on reading one newspaper article. You ASSUME she was coning people. You ASSUME people were living in the property and paying their rent where she took that money and spent it. You ASSUME people buying are losing their homes! You don’t KNOW anything about what really happened here or what caused the propblem, whether it was really a con or not, or anything about this case! You only ASSUME what you want to ASSUME happened! But you or I really don’t know anything about this.

GL, you above all people being an investor compared to the average lay person that knows nothing about investing in real estate should know better than to ASSUME anything from reading one side of some story written by some newspaper reporter!!! Man, this story has you ASSUMING crap and you are an investor! Imagine all the crap the general public must ASSUME after reading that article! But that is exactly why reporters write these stories the way they do. They always tell one side of a story making the accused out to sound like some kind of scam artist that was out to rip people off! And you seem to be falling for it!

Don’t inflate the issue - Posted by William Bronchick

Posted by William Bronchick on July 14, 2002 at 09:49:13:

Enron? Wordlcom? Get real . . .

You are forgetting that in at least 80% of cases, people who are willing to hand you over a deed for nothing are either in default already or are planning on walking.

Re: Here’s another point everyone forgets . . . - Posted by William Bronchick

Posted by William Bronchick on July 13, 2002 at 22:20:37:

Yes, you are correct. In the absence of fraud, criminal activity or disregarding of corporate formalities, a corporation or LLC will protect you from liability in these cases.

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

Posted by GL(ON) on July 14, 2002 at 13:32:19:

I guess my mistake was I ASSUMED that dealing in real estate “subject to” could be done in a safe legitimate way, and that if someone went bankrupt for $800,000 and took all those people with her, she must be a crook.

Now you say she was 100% legitimate, never tried to cheat anyone, did everything on the up and up AND THE WHOLE BUSINESS BLEW UP IN HER FACE ANYWAY.

What the heck, at least by dealing subject to, she can skate and leave someone else holding the bag, right?

Re: Don’t inflate the issue - Posted by James Buster

Posted by James Buster on July 15, 2002 at 22:18:56:

If you end up defaulting on multiple properties because the local RE market crashed, the real risk becomes an aspiring DA hungry for fame hitting you with criminal charges, not a civil breach-of-contract suit against your LLC. If the DA’s RE expert testifies that one of the advantages (to you) of a Sub2 deal is that your credit isn’t trashed upon default of the underlying mortgage, that will look real bad to a jury predisposed to see the trial as “poor homeowner vs evil businessman”. Your (very valid) point will be lost in the shuffle.

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

Posted by JohnBoy on July 14, 2002 at 14:17:59:

I never said she was 100% legitimate. Where did you fantasize that from??? I said we don’t know what happened. We only know what some reporter wrote based on what she interpreted based on hearing some things from only one side.

And there are many businesses that do everything on the up and up that blow up in owners faces. Are you saying that just because a business blows up in someone’s face then that means they were not doing things on the up and up?

And she isn’t skating away from anything! She has been sued, she is being sued, and she has lost! But that doesn’t mean what she did wasn’t on the up and up either. It doesn’t mean it was either. We don’t know what happened.

And this has nothing to do with the types of deals she did. Had she gotten bank loans in her own name on each of these deals are you saying she would not be in the same boat defaulting on the mortgages??? Had she gotten bank loans in her name all the banks would be facing the same problem. And who do you think all the money the banks loaned out belongs to? The banks? Wrong! That is money that belongs to many people that trusted the banks to handle it properly. Does that make the banks that would have loaned the money part of the scam also?

You are just being silly now jumping to assumptions and taking everything out of context.

Bottom line. You don’t know squat about what happened here and neither do I or anyone else that just read that article. The only one that completely knows what happened is Porter! We may never know the whole story. But it has nothing to do with how she purchased these homes. Regardless of how she purchased them, had she put plenty enough aside for reserves and had she made the payments then none of this would had happened. Same for ANY type of deal whether it be business, real estate, owner financed, subject to, lease option, bank loans, or whatever!

No matter how you do deals, there is no just skating away while leaving someone else holding the bag. I hardly consider having to file BK just skating away. But if she could had just skated away with no lawsuits, no BK, and just tell the sellers that is life…then that would be just skating away leaving others holding the bag. That isn’t what happened here. She has big problems to deal with over this. But she would have the same problems had these all been loans that she had gotten in her own name! The ONLY thing she doesn’t have to deal with is the banks in this case can’t come after her in addition to all the sellers coming after her and any buyers that MAY be affected by this coming after her! So what is she skating away from??? Nothing!