Re: Wholesaling properties - Posted by Frank Chin
Posted by Frank Chin on August 30, 2011 at 06:40:33:
Ben:
I agree with what you are saying.
First, the law is against “I’m going to save your home from foreclosure” investors. Year’s ago, it’s “let me buy your home before the minorities move in” investors.
In each case, the state had acted to stop these methods. I am pointing this out to the OP looking for wholesaling opportunities, and if you don’t know about the laws governing the purchase of properties, you are in a world of hurt.
Unfortunately, many wholesale investors often approach the elderly such as my dad, and you are right that there is no law against offering 50% of FMV, for a home where there is nothing wrong. And legally there is nothing legally wrong with lying about the FMV of the home to the elderly, or change the subject if it ever comes up either. I took a course in real estate investing some time back where the investor looks through the public records, find free and clear properties, and then make sure the owner is an elderly person. He would then make a 50% low ball offer, and if the person says no, he moves on. But sooner or later, someone would fall for it.
If you say there is nothing wrong with this type of investing, yes, there is nothing legally wrong. But morally, I would not engage in this type of investing. It is a grey area. Apparently, many state AG’s crack down on this grey area as well, as apparently, Washington state did.
And if you are saying there is no equity in foreclosure situations, the law cracks down on “investor rescuers” where the elderly may have run into trouble falling behind on home improvement loans, usually a small fraction of the worth of the home, or fell behind on taxes, for instance, for some debt for around $10,000. The rescuer would come in and say “why don’t I pay you $50,000 for your home, deed it over to me, and I’ll take care of your problem.” The problem here is the elderly may not have the means to go get a $10,000 loan even with a $100,000 equity, as they may not qualify for the loan.
Then, technically, if the house is allowed to go to forecloure, and sold, then normally the overage goes to the owner. Guess what?? The home is already deeded to the investor rescuer.
But, for every one person that tries to do a wholesale deal legitimately, there’ll be another one that’ll take an opportunity like this, and turn it into a scam.
For those that argue that the state took all this trouble to pass a law for an non-existent problem, GOOD, then there should be no complaints. And if you are saying there is yet NO LAW against investors scamming the elderly, then I’d say something should be done about it.
Just to add a story I read in the Chinese newspaper a few months ago. I studied that language as a young boy, and I read it weekly to keep up.
The story reports on an elderly women who was evicted from her home, and wound up at a shelter. The story got into the paper because her home health aide was arrested for fraud, as well as her boyfriend.
Apparently this elderly women had no children or any known living relatives. During the foreclosure of her home and eviction, the case caught the attention of someone at Legal Aide.
Checking into it, turned out this elderly women owned a shopping center and her home free and clear only a few years back. Her annual income ran half a million to a million from the rent. Apparently, the health aide learned of all this, and convinced the old women to deed the real estate to her and her boyfriend for a “low ball” price, and she’ll take care of her for free for life, as a daughter would.
Long story short, the health aid never kept up her side of the bargain, and obvioulsy the elderly women soon ran out of money, to pay for her care.
Anyway, the story ended that the attorney for the health aide and her boyfriend claiming that there is NO LAW against making LOW BALL offers. They claim the old women was of sound mind. And NO, they never told the old lady they’ll take care of her. “Well sorry, she heard it all wrong”.
So when you mentioned about no law against the investor making a low ball offer to my dad, it reminded me of this. But is this right???