Thursday, September 13, 2007

Don't Fall For Real Estate Investment Seminar Scams

Some of the real estate investment scams out there are so absurd you’d think there would be no possible way that anyone would fall for them. But they do – my, how they do!

One day a sweet retired lady came to our office and told our Loan Officer, Norm, that she had just spent the only $23,000 she’d had to her name at a real estate investment seminar in Florida. But not to worry, she’d learned at the seminar that she could come to us and purchase investment properties anyway, since she didn’t need any money for that. For qualifying income she received $1,300 per month from social security. Even when we had 100% loans for investment properties, she couldn’t have qualified for one of them. She insisted that she could do it though, because the people at the seminar had said she could. If we hadn’t felt so sorry for her, we would have told her to go ask the seminar people for the money.

More recently, a previous client came to us in a panic, because they’d joined an investor network (All of these are not bad – we participate in one, but make sure you READ BEFORE YOU SIGN.). If you sign without reading or understanding you could end up like these people, owning three properties, with three mortgages and very little to no equity. One of the houses is vacant, and two of them are rented for much less than the payment. And our friends are obligated to make the payments for a full year or until the houses sell, whichever comes last.

At the end of them taking all the risk and making all the payments, they’ll have to pray that the houses sell in these crazy market conditions, and if there’s a profit, they get HALF of it. Not a good situation for them. Good for the realtor who conned them into it, however -- he gets a nice commission on the purchase and the sale, regardless of how the investor does. Sadly, there’s nothing we can do for them either, so we just referred them to a good real estate attorney. These are not dumb people, by the way – they were in good financial shape with perfect credit before this happened – hopefully they’ll get through this ordeal without completely destroying that.

I don’t know how people sleep at night, but seriously, be careful with those investment clubs and seminars. Make sure you understand how you’ll benefit and if the level of risk you’re taking is appropriate to the potential pay-off.

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