Guru Scam Help, Is What I Have Now Still Valuable?

Question

So, I have what seems to be a weird question to me. I started following a "Guru" that is teaching about seller financing and was selling a course about it. He was teaching to:

1. Get properties under contract from sellers with seller financing.

2. Get them under contract below market value

3. As little down payment as possible

4. See if they will accept your offer with 0% interest (or very low interest)

And then they would teach you to turn around and sell the property using seller financing but raise the price by at least 10k, require a larger down payment, and put a higher interest rate. I thought all this sounded like a great idea and was going to buy the course. I knew I would have to start building a list of potential buyers in my area so I have been posting to Craigslist and have since started to acquire a list of buyers who want/need seller financing (20+ people).

The issue is, I have since decided to not buy the course (because I think it's another Guru scam) and now I have a growing list of people wanting/needing seller financing in the Morgantown West Virginia area. Is this valuable or should I stop building the list? I am sure to inform the people that this doesn't mean that I have a house available for them, but just that I will have all the wants and contact information if anything becomes available.

Could I maybe connect with investors and match them with a potential buyer?

I don't really know what else to do with this so any help would be greatly appreciated. Thanks.

Dakoda

Account Closed · Answer

My main method to get these houses is expired listings where the house is vacant. I market to them 45 days after the listing has expired. That's because they will be inundated with realtors trying to get them to list their property. I then send them a letter telling them I am willing to pay full market price for their house, please call me to discuss.

Unless you have the cash to buy and close on a REO deal, that that won't work. After you close on the deal yes you can then sell it with owner financing.

Jay Hinrichs · Answer

Account Closed

Bill Gulley · Answer

Yes, you have found a guru scammer! Sounds to me like a guy named "Joe" may be "Charles"!

@Denise Evans, an attorney in AL. has written a book on seller financing, it's pricey but it should be worth it from her experience as she teaches RE for RE exams and has helped write the text for the state. I would think her book would be applicable nation wide but it is limited to her state, so further investigation and due diligence is still warranted.

My book is still in the oven!

I laugh when a guru or investor uses the term "buy under market value" if the seller advertised on the market, the sale price struck IS the market value, so look up the definition of "real estate market value"!  A distressed seller or property may have a depressed price, but that price is the market value when the conditions of the sale meet the market value definition.

A distressed property will need a "value add" to increase the value, a distressed seller can sell allowing you to profit without touching the property, but this has limitations as well as to giving a fair price and not screwing a seller. If any seller can be seen as not acting prudently, their deal can be unwound even after you take title, remember even idiots have relatives, know smarter people than they are and might even have a cousin that's an attorney, you never know.

Nothing or very little down is another contract flaw, financial consideration must be reasonable at the price agreed to, a promissory note can be used as consideration so you can retain your cash. If you want your contract to be enforceable then provide equitable consideration, not this $100 junk.

0 interest will really tic off a seller when they have an imputed tax on interest and depending on how you led them to accept such a deal can take you to court. Predatory lending can go to the party that devised or introduced terms, it's not just on the lender's back with seller financing. If you can't pay 4 to 5 % right now, you shouldn't be in real estate, if that breaks a deal then it's not a deal.

A seller financed (SF) note is not the same as a purchase money mortgage, it is funded by equity based on an agreed sale price, this makes it an installment loan and a different animal than a cash funded note.

Institutional notes have a due on sale clause, an SF note should have if it is common for your jurisdiction but it may not have. But what the seller has is a type of contract that requires consent of any assumption of their financing. If you don't have consent they can call the note due or untangle any deal you did. Assumption of their financing is you using their equity to fund another obligation!

Next, adding interest to an underlying loan, several issues, but your interest rate won't match the principal owing on the underlying mortgage this makes tax reporting and borrower disclosures difficult, beyond the financial scope of any small investor without a loan compliance department.

A financed option is a financing arrangement under Dodd-Frank with any consumer.

Selling significantly above your recent purchase price, basically increasing the value for your financing is predatory dealing and lending, the value of a property does not increase due to financing terms! A higher price needs to be based on value added, your name on title isn't a value add, neither are easy buying terms, anyone should be able to put lipstick on a pig before they sell it, that can add value! $10,000 is significant on a $50,000 house, not so much on a $150,000 house. Value is not arbitrary, you don't pull it out of the blue, again, real property is different than personal property and they way we value it and deal with it is not the same thing as personal property.

You need to learn real estate before attempting to understand real estate financing or deal making. No guru teaches real estate, they teach ploys to do transactions and usually if they aren't illegal they are unethical. Read my BP blog "How To Develop A Good BS Meter"!

Good luck......and stay the h3ll away from gurus! :)

Brian Gibbons · Answer

1. Pick up phone and call local KW office.

2. Ask to speak with a broker.

3. Ask for an appointment to talk over being an agent.

Brian Gibbons · Answer

@Dakoda Spencer

Real Estate License West Virginia, see a great RE Broker, I like Keller Williams.

Single Payment Note is one payment due in the future (3-4 months), not monthly payments.

John Thedford · Answer

Buyers who want and / or need seller financing are a dime a dozen. They can range from penniless buyers to experience investors. I don't think there is a need to retain that list but others may have a different opinion.

Brian Gibbons · Answer

In the lease option business, I would be licensed, whether Property is located in WV or FLA.

Then I would look for home seller problems, such as expireds, cancelleds, long days on the market, eviction court with DIY Prop Mgrs, etc.

Also wholesalers that have leads with little equity.

If you are in the "solving problems for sellers" pretty houses with little equity is a good niche.  You can make 3% by listing a home on "Lease Purchase" and get a commission.  I like a Delayed Sale and Purchase Agreement with Rights of Possession.

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Another problem for Sellers is "Minor Rehab"

Say you have a $200K ARV but only needing $20K in rehab.

This is a lousy offer for the Seller.  .7 x $200K - $20K = $120K net.  Crap Offer.

How can you help the Seller?

A. Go to REIA meetings and get Private Lender Rehab Money, $10K - $30K, terms 10% interest, paid off in full in 3 - 4 months

B. Convince the Seller you can use your funds to buy, fix and resell on Seller Financing.

C. Key - You must get on title by using a Single Payment Note, fix property fast, and resell at a good fair price fast.

D. No payments to Private Lender or Seller until resale.

@Steve Vaughan may want to comment.

John Thedford · Answer

@Dakoda Spencer

If you start doing lease options, lease purchase, etc that has its own set of legal issues.@Brian Gibbons

@Bill Gulley

These two guys may want to chime in. If you have cash, which it appears from your post, why not consider just doing flips and selling for cash? Another great option is buy and hold rentals. Get enough of those and you have financial freedom. Last but not least, is becoming a private lender. You must know your state laws as well as have a handle on Dodd-Frank. I know enough about DF that I just want to avoid doing any loans that are in violation.

Brian Gibbons · Answer

Hi Jay - You and I have spoken ad nauseum about buying on either Sub2 - sell on a Wrap,  and buying on Sub2 - and selling on LO, and how you have rescued poor sellers from neophyte OR Guru Graduates buying on sub2.

My advice w buying on sub2 for most people - get on title and either fix and resell or quickly resell for cash, cashing out the seller quickly of the existing financing.  Nothing long term when buying on sub2.

Dakoda Spencer · Answer

@John Thedford, I don't have any money that I am able to put into a flip. I need to find some deals that I can start to raise some capital on since I am so low on finances. Only about 5 months ago a got a good job instead of part time construction jobs so I'm just now able to start saving money.

Account Closed, how can I become licensed? I have entertained the idea of becoming licensed several times before but I haven't ever found out how. You also said something that I don't quite understand. What is a "Single Payment Note"? I understand most of the overall theories but I lack the specific understanding of any one subject.

Guru Scam Help, Is What I Have Now Still Valuable?

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