Provide guidance or Caveat Emptor?

Question

BP provides a platform for investors to share knowledge and to conduct deals.  Many (especially newer) investors often ask for help in evaluating deals.  My question is do you ever provide answers to the unasked questions?  Specifically, do you comment on posted deals that are not deals because of information that may not be obvious to the buyer?  Should we do so or is due diligence entirely up to the Buyer?  Here's a couple of examples..

1) The ARV and/or provided comps are significantly incorrect.

2) The property has a stigma that is publicly known, but isn't advertised.  (I recently saw a house posted in a neighborhood that had 5 murders in the last 6 months.  The Buyer had no idea how tough the area was).

3) The property has non-conforming features that a buyer may not be aware of.  An example would be one or more "bedrooms" in a basement that could not be legally classified as bedrooms at resale.

Everyone has different goals, rehab costs, standards for livability,etc.  So, I see no reason to get involved at that level.  But, are we obligated to help others properly evaluate risk or are we obligated to not interfere?

Erik Hitzelberger · Answer

@Steve Milford  I like the line, "anyone can get lucky once or twice but this industry takes tenacity to succeed."  No one is more of a danger to himself/herself than the person who's had tremendous success on the first deal or so.  If not careful, that person will (very mistakenly) believe this business is easy and he/she is untouchable.

Jay Hinrichs · Answer

what your describing is why those that are not experinced in a market need to hire a qualified agent to lead them  to the promised land and run them around mine fields.

I am exactly like @Jd Martin  VERY LAST thing I am going to do is educate my competition..

If I was going to do that then I would just become a guru and charge for the information or knowledge I have attained over the years ..

JD Martin · Answer

As best as I can tell, what you are asking is if we do any legwork to help out the poster. I don't. I don't mind offering my opinion based on the numbers they throw out there, but if they don't know if the comps are right or if there's a landfill next door, I'm not going to the house or Google Earth to find out for them. If they already know stuff, and mention it, or provide pictures, I'm happy to comment on that stuff to the best of what they've put out there.

Caveat: if any of these people were direct competitors to me on deals in my area, I might be inclined to be less charitable! :D  Part of successful REI involves combining luck, knowledge, resources, and instinct to obtain profitable properties, and I don't have any interest in helping people going after the same properties as me, nor in sharing what I know about the property.

Steve Milford · Answer

1) If I am in direct competition with another right now, then they are on their own.

2) Otherwise, if someone needs help I willingly provide it once that person does a little homework, exerts some effort, or takes a little risk. If I need more info, then I ask it. In the end, I become better when I teach others. I am less concerned about individual competitors as I have found that most want an easier answer, yet they bow out when it becomes difficult, or they lose a few bucks. I.e. I have a friend that asks about my experiences and income as a Realtor about every 4-6 months. I tell him about income and then remind him about expenses and time involved. I don't believe he will ever pull the trigger even though I encourage him. He just doesn't want to take on the effort.

When we offer opinions, we also learn for ourselves. I.e. recently I commented on a direct mail post, and I offered an opinion. Afterwards, I looked again at costs, and found a new way to market to my market at an acceptable cost.

What I like about real estate is that the "little guy" can become wealthier in a short amount of time. That being said anyone can get lucky once or twice but this industry takes tenacity to succeed, and particpants need to be willing to taking a few hits. We learn more by our mistakes. To be better, I study and learn as much from those that are successful that answer and don't answer my questions. I.e. I became a Realtor to offer better service than I experienced. And it took me a while to find a mentor that has a similar style and now I am a direct competitor of those unwilling to previously work with me, as it turned out. What comes around goes around. And yes, DIY is expensive. Learn fast or bow out trying.

Erik Hitzelberger · Answer

@Jd Martin  I agree that it would be foolish to assist competitors in houses you are interested in.  But what about when you see a posting and say "I'd never buy that house because.."  If the reason has nothing to do with money and more to do with the quality of the neighborhood or the fact the city just approved a plan to build a new highway in the backyard or ...  would you ever share your knowledge on the post?

@Jay Hinrichs I completely agree with you that new investors need to hire an agent or mentor to show them the ropes.  The concept (often promoted on this very site) that you should never pay for expertise is ludicrous to me.  The mistakes you detailed at the auction show just how expensive DIY can be.

Jay Hinrichs · Answer

@Jeff B.  Oregon went to judicial sales a few years back that led to all sorts of games being played with redemption rights.. and no case law in some scenarios  ... talk about some folks being parted from their dollars

Jeff B. · Answer

Yeah, that's very sad that these sales are so obscure and the naive jump into the rehab or renting them before the title is filed.

RULE 1:  KNOW THE RULES!!

Jay Hinrichs · Answer

Were I really saw this was when I was a very active courthouse steps buyer.

our sales here in Oregon there are usually 2 to 5 bidders ( regulars) and 30 people looking they have their sheets etc... and when they see you buy a few houses they want to walk up to you and ask you all sorts of questions.. Many trade secrets... I would simply and politely tell them real estate is all public knowledge and one must gain that knowledge on their own or pay for it... and I don't sell the information and I don't give it away.  end of discussion.

Also I have witness on any number of occasions folks buy seconds when they thought they were firsts.  first time I saw this happening I tied to be the nice guy and let the person know it was a second and they were about to make a total bone head move and lose all their money..  person got defensive and thought I was trying to snake the deal from them .. So that was the last time I tried to help someone.

and it happened to me once.. I bid on this house in Portland opening bid was like 250k ( back in 04) but I did not know it had senior deferral tax on it of 95k and no one else was bidding .. could not figure it out.. until I let my check go and it was done someone asked if I knew there was a deferral and up until that point I had never seen that .. but I could not figure out why someone was letting me buy it for buck over and it was worth 400k... LOL... I came out of it OK but it could have been a disaster.

Lastly I watched a newbie buy a second and then go on to rehab the house.. the first went to sale 4 weeks later and I bought the first.. he was out his money for the second and all the rehab money.. never saw him at the sale again.. its CAVEAT EMPTOR all the way

Jeff B. · Answer

I will comment when there is a glaring contradiction or statement that needs reevaluation.

Just hate to someone headed into the swamps...

Provide guidance or Caveat Emptor?

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