Just Left Seething from a Real Estate Club (with a Pace Morby mention)

[Jeff S.]

I can’t express how upset I am now. I just returned from a local real estate where I had a conversation with a young man named Frank. After the usual pleasantries, Frank shared he’d been in real estate for about a year and was a student of Pace Morby. (Here we go.)

I asked what he did in real estate specifically and Frank said he, “sources funds for real estate.” Whatever that meant. I asked about a recent deal, and he was proud to tell me he’s just in the middle of his first.

A local RE broker found an “old lady” who owned her home free and clear but with $83k in back taxes owed. Apparently, the home was a wreck and inhabited by a squatter. She just wanted out.

Frank was proud to tell me that they were able to buy the property from this woman for the $83k owed. The ARV? … $1.2M

With head shaking, I responded that he didn’t just buy a $1.2M property from an old woman who was unable to pay her taxes for $80k. Did he? “Oh no,” he said proudly. “She will get a cut of the profits once they fix the home.” Fine. How much?

They have it arranged that a broker (this poor woman’s fiduciary!!!) will get 50% of the profit, Frank and his investors would get 30%, and the woman would get 20%. 20%!!!  I thought I swallowed my tongue.

I regret I did not ask Frank specifically if he thought this was a good deal for the woman. He absolutely knew it was slimy though. All I could do was caution him to be careful who he associates in real estate. He said he understood but I doubt he got it.

Frank never said that Pace Morby was directly involved in this deal, but he acknowledged this is where he’s being educated and meeting colleagues. I cautioned him again to be careful with whom he associates. He said this was his first real estate club not held by Pace Morby and he left soon thereafter. Good riddance.

I know nothing of Pace Morby and don’t really read the lengthy posts here about him. This was my only real-world exposure. In over 20 years of attending real estate clubs, this was easily the most upsetting conversation I ever had at one. How anyone could teach such greed and exploitation is beyond me. It’s been hours now and I’m still upset. What’s with this guy? And what about the broker?

[Nathan Gesner]

Quote from @Jeff S.:

What happens if this old lady doesn't sell her home? She will lose it.

They are offering to pay off her $87,000 debt, they will remove the squatter, they will pour money into the property to ensure it sells for the highest value, and then they will give her an additional $240,000.

She is getting $327,000 for a property that she is about ready to lose and it's probably affecting her mental stability and physical health. She will go from broke to financially stable in a matter of months. Meanwhile, the investor is taking all the risk and pouring in all the capital.

Would you rather she lose the house and get nothing? How would you approach this lady and make a better offer?