Warning for STR Pumpers

[John Carbone]

I’ve mentioned over the past few years to be careful how you pump and promote short term rentals to people in search of real estate. As I said before, when people take loses, they file lawsuits at anyone associated.

Different industry, but all the celebrities and athletes who associated with the FTX crypto exchange are now having to lawyer up for being an ambassador and pumper on their.

promote wisely. 

https://www.google.com/amp/s/s...

[Collin Hays]

Real estate professionals are, in many ways, acting as financial professionals.  Not unlike a financial advisor.  Of course, a real estate agent's job is to sell.  An agent is compensated at closing.  By their nature, sales people are inclined to point out the good and minimize the bad.  Nothing wrong with that.  

I wouldn't go so far as to say that a real estate professional has a fiduciary obligation to a buyer.  On the other hand, words and phrases such as "guaranteed", "no risk", "no brainer", "can't lose", and "you can do it from your iphone" could be quite problematic.  

We have a client that, in September 2021, purchased a cabin in the Smokies and called and asked us to manage it for them.  Of course we were honored, but when we went to the cabin to inspect it, we found that it was going to need about $75,000 of work just to be safe for guests.  And the maximum we projected it would rent for was about $35,000 per year.  The location is awful and it doesn't have any sort of redeeming qualities, other than just being a decent house in the woods, almost an hour away from attractions, and on a road that you need a 4WD to traverse.

The homeowner became angry with us and said "well the realtor said he thought it would do $75K a year easily."  Hmm.  That's a problem.

Fast forward today:  They've spent almost $100,000 on the property and it's still got bad water.  It took them 13 months to get it ready to rent.  We finally started renting it in October.  As expected, it did around $3000 in October and around $2000 in November.  I was surprised it did that well. 

Meanwhile, they have about $420,000 tied up in a property that is probably worth less than $200,000, fair market value.  Do they have a cause of action against the realtor?  I have no idea - I am not a lawyer - but I wouldn't want to be sitting in his shoes right now.