Wholesalers Beware - Equity skimming: Tale of a local home sale and a lawsuit

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Former ‘wholesale finder’ says he was thrown under bus by the prominent real estate investors.

https://www.seattleweekly.com/news/equity-skimming-tale-of-a...

His job was seemingly simple, but also important to the business model that Heaton-Dainard would work by.

Lundquist described his job as what was called a “bird dog,” or wholesale finder tasked with searching for low-value properties to be purchased by the agency, invested in, and sold for a much higher price.

The properties that Lundquist was asked to find would be relatively low in value — decrepit houses, homes in foreclosure, tax delinquent homes and even homes with recently deceased owners.

These kinds of properties are valuable to certain real estate investors because they can be purchased for low prices, then flipped and resold for lucrative profit margins.

Lundquist said he was able to find a lot of these properties during the few months that he worked for Heaton-Dainard. He worked primarily in the West Seattle area, where he grew up.

He said getting these kinds of homeowners to sell could be difficult, as often the owners were elderly and did not want to leave a home that was familiar to them.

Lundquist said he figured out that to be good at his job and to convince people to sell their homes to the company, he would have to spend weeks, even months getting to know the homeowners and figuring out what they wanted. He would stop by regularly to visit these potential sellers, putting in the work to gain an edge on his competitors.

But Lundquist said trying to broker a sale with the owner of these kinds of properties was often a “legal gray area” because homes going into foreclosure are legally referred to as “distressed homes” in Washington state.

“Distressed homes” legally require a “distressed home consultant” to be involved in the transaction and to represent the homeowner’s best interests in avoiding the foreclosure and understanding the deals and contracts they are offered for their home.

Washington state’s “distressed property” law is intended to protect distressed homeowners from predatory investors and wholesalers looking to take advantage of their situation in a practice known as equity skimming.

Under state law, equity skimming is illegal, and being identified as having committed a “pattern of equity skimming” can land an offender with a class B felony, according to RCW 61.34.030.

In 2013, less than a year after being brought on as “bird dog,” Lundquist believes he was made to unfairly take the fall for an equity skimming lawsuit involving a Vietnam veteran and the negative publicity it garnered.

‘As long as the price was cheap, they would take over’

Ames Larson was about 67 years old when he met Chris Lundquist. Larson owned a house in West Seattle, a property that Heaton-Dainard was interested in purchasing.

The home was going into foreclosure because Larson owned over $11,000 in delinquent property taxes. Because of Larson’s fixed Social Security income, he could not afford to pay the property taxes he owed, nor could he afford the cost of utilities in the home.

Lundquist said he had spent quite a bit of time with Larson and remembers how cold and dark the home was without electricity.

[Bryant Brislin]

I don't think there that many wholesalers that are making a killing.  Many are lucky to make 5k to 10k per deal, and that's usually a decent amount below what a typical agent commisison would be, plus usually the buyers are paying all the closing costs.  I'm only working on 2 or 3 at a time these days, and I'm basically a concierge helping these people with title work that they weren't willing to face, and I'm helping them figure out issues on houses they were going to abandon practically.  I'm also helping them get access to homes they didn't have access to for whatever reason, and I'm getting them to talk to their lenders who they've ignored for a year or longer.  If anything, I'm underpaid for as much work as I have to put into these, not to mention the divorces and probates where I'm waiting months for spouses and heirs to fight it out. I'm also helping with tenant and propert management issues, etc. Wholesalers wouldn't exist if agents/brokers could help on every type of deal, and if sellers weren't too intimidated/scared/not excited about working with agents/brokers.  I'm an agent, so I'm not anti agent/broker, I just think there is a lot of housing supply frozen in ice because sellers need a real partner to work through various issues they have before they can sell. I guess I'm not surprised because when I call my fellows agents, half or more of them can't be bothered to pick up their phone and would rather text, or whenever they actually pick up they always sound like they are at Target or getting a massage in the middle of the day, and not actually working.  You're lucky if they'll make the time to give you the lockbox combo, if it's not too much work for them.  Anyway, obviously there are some real hustlers out there, and they are not all like that, but I'm not surprised why sellers are not wanting to sell the traditional way.