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.