Morality issue...

[nategesner]

I try hard to be moral in all aspects of life, so this question pertains to that.

I've read a lot about flips, bird-dogging, and other REI methods.  They are obviously legal, but are they moral?  The way I understand it, and I may be wrong, the intent is to take advantage of someone's predicament.

For example, I find someone that is recently divorced and can't afford to keep their home.  The property is worth $150,000 and she still owes $110,000 on it.  I tell her that I can put cash in her hand and keep her out of bankruptcy or foreclosure if she will sell the property to me for $120,000.  She likes the idea of $10,000 cash and keeping her credit and we close.  I then turn the property around, sell it for $140 - 145,000 (quick sale) and make a neat $20 - 25,000 profit.

I know this is a simplistic version of events, but it is the basic gist.  My problem is that I am basically tricking this woman out of her equity.  It seems that the moral thing to do would be to offer to help her sell the home for a standard realtor's fee of 3%, or even to split the profits with her.  That would be an honest attempt to help her while profiting.  The flip thought process is to hide the truth concerning the profit and ability to sell quickly, thereby making the seller feel they have no choice but to let me handle the deal for them.

Am I wrong on this?  

[makenmoney]

Hi Nategesner,

Thanks for keeping us honest and moral.   Are these techniques moral? It depends on you!  I'm sure there are investors out there that are just out to make a buck and don't care what the end result is to the seller. I've come across them already and refuse to deal with them on their level.

I would like to think there are more honest moral people, like myself, that are out there to solve people's problems, make it a win/win situation and make a profit at the same time.  

In your scenario if the divorced woman can't afford payments on $110K for a couple of months and ultimately ends up in foreclosure with NONE of her equity and bad credit haven't you done her a service?  Remember bad credit affects every aspect of your life these days (insurance rates, car loans,  etc.).  In this market, with underwriters swamped,  it can take 30 days just to get the loan closed so the sale just might not be as quick for her as you claim.  This would be along with dealing with the realtor, keeping the house cleaner, people in and out of the house at their convenience, not necessarily hers, negotiating repairs and worrying if you don't concede you have to start over.  Get what I mean?  It just may not be worth it to her.  The good investor has the interest of the seller in mind also and tries to find the happy medium.

Have you actually purchased a property and talked to a desperate seller?  

The ones I've dealt with just want OUT and need someone to help them do this.  One that comes to mind was the first property I purchased.  The seller had gone through a bankruptcy and thought he had paid what he owed. The bank stated he was 6 months behind on payments and was foreclosing.  He had the house rented to a friend who could document that the previous 18 months of payments had been made on time.  The customer service people kept him on the phone for hours and told him to call the lawyers, the lawyers told him to call customer service.  Are you seeing this picture?  He didn't have the money to repair the roof and paint the house.  He wanted $14000. when all was said and done.

I talked at length with the seller.  Had his mortgage statements audited. Talked for hours with customer service, accounting, and lawyers to stop the foreclosure process.  They closed the bankruptcy department and moved it to a different state the day before we closed so we had to close with inaccurate numbers.  In the end he got a $4100. refund from his bank  and received his full $14000.00.  He salvaged whatever credit he had left, the bank got rid of a bad loan, and I paid $88,000. for a property worth $127,000.   Was it worth it-yes!  Was it moral? Yes, I think so....

I can't quote the verse exactly..The love of money is the root of all evil.  It all depends if the person is evil in the first place!!

Kathy

[RKIMBELL]

SOUNDS TO ME LIKE IT IS A WIN/WIN SITUATION. YOU ARE SAVING HER CREDIT, GETTING HER OUT OF A BAD SITUATION, AND HELPING HER GET $10,000 WORTH OF EQUITY. THE IMMORAL THING TO DO WOULD BE JUST TO GIVE HER $110,000 AND GET HER OUT OF THE SITUATION. SOME PEOPLE DONT HAVE THE KNOWLEDGE TO GET THEMSELVES OUT OF PREDICIMENTS AND COULD USE THE HELP. HEBREWS 5:2 " HE IS ABLE TO DEAL GENTLY WITH THOSE WHO ARE IGNORANT AND ARE GOING ASTRAY, SINCE HE HIMSELF IS SUBJECT TO WEAKNESS."  GOD DIDNT PUT USE HER NOT TO USE THE KNOWLEDGE HE GAVE USE, WE ALL ARE BLESSED WITH DIFFERENT GIFTS WE SHOULD PUT THEM TO WORK FOR HIS GLORY AS NOT TO LOSE THEM.

SORRY I'LL GET OFF MY SOAPBOX.

RKIMBELL

[nategesner]

Thanks, everyone, for the information.  I'm still struggling with the concept, but you've definitely explained it better and given me a little more to chew on.

It's not that I automatically dismiss these deals.  I've just seen many discussions about them and it always feels a little dirty, kind of like the used car salesman.  You've given me a different perspective.

Thanks!

[$Cash$]

nategesner,

Glad to meet you.

First and foremost I use the Subject To method to invest.  I have helped many people both on the buying an selling end and never have done a deal unless it was a win/win for everyone.  I made serious money doing what I do and sleep very well at night.

I also am licenced by Nevada State Insurance Division as a Bail Bondsman and own my own Bail Bond Company.  So I post bail for all kinds of suspected criminals.  I believe you will find that  this is the American way of doing things.  I do not judge them before I bail them out, well I shouldn't bail out the Domestic Violence people, or the Bank Robber or the Meth Head, but it is ok to bail out someone who only had a traffic ticket they did not pay.  We should keep those other people in jail even if the court proves them innocent later on.

This is the part of your post that got to me, dirty used car salesman.  I am also licensed by the State Department Of Motor Vehicles as a Used Car Dealer so I guess this makes me a dirty used car salesman also.

If you insist on quoting from the Bible at the bottom of your post and talk about morality, then I will turn the other cheek for you as you have already slapped one side.

John $Cash$ Locke

[tedjr]

I agree with every other post here so far. We as hopefully professionals should deal honestly with everyone. Sellers that are desperate know they are desperate. It would be nice and moral just to give them the cash to help them keep their house.  The moral thing is to say that you are not a vulture trying to pick their bones and leave them nothing but are in fact trying to help them. They MAY be able to get more for their property if they can wait and fix it up but maybe not. There are shurelu crooks out there that will tell a seller they will give them the moon and at the last day say sorry can not do the moon but how about some stale cheese and some mouth wash to wash the bad taste out. Doing all this on purpose of course. I have dealt with a few investors i=like this and the moral thing to do would be to castrate them. his stuff is getting too deep. If you always do win win deals like John says you will be able to sleep at night. Give away too much trying to be a do gooder and you may as well hand out $100 bills on the corner. I tried to open a car lot here in Austin too but did not have the cash to make a go of it.

Take care

[branboles]

I think that if you are going to take this point of view, nategesner, why are you even considering doing anything in real estate?  I agree with the other responses; if it is a win/win and you are not trying to swindle anyone, how are you taking advantage of anyone?  Transactions in real estate boil down a buyer paying what seems to be a fair price to the buyer, and a seller selling at what seems to be a fair price to the seller.  Of course, what a "fair price" is, is always subjective to some degree.  That's business in the real world, no matter if it is real estate or not.

Secondly, I have to support Mr. Locke as well.  This is not the appropriate place to quote the Bible and post something about morality.  There are plenty of other places for that.

Just my $0.02.

[WilliamGA]

It seems to me that there needs to be alot more discussion these days about morality and honest business practices and I see no problem with it being discussed here as long as it is in relation to how we do business.

Most of the investors I meet, I try to stay away from because of their shady business dealings. We all suffer because of this and the negative thoughts people in general have when you tell folks you are a "real estate investor".

I am glad that some people on this board are concerned about this and want to talk about insuring that the way they are doing business is both ethical and moral.

As far as my bible quote in my signature, I don't care if you like it or not. If you don't want to see it, don't read any of my posts.

[agkatz]

The real issue that you're having is that you are UNCOMFORTABLE WITH THE BASIC IDEA OF MAKING A PROFIT AND GETTING PAID.

My question to you is  Why do you find making $30K in profit to be immoral, but making the standard 3% realtor fee NOT immoral?  

Why not just calculate minimum wage (pay yourself $7 an hour) and give the seller almost all of it?

You could do this.  But you shouldn't.  And here's why

If you look deep inside yourself, I think you'll find that you're really uncomfortable with the idea of seeing yourself as wealthy.  You might even have feelings that "you don't deserve it."  

Well, understand this my friend  You deserve to be compensated to the-- for your time, money and education.  (And more than just minimum wage)  You don't have to feel guilty about this.  You're not taking advantage of ANYONE.  The sellers know upfront that you are making a healthy profit and that this is the price for them getting a quick, hassle free sale.  THEY KNOW THIS.  They know that they could do it themselves and sell it to a retail buyer.  Or maybe they can't, so you're earning your money twice-over.

Unless YOU CAUSED THEIR FINANCIAL CIRCUMSTANCE, then you are under morally obliged to get paid WELL for helping them out of it.

And how much you get paid has a direct correlation with YOUR SELF IMAGE and what you FEEL YOU DESERVE.  

If you feel that you deserve nothing for your efforts, than just charge them $7 an hour.

But I bet you're worth more than that.  I know I am.  In fact, I feel I'm worth about $1,000 an hour.  That's how valuable I feel my time is.  

- Adam.
RealEstateCourseReviews.com
http//www.realestatecoursereviews.com

[$Cash$]

William GA

Letter and signature on file.

$$$

To:  John Locke

Dear John,

I want to thank you for all your help in selling my home.  I was very impressed with how you do business.

Your concern for my well-being as well as your knowledge of the Las Vegas housing market, helped make this less trying.  As you know, my husband was overseas while we were negotiating the deal.  Never at any time did I fell under any pressure from you.

On the contrary, being able to vacate my house without the added chores of cleaning or painting made my move much easier.

I was very apprehensive at first about having someone be responsible for my loan, but your knowledge of the financial procedures along with the help from the loan servicing company helped do away with those fears.

I have no doubt that selling my home through you was the best thing I could have done.  Local realtors discussed selling my home through a deed of contract, but they wanted to sell it for much more that the market could bear.  It never would have sold, and I never would have pocketed the amount of cash I did.

Once again, thank you for your help in selling my home I will (and have) recommended you to my friends.

Thank You,

Patricia J. Collins

$$$

I have many letters similar to this in my credential book.  Does this sound like I took advantage of this lady?  Did I make money off this deal, of course I did, that is why I am in business.  Where would this person turned to for help?

As far as quoting scripture, I did not say there was anything wrong with this, being a Hard Shell Baptist, I know all about Fire and Brimstone.  My point in my post was two fold you should get rewarded for what you do, the second point being if you really hold true to the Word, then why judge anyone lest ye be judged.  I hope you did not feel I was degrading someone because of his or her beliefs only that you should learn to be careful what you say about anyone.

It also relates to marketing, included in marketing is Public Relations, in this case you are in front of a seller who needs help, you get to the part where you can help them find out he is a used car salesman, is the point where you jump up and say “I can’t help you your are a dirty car salesman.”  So the lesson in all of this is be careful what you say.  Always think about the other person’s feelings.  It’s called Public Relations.

By the way one of my daughters, is Catholic, one is Mormon and one is Jewish, the truth, so who am I to Judge.

John $Cash$ Locke

PS:  To the poster who started this thread don’t be discouraged, it is OK to help someone and make a profit doing it.

[agkatz]

Hang on, guys....

Nobody is arguing AGAINST being moral and ethical.

The issue-- as I understand it-- is "Is it moral and ethical to make a profit by helping someone who made a poor financial decision in the past? (when they bought the house in the first place)"

I believe that it IS both moral and ethical.

- Adam.
RealEstateCourseReviews.com

P.S.  Let's make a new rule that if we're going to quote scripture, let's make sure we quote really cool passages, like this one from Pulp Fiction

"Ezekiel 2517. "The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of the darkness. For he is truly his brother's keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy my brothers. And you will know I am the Lord when I lay my vengeance upon you.""

;)

[WilliamGA]

John,

I don't need to see a testimonial letter from you to "prove" to me that you help people out of a jam and do an honest, ethical business. I help people all the time and make money while I do it. No shame in that.

I was just commenting on the fact that it is ok to have questions about when a win/win becomes win/lose for the seller and I have seen some of those deals happen.

In my opinion some investors like to push a good deal to the point of really creating a hardship for their seller. After all, they ARE desperate, right? Get all you can. I hope I have never done this.

Is making money immoral? Absolutely not. Is extracting every last dollar (and then some) from a seller (as some course authors tell you to do) just because they are desperate and you can? I believe it is.

[$Cash$]

William,

The letter was not necessarily directed at you.   It was done more for the other posters to show that yes, we should be moraly and ethically responsible for our actions when conducting creative real estate investing business.

This is what gets us referral business, keeps us in business, none of us would last very long if we did not conduct ourselves in a win/win manner.

I felt that because of your pro investor status that you would understand better than most what I was trying to accomplish with my posts.

All in all very good thread this is how we all learn.

John $Cash$ Locke

[Mark Ratliff]

deal
What about TREC?
The Texas Realestate Act says Bird-dogging is NOT "obviously legal" as
The Gentleman has stated. Go to TREC.COM and look at the Q and A section.  It clearly states that Bird-doggong is ILLEGAL.
My .02 ? I thing there is nothing wrong with a person earning a decent living doing this kind of work. I've done a little "Beatin the streets" myself,but now I wonder if i should continue without a realestate lisc. Any advice would be appreciated. The fact is, Bible quotes don't pay the bills and I'm quite sure that prison food sucks!
PLEASE HELP...Desparate Bird-dog.

[Mark Ratliff]

hammer
Sorry. I meant to say" MORALITY vs LEGALITY " on that last header.