October 25, 2014 • By Dennis Beaver
“I have received an invitation to attend a free real estate seminar put on by a company that flips homes but have never had any experience in buying or selling real estate. The TV show makes it look pretty easy to buy a house and quickly sell it for a big profit.
“However, on-line there are lots of negative comments about these seminars, from people feeling sucked into paying thousands of dollars for advanced training and getting nothing of value. I’m a retired Hanford elementary school teacher and have a tough time in saying no to anyone, so a high pressure sales situation worries me.
“Have you ever been to one of these seminars? Do people make money from their courses? Do you have any advice?”
‘Most students do not make money’
The week after receiving our reader’s inquiry, we spent from 8:30 until around noon at an incredibly interesting seminar on flipping real estate. It felt like being at both a religious revival meeting and a dinner hosted by cannibals where seminar attendees were the main course.
The entire objective of the free program is to get you to sign up for a three day $1497 seminar followed by others costing thousands of dollars.
Arriving at 8:30 a.m. Saturday, a group of the flipping company’s staff members with a hungry, fake look, communicating, “You are my commission!” hand out registration forms containing powerful disclaimer language which we saw no one take the time to read before signing and turning in.
Repeatedly, we asked for a copy of the form; reluctantly given one, the hassle explained by one sentence making complaining customers go away:
“Most students do not make any money and they also purchased additional training materials.”
‘We give you an unfair advantage’
The messages at this free seminar were convincingly stated by a talented, high energy presenter:
- Real estate investing — flipping homes and buying tax liens — is easy, realistic and our instructors open the door of possibilities for you.
- Wealthy people have an unfair advantage which we give to you. We have access to information that others do not.
- Take action! Don’t sleep on it! Sign up for our three-day seminar! Go to the back of the room and sign up now!
- Surround yourself with smarter people — people who can help.
- To get what you’ve never had, you must do what you’ve never done!
- Stand up and follow me to the back of the room where we’ll sign you up. And yes, we have payment plans.
Reality is something quite different
“House flipping has enormous risk and those successful at it are seasoned, experienced people with money they can put at risk bringing a structure up to local building standards without affecting their personal economic health,” Sacramento real estate appraiser Atom Levi told You and the Law.
Forty-seven years an appraiser, Levi holds the highest national designations in real estate appraisal, MAI and SRA, and has been a licensed real estate broker for 37 years. He is well acquainted with home-flipping seminars, “That do little beyond selling hope to the desperate and deceiving the naïve.”
“There is no free lunch and you can’t just put a coat of paint on a property and sell it for great profit, especially now that house prices are elevated because financial institutions are keeping billions of dollars of properties off the market, by allowing people to remain living in homes without making payments. This is a shadow inventory of houses, and it is enormous,” he points out.
“The TV show ‘Love It or List It’ is a good example of how an older property has many unseen issues and you do not know what you are getting into. You have to replace this and that, you would like to have a competent building inspector look at it before you buy. But these properties are generally sold as is and sight unseen.
“So, often it’s a bag of problems, such as a meth lab you can’t clean up. You have to have experience and deep pockets, figuring in transactional costs, commissions, fees, title insurance, and putting yourself at great risk if you do something in a non-conforming manner. And if the market shifts, you must sell at a loss.
“Appropriate building codes which are applicable in your local must be respected, often calling for a complete re-wiring, new roof, new plumbing and the list grows from there,” he stressed.
“Typically, the people who do this are investors with deep pockets, and it is the only thing they do,” Levi points out, adding, “When these seminar people admit in their literature that most students do not make any money please believe it!
Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.