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FIB - Scams 101 - Ye Olde Archives
Posted By: eshannon In Response To: Couple points (Larry Foster)
Monday, 7 February 2005, at 12:20 p.m.
Hi Larry,
I definately wasn't calling this a scam! No way. I'm the last person that would dismiss ANY business as a scam.
When I was talking about options, I meant to make it clear that I have absolutely no experience in that area and only have very limited knowledge of how that whole business works. So my understanding of the field leaves MUCH to be desired!
Maybe you can make it a bit clearer for me.. why would an option to buy only cost you $100? Doesn't the option give you exclusive rights to the property for X number of days/months? If so, why would the owner let the property sit on the market for that long for a measly $100?
The way I thought it worked is like this.. lets say I see an apartment complex that's been on the market for a few months with no serious takers at a list price of $500k. Now, lets say that I know several investors who live out of state that would consider this place a steal at $500k. Wouldn't I buy an option to buy at, I dunno, $450k, then collect the difference at closing?
Now, if I wanted the option for 3 months, wouldn't it cost several thousand dollars? Isn't the seller placing all his eggs in your basket when he sells this option to you?
This could be totally wrong for all I know. And this is what I thought Maw Maw was asking about. When I said it was risky, it's because she probably has absolutely no network in place to offer something like this to. For someone who is already in the business, the risk is obviously much less.
> In Pennsylvania, at least,it IS illegal to accept referrral fees from
> mortgage brokers unless you have a brokers license or are an employee of a
> brokerage.Surely, Pa isn't the only dumb state that has this law. Pa does
> have some pretty dumb laws.
> I have optioned perhaps a dozen properties in the last year and a half
> mostly for $10 option consideration with a couple $100. I am sure there
> are properties that require several thousand in option consideration, but
> if you're talking residential, that's not necessary.
> I know of 1 guy (yes, he teaches a $5000 seminar on this) who options
> luxury homes for $100. I have seen copies of checks running upwards of
> $300 THOUSAND for his profit.
> What is your definition of seriously undervalued? I option these
> properties at 80-85% of fair market value. That's pretty close to what a
> seller will realize if selling their home through an agent.
> Generally, my option has a standard 6 month term. That is negotiable.
> Risk? Which is riskier? $100 and some marketing expense and failing to
> find a buyer in the option period or the chance of getting caught doing
> something illegal?
> I have HUD 1 settlement statements showing my profit to be upwards of
> $8500. I'd have to do a lot of $300 referrals to make that.
> Do some of my options expire? Sure.
> This is not a personal criticism of you, but there are so many people here
> that are stuck with "in the box" thinking or that if something
> is non-traditional it is a scam.
> I live in a small town. How long would I last if I were ripping people
> off?
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