I asked this question in a very active real estate oriented Facebook Group and it got some significant attention!
The answer ranged from “let it go”, “move-on”, etc. to a very emotional response from someone that just got screwed out of $350,000. In real estate, we often have to trust people to do the right thing. Those that don’t do the right thing gives the rest of us a bad name. But everyone has their threshold. For this man, $350,000 was not something he was going to let slide, and I don’t blame him. But where do you draw the line? What is your threshold?
Whether to go through the judicial system for such a violation seems to be extremely expensive to me. For example, I’m all about “Rehabbing Remotely”. I do deals all over the country, whether wholesale or rehab, and I utilize the internet for communications, deal making, project management and more. So if I have someone in Nevada offers me money to find him a buyer that happens to be in California for a house that is in Illinois, and I deliver that buyer, and then he doesn’t pay me, what is my recourse? The answer, not too much.
In any law-suit, the first question is the legal jurisdiction. The courts are still struggling with the issue of interstate contracts, and there is a lot of money spent in the courts time alone, let alone attorney fees, just to establish a proper jurisdiction to hear a case. I am not an attorney and don’t have the answer to this question, but if I got screwed out of $10,000, well, I would probably ban this person from any benefits of knowing me, refuse to do business with him in the future, and warn my friends that this incident happened. Yes, my biggest recourse against someone that screws me is my ability to share my experiences from a position of integrity, because they don’t live up to their promises in my experience and therefore in my opinion.
[Just a side note – there was a time I watched people suffer due to a guru’s lack of follow-through of their promises (I didn’t suffer), and I stood up for those people and was immediately bombarded by attorney calls intimidating me to be quiet using terms like “business disparagement”, “unfair competition”, and “tortuous interference”. It wasn’t really my battle, so I became quiet as they asked, so just to warn people you can’t be going off saying things about something that happened to somebody else, even if was true, and even if it was your opinion. So that brings me to, can I really tell people that person xyz didn’t fulfill their end of our agreement in this social media world? Would that fall in the lines of “business disparagement”, even if it was true, and I was hurt by it? Or is it a warning for future victims? This is a question often asked by those victimized by con-artists. (Sometimes I wonder what Duncan Wierman would do?)]
So then, if legal jurisdiction is decided (some tens of thousands of dollars later), then the court has to decide which state’s law to adapt to the trying of the case. I know this sounds confusing, but if I do business in Illinois, and my counterpart does business in Illinois, even though our companies may both be Nevada corporations, the question of which law applies to govern the case? This is significant, as the Nevada laws are very protective of corporate representatives, where often times fraud has to be proven in order to penalize in a civil matter such as this.
Which brings me to the question, why do we even bother with paper contracts in situations like wholesale fees? These contracts will never see the light of day in a courtroom. Anyone seeking judicial remedies will have to reserve at least $50,000 to $100,000 just to be heard in court. But there is one very good reason in our business, and it’s simple: It becomes a directive to third party that distributes funds. There is no way someone can get screwed out of a deal where an independent third party is around to administer the transaction.
So get your contracts in writing, not for the eventual courtroom, but to submit to an independent and disinterested third party prior to closing a deal. Avoid situations where a third party isn’t present, or if there is some credible knowledge of a person’s previous deal-making habits.
What do you think?
Interesting that you bring this topic up and I agree with your thoughts on how to react to the situation. But at what point do you allow someone else to fall victim to your dismay?! I took the higher road and turned the cheek the other way, how difficult that may have been is something that took great restraint! Be careful in the choices you make when finding a “Partner”, they very well might be the ones to stab you in the back! We shared a mutual Agent that I had vested interest with, more than my Partner who lives in the upper parts of California. So my efforts were put into a property that we found, walked and provided an offer as a Corporation that we were working under. I spent the time and took my Contractor to get me an estimate to confirm our numbers. We had everything ready to go and move forward with. At some point the Agents stories started to change with the status of our acceptance from the bank?! She was going back and forth with her stories, later to find out she was stalling for time! The back-stabbing partner convinced her to remove our offer that was accepted and gave them a story that we could not fund. This was so “X” would be able to put in there offer in their other Corps name. Soon to find out that they had moved forward with the offer, being the Bank was motivated after us “Supposedly” not performing?! I waited for the updated title report to confirm what I already knew to be true! I confronted “X”, along with my other partner who had their tail between their legs, only to find out they admitted it and blatantly confirmed their actions! This is a person that came from the same educator, someone you would expect to trust and not have look over your shoulder with. The sad part is that they were also in the works of becoming a ___ leader for this educator. So it goes to show the product they would be putting out or what other victims would fall under “X’s” wrath. Be wise in your decisions of who you work with, always go with your instinct and never settle to satisfy someone else’s (other partner) decision in bringing in who they thought was a seasoned investor…
Be careful with the mentor you choose is another lesson I learned early on. Found an unusually sweet property near Austin early in 2013 and called my mentor asking for his advice on how we might structure a deal and if he wanted in on it with us. He cut us out, got the property under contract with his lender friend, and never answered my calls again. He also is a “rising star” wholesaler for a popular guru. The sad part is I knew this person as a friend before we ever formed our company. That did hurt. I was shocked at first, but let it go.
This event taught me to rely more on my own due diligence and to not offer anyone something until I had control on the property and it was under contract. Even then, I have had another investor try to go around me to the agent and bank. My brother’s thoughts are that people will be opportunistic when there is money to be made and it’s just business. My thoughts are we can all make money through cooperation and in the long run, we will maintain our relationships through being honest and ethical in our business transactions.
I like your idea of a 3rd party being involved. Would this be a title company or ?