Dealing With The Unscrupulous Investor
I’m going to discuss a story today about an unscrupulous investor.
Hello everyone, welcome back to another episode of Probate Stories. I’m Brad with ProbateResource.com. We created ProbateResource.com to be a one-stop online destination for anyone going through the probate process to find answers to their questions. We provide referrals to excellent probate attorneys, therapists, and real estate agents.
By the way, at our core, we are a real estate solutions company. We purchase properties for cash all across the US, including single-family properties and commercial properties. If you’ve inherited a property, we would be interested in making you an offer for it. Additionally, we have a great network of real estate agents throughout the US who specialize in probate and inheritance and can assist you in selling your property.
Throughout my years in this industry, I’ve encountered numerous investors, some of whom are short-lived due to their unscrupulous practices, while others manage to stay in business despite engaging in borderline unethical behavior.
We recently closed a deal when a seller contacted me about inheriting a house from their mom, who had been operating it as a boarding house. The seller’s mother rented out rooms in the house while living upstairs.
Story Time
Anyway, there was this lady, who is actually my great great great aunt, or something like that, who did the same thing in Portsmouth, Virginia. She inherited a big house from her relatives and converted it into a rental property. The house was located near the Naval Yards, so she rented out rooms to sailors and people working in the Naval Yards. My mom told me about this story, and she has memories of visiting the house. It was a huge old Victorian house with many rooms that she rented out during the depression. So, when we bought that house recently, it reminded me of that story.
This lady’s mom was doing the same thing. She had a house and was renting out two rooms in the basement, as well as two other bedrooms on the main level. She was living in the master suite. The area where she lived has been a heavy rental area for the last decade or two. The house was built in the late 1950s. After her kids grew up and moved out, she started renting out the rooms.
The Seller
The lady’s mother owned the house, and she had a brother.
This lady lived on the other side of town, and it took about an hour to drive there in traffic. After her mom died, she had dreams of fixing up the house, but she and her husband soon realized that it was too much work. They had their own jobs and obligations at home, and they didn’t have the time or energy to invest in the house. It was a struggle to get there, and they were dealing with a lot of complications. Fixing up the house would require a lot of work.
She called us and said, “Hey, I inherited this house from my mom. My brother agrees to sell it, but there are two tenants living there. I don’t know how to deal with them. One of the tenants doesn’t like me, but the other one does. Can you help me?”
We assured her that we could help. We assisted her in dealing with the tenants, issuing notices to vacate as they hadn’t paid rent for three to four months since her mom passed away. We explained that she could evict them for non-payment and served them with a 60-day notice to move out. We also let them know that they wouldn’t be pursued for the unpaid rent, considering it a fresh start for everyone.
Clouds On The Title
We assisted her with that. We provided her with templates and letters that our attorneys had written over the years to help her deal with the tenants and give them their notices to vacate. We also encountered some other obstacles along the way. One of these obstacles was a cloud on the title that was discovered during a title search conducted by my title company.
These clouds on the title can go by different names in different states, such as memorandum of contract or notice of settlement. Essentially, when you enter into a contract with someone to buy a property, particularly in real estate investing, there’s been a trend in recent years where people are being taught to record these memorandums of contract on deals.
Unethical Behavior
I’ve had experiences where a seller tried to back out of a deal after I had already invested time and money into it. In these two instances, the sellers were not acting ethically. Normally, if a seller wants out of a contract, I have no problem with that. However, these situations were different. In fact, I almost sued one of the sellers and their real estate agent for unethical behavior. The agent broke their code of ethics, and I threatened to report them to the Real Estate Commission. After that, the agent’s broker contacted me to prevent me from reporting them. This incident involved a probate deal, where the seller had inherited the house from his dad and had reached out to us for an offer.
He initially agreed to sell the property at a certain price, and we agreed to buy it at that price.
However, he later tried to back out after his real estate agent suggested that he could get a better offer from someone else. It turns out that the other potential buyer was actually a friend of mine, so the situation came full circle. The other buyer then realized that I was involved, and things got complicated because he knew I operate with integrity. I won’t delve into the details of that deal in this video.
In our deals, investors usually record memorandums of contract, which are documents filed with the court to indicate that a contract is in place to purchase a specific property. This is different from an option contract, which I also use in some deals, but it’s a bit of a gray area.
Unscrupulous Investor Deals
In this specific situation, the lady had consulted with an investor more than a year before I spoke with her. This was right after her mother passed away.
However, the deal with the investor went sour because he didn’t follow through on his promises and then suddenly wanted to bring in other potential buyers to the house. This turned her property into a kind of impromptu auction site, with multiple investors showing up and causing a disturbance. It’s worth noting that I know this investor, and on another occasion, the police had to be called to the property due to a similar situation with multiple investors vying for the house on the front lawn.
This individual was attempting to sell his contract by inviting multiple potential buyers to bid on it, with the highest bidder securing the deal upon sending the money to the title company. While this approach may be effective and profitable, I personally don’t consider it an ethical way to conduct business. It might lead to alienating a lot of people, which could have negative long-term consequences. However, everyone has their own way of doing things, so it’s a matter of personal choice.
Tenant Privacy & Legal Proceedings
In this specific case, the situation upset the seller because there were suddenly a lot of people coming through the house. The tenants were unhappy about the presence of many people in the house, given that they valued their privacy. Despite our respect for tenant privacy, there was a privacy issue.
The tenant had a legal right to enjoy the property without disturbance. Later, the owner entered into a contract with someone who then attempted to change the price and terms of the contract. When the owner tried to terminate the deal, the other party refused, citing the existence of a recorded contract. However, the other party did not fulfill their obligations under the contract. A year later, legal action was necessary, and my attorney requested copies of the contract and all communications. The text messages revealed unethical behavior on the part of the other party, who should have simply allowed the owner to terminate the contract.
However, it seems that he intended to win the fight and perhaps trick her out of some money.
Oh well, everyone has their own motives, right? So, she found herself caught in the middle of this situation.
We couldn’t close the deal because my title underwriter needed to confirm that the contract was null and void. We ended up contacting the original title company. The original title company informed us that they no longer do business with that person due to similar incidents in the past. This provided us with the necessary proof. Additionally, we discovered that the contract was worded in a way that made it voidable. This means that if it were to go to court, a judge could potentially void the contract or decide that it should be upheld.
They had to consider the intent of the contract and other factors. It’s a whole legal conversation for another day.
Anyway, the person didn’t tender any of the earnest money deposit and some other issues arose. I won’t get into all the details, but basically we had to involve another attorney and have them disprove the contract. Ultimately, this was enough for the title underwriter on our end to feel comfortable with the deal. Also, it’s been a year and the memorandum of contracts are only valid for a certain amount of time, and that time has expired. So we’re willing to ensure titles. We got through all those hurdles and dealt with the tenants. Finally, I’m happy to say we closed on it.
Closed Deal
We purchased the house. She was overjoyed about selling this house. There were some tears shed on the last day. She felt sad to let go of the house, but she was also relieved to be done with all the stress and emotional turmoil that came with finalizing the deal. All of this was because an investor prioritized money over people.
At ProbateResource.com, our core value is to never prioritize money over people. We are all human beings here, and we need to treat each other with respect. We should keep our promises and treat others the way we would like to be treated. We should never let money stand in the way of doing the right thing.
I am in this business to make money, as it provides for my family and me. I buy and sell real estate and also rent properties. But at the end of the day, we are all people with our own stories, and it’s important to respect those stories and operate with integrity.
Unfortunately, in this case, the investor did not act with integrity, causing a lot of heartache, drama, and financial loss for the seller who had to involve attorneys and incur costs to fix the situation.
We Are Here To Help!
If you are dealing with an unscrupulous investor, we can help connect you with legal resources. I can recommend some attorneys who can assist you with litigation if necessary. It may be beneficial to seek intervention from an attorney, and sometimes a simple demand letter can be effective.
There are times when dishonest investors put properties under contract but fail to follow through with their commitments, causing problems for the sellers in pursuit of profit. It’s unfortunate that such situations occur, but they are a reality in the real estate world.
If you have a property that you want to sell, whether you’ve inherited it or not, ProbateResource.com can help. We purchase properties throughout the US and can provide you with a cash offer for your property. Alternatively, if you prefer the traditional route, you can list your property with one of our many reputable real estate agents who specialize in probate and inheritance sales.
If you’re interested in working with us, please visit ProbateResource.com or click on the link in the description below. Once there, you can fill out the form on our website. After you submit the form, a member of our team will get in touch with you as soon as possible.
Thank you for watching this video today. Stay tuned for more episodes of our probate stories, where I share some of the crazy deals we’ve done and the wild stories that have unfolded over the years. Thanks again and have a great day!