Honest real estate investors are a very diverse group. Some like to manage property, some see it as an opportunity to further diversify their portfolios, some invest in real estate for specific tax benefits, some treat it as a hedge against inflation, and others see it as a safe long-term investment.
One thing that these honest investors typically have in common is that they are willing to pay a fair price for a piece of property. These investors achieve returns through a combination of value appreciation, property improvements, and inflation. Scouting for "steals" is not their style. Their time is too valuable to waste looking for a gullible or desperate seller who will give away thousands of dollars in equity for a sale.
On the other hand, we have the predatory flipper. The guy who looks for "steals" full-time, buys them on credit, puts some lipstick on the pig, and sells for full market value. Such individuals manage to convince themselves that $80 worth of paint adds $15,000 to the price of a home. Not so. Most of the gain in this scenario was realized by snatching equity from a gullible or desperate seller.
I have to bite my tongue when one of these predatory types approaches me with the following proposition:
If you run into any really motivated sellers with nice homes that I can buy on the cheap, let me know. There's $500 in it for you.
This is a laughable proposition for many reasons. Here's just a few:
- I have a fiduciary responsibility to my clients to put their best interests first.
- I haven't remembered the NAR code of ethics verbatim, but I'm sure there's something in there against scouting for the desperate and feeding them to the sharks.
- If you're going to ask an agent to break the law, dismiss the code of ethics, and give someone else's money away to a complete stranger, it would not be wise to offer this agent substantially less compensation than he would receive from a 100% ethical transaction.
Just my personal thoughts on the matter though...
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