Re: Partner Contingencies - Posted by John Behle
Posted by John Behle on June 05, 1999 at 16:00:02:
It’s hard to find even 2 cents worth to add to one of Jim’s posts, but I do want to echo that.
The circumstances mentioned “non existent partner contingency” and “land trust to avoid due on sale” are very different. “Misrepresentation with the intent to deceive” is one of the definitions of fraud. I believe a court could construe the first example as just that and I think I’ve read or heard something about just that. That of course doesn’t mean it’s automatic - just a risk.
The second case is just a risk of a lender accelerating a loan through their contractual rights. I don’t believe a judge would even hear a case like that unless somehow a lender was damaged badly. For example, if someone put a bunch of properties in land trusts and then didn’t make payments. (I think that was a discussion last week).
I almost always have contingencies and they are real contingencies. I would never back away from a deal unless something were mis-represented to me. It does lead to a real risk of a lawsuit and the potential to lose my real estate broker’s license.
I disagree strongly with someone playing what has been called “the greater fool theory” of trying to tie up properties with no intent or capability to perform.
How does that correlate with all the discussions of “flipping” properties, lease options, etc. - PERFECTLY. You can flip properties (not my personal philosophy), but you should know your potential buyers or at least your market to the point of knowing you can market that property. You may not ever be able to be 100%, but pretty close. Have a buyer you know and have qualified and have a backup buyer - and maybe another.
This may mean spending more time in cultivating that end of your business. Doing so avoids the highly questionable ethics of tying up properties, running the risk of hurting sellers and the VERY real possibility of being sued.
Leading sellers along does hurt people and run risks. That is very different from running a business as a professional “Bargain broker”.
As far as contingencies like backing out of a deal with a “Termite inspection clause” that comes back positive - that has been tested in the courts and you will likely lose. Seems to me I even heard some so-called educator even laugh about it one time - “Well gee, Mr. Seller - I wanted termites”. You probably won’t hear his same joke - he isn’t around any more, but don’t worry someone else will come along and try to get you to rationalize your ethics.
We talk about un-professional agents and they are plentiful, yet un-professional, dangerous and ignorant investors cause as much or more damage.
Some people promoting some of the ideas and techniques you hear about have actually gone to jail. Others should have. Even some of the better materials out there have highly questionable techniques that are highly un-ethical and even potentially illegal.
I think everyone needs to learn all they can about this business and take nothing at face value. Be a student of many and develop your own strategy and philosphy weighed against your own principles, talents and resources. Do not be a “follower” of a Guru. Learn all you can from everyone and weigh it.
If something doesn’t sit right with you, learn more or discard it. As one great leader and teacher said “Prove all things, hold fast that which is good”.