Risks involved in a transaction - Posted by William Bronchick

Real Estate Investing Real Estate Gurus
#1

Posted by Bill on April 02, 2002 at 23:18:42:

Probably approximately the same risk for each.

My point was that with any “Tool” there is some inherent risk and a person should go into the deal knowing what those risks are and be equipped to handle them.

I was just trying to point out that many of these so called “Gurus” just briefly, if at all, mention the risks with their “Tool” of choice. However, they wax eloquently on and on about all the positives.

I just happen to think that they need to give equal attention to both.

#2

Risks involved in a transaction - Posted by William Bronchick

Posted by William Bronchick on April 02, 2002 at 18:30:18:

The Countrywide thread was getting too long below, so I wanted to make a new point here.

Anyone who has purchased my courses knows that I go into DETAIL and AT LENGTH about the risks involved in various real estate transactions, including “subject to.”

Anyone who has purchased my courses also knows that I cover the legal and tax issues more than any other “guru.”

Anyone who makes comments about the “failing to disclose risks” obviously has not read my courses and is speaking little about what he/she knows.

Now, the point here is that although this board is great for getting info and help on deals, you would be a fool to proceed without getting a course and the advice of professional in your area. Lease/options, subject to, wraps, PAC Trusts, etc etc sound great in principle, but you need to get fully educated before jumping in with two feet.

#3

Re: Risks involved in a transaction - Posted by ZDawg

Posted by ZDawg on April 03, 2002 at 07:22:20:

Wow! Didn’t mean to cause such a stir. Would like to thank all who responded. Let me reiterate some points already well spoken here:

  1. I used all of B. Bronchick’s paperwork and reference material in disclosing ALL risks to seller and buyer. Everyone knew the risks going in
  2. I knew (because) of B.B.'s course that the DOS had been violated when the seller assigned his beneficial interest to me.
  3. THe seller was pressured from the ex to get her name off the loan, hence his call to the Lender.
  4. This is the first of MANY sub-2 deals that went bad. The seller is ignorant and shot himself in the foot when he opened his mouth.
    The most important fact
  5. I KNEW going in ALL the inherent risk associated with this transaction and more importantly am prepared to make it right with the buyer. I am a big boy. I am responsible for my own actions. Those who have tried to lay the blame on the “Gurus” need to do a little self analysis and get off this “poor pitiful me” attitude that everyone’s out to get them. Read the material. It’s there in black & white about the inherent risk associated with this business. For those that don’t want the responsibility of assuming the risks have no business in assuming any potential profit either.

I will post the results of this situation as it develops over the next few weeks.

Once again many thanks to ALL who responded.

#4

Never more true… - Posted by ScottE

Posted by ScottE on April 02, 2002 at 20:36:42:

I had Bill’s 1-on-1 consulting program (which included all of his courses) and he walked me through my first ‘subject to’ deal.
In fact, I can remember driving to the closing and talking to Bill one last time to make sure I had the right paperwork. He must have said “make sure they sign and understand the CYA agreement” three times along with the other forms.

In retrospect, I don’t think I really needed to talk to him at all. All of the same cautions are in his course AND all of the other ‘subject to’ courses I have seen.

There are some risks, but the gains far outweigh those risks and EVERY investor needs to be able take the personal responsibility to make those decisions knowing those risks.

Scott

#5

Re: Risks involved in a transaction - Posted by Rich[FL]

Posted by Rich[FL] on April 02, 2002 at 20:14:05:

My point exactly Bill. Thanks for jumping in here and saying this. I feel you’re one of our more valuable contributors here and should be carefully listened to by all.

Rich

#6

Re: Risks involved in a transaction - Posted by GL(ON)

Posted by GL(ON) on April 02, 2002 at 19:23:01:

Thanks for the heads up.

There is one more point I would like to clear up. Do you recommend “subject to” transactions to a novice investor with limited experience, money and credit?

#7

Re: Risks involved in a transaction - Posted by ZDawg

Posted by ZDawg on April 03, 2002 at 07:26:07:

Correction! This is the ONLY sub-2 deal that has gone this way. The many more I have executed have went flawlessly, making me 100’s of thousand of dollars.

#8

Re: Risks involved in a transaction - Posted by bronchick@legalwiz.com

Posted by bronchick@legalwiz.com on April 02, 2002 at 19:26:04:

Limited experience, no, unless they have reviewed my course materials thoroughly.

Limited money and credit, yes, as long as they are willing to accept the risk of what may go wrong.

#9

Re: Risks involved in a transaction - Posted by GL(ON)

Posted by GL(ON) on April 03, 2002 at 10:07:50:

Thanks for clearing this matter up. There is one little thing that bothers me. You say you have made 100’s of thousands of dollars. Then it should be no problem to go pay off the mortgage with cash, right? So what were you worried about?

#10

Re: Risks involved in a transaction - Posted by Bill

Posted by Bill on April 02, 2002 at 19:39:02:

Check out this article on buying “Subject to”

The article says in part, “There are several ways to purchase homes. We have all heard about buying on Contract, Lease-Optioning a home, or paying Cash. The one way to purchase homes that is not new but is getting a lot of attention is buying homes “Subject To.” It sounds complicated, and some people even think it’s illegal, but it is the safest, easiest, and, often times, the most profitable way to purchase properties”

If I were a newbie, after reading this article, I might just think I had found the motherlode and, “jump in with two feet”. as Mr. Bronchick said. And, if its on this website, it must be true.

#11

That’s the easy way out! - Posted by Zdawg

Posted by Zdawg on April 03, 2002 at 16:04:06:

Good post Matthew C. The easiest thing to do is throw money at the problem to make it go away, and that’s what I’ll do IF I have to. However, if I do it now I won’t learn anything about how far Countrywide was ready to go. If I go through this without learning something then my time (and yours) has been wasted. I’ve already learned that the seller can really screw things up. Of course I’ve read about that in different Sub-2 courses I have, but it’s a whole different ball game when it happens to you! I want to learn something (firsthand) about how far the Lender is willing to go. I’ve already asked them if they’ld rather have the house or the monthly payment. They responded with another letter. Are they bluffing? Don’t know, but I’ll find out soon.

I’ll keep you posted.

#12

Just because… - Posted by MatthewC

Posted by MatthewC on April 03, 2002 at 14:08:23:

… I had $100K in the bank, doesn’t mean the first thing I would do with it is to part with it.

The challenge is to find a resolution that minimizes his outgoing cash, not throw money at it.

Sounds like he is working on it or preparing for the consequences.

#13

Re: Risks involved in a transaction - Posted by JohnBoy

Posted by JohnBoy on April 03, 2002 at 10:33:09:

From reading his original post I didn’t see anything that indicated he was “worried” about anything. He listed 3 options he knew of to remedy the problem and was merely asking for other ideas in case there might be a better option he hadn’t thought of. At least that is what I got from reading his post. So perhaps he can clear this up better for everyone. But from this post he just made he claims he knew all the risks and accepted the risks and explained and disclosed the risks to his seller and buyer. So there are no innocent parties in this since everyone accepted the risks after being informed of them. There were no smoke screens from the gurus as you accused them of. It takes a big man to admit his mistakes and you made false accusations accusing the gurus of things that weren’t true in your original post. Are you big enough to admit when you were wrong? Or are you just going to continue to back peddal your way around it?

#14

Out of Context - Posted by Nathan(oh)

Posted by Nathan(oh) on April 02, 2002 at 20:57:03:

I can tell you this, that any experienced investor on this site, including Mr. Bronchick, will tell you not to do a sub2 deal until you done plenty of research, reviewed a course, and maybe even consulted an attorney. With that being said, I believe you took the article out of context because of those reasons.

Also, that article is not by any of the investors that frequent this site and while avoiding most of the risks involved, it does mention that there IS risk involved.

Finally, I believe that if an investor has done sufficient research and is ready to do sub2’s then they are just as Charlie said. If you do the deal right, it is one of the “safest, easiest, and, often times, most profitable way to purchase properties.”

The bottom line is that yes, there is risk, and yes all gurus here acknowledge that. However, if you are a risk taker and want to venture into investing creatively, then sub2 is a great way to solve problems and make plenty of cash. Just my .02

nathan

#15

Re: Risks involved in a transaction - Posted by William Bronchick

Posted by William Bronchick on April 02, 2002 at 19:52:37:

Cheap shots are easy when you post anonymously.

#16

Re: I’ve got to disagree - Posted by Stacy (AZ)

Posted by Stacy (AZ) on April 04, 2002 at 11:44:32:

Zdawg, I can understand what you’re saying about forcing Countrywide to play out their hand. It would be an interesting exercise. But that wouldn’t be the way I’d pursue it.

I’ll bet you a beer Countrywide will absolutely take the property back. I don’t need to test this to learn anything. Countrywide is (and has been) making it a priority to focus on this issue, and as the largest mortgage lender in the country, they have the money to take your property back, at a loss, without even so much as a second thought.

As a businessman, taking the emotion out of this decision is a strict no-brainer. For the price of recording some documents, this whole quagmire could be straightened out. Converting this from a subject-to to a CFD purchase is the simplest, quickest and cheapest way to get everyone in line.

In short, I disagree that your time would be wasted if you don’t stretch this thing out as far as it will go. To the contrary, I think you’re wasting your time by trying to push Countrywide. And, if you end up pushing them to the brink of losing the property, you’ll have to use a large chunk of your cash, and/or some of your credit to buy the property at the last minute. All that, when you could have spent under $50 to fix the problem?

Just wanted to give my opinion, OK bud? Good luck whatever you decide!

Stacy

#17

Re: That’s the easy way out! - Posted by JohnBoy

Posted by JohnBoy on April 03, 2002 at 16:13:07:

That’s exactly what I would do! As long as you’re in a position to take care of it when push comes to shove, I’d sit on it and keep sending the payments and wait to see if they go all the way with it.

BTW, are they still accepting the payments? After they know about the transfer and after a certain amount of time laspes from once they know about it and continue to accept the payments you may be able to win by claiming they waived their right to call the loan on the DOSC issue by accepting payments after knowing about it.

#18

Re: Risks involved in a transaction - Posted by Bill

Posted by Bill on April 03, 2002 at 12:35:49:

Check out this article on buying “Subject to”

The article says in part, “There are several ways to purchase homes. We have all heard about buying on Contract, Lease-Optioning a home, or paying Cash. The one way to purchase homes that is not new but is getting a lot of attention is buying homes “Subject To.” It sounds complicated, and some people even think it’s illegal, but it is the safest, easiest, and, often times, the most profitable way to purchase properties”

After reading this article, if I were a new real estate investor I might just think I had found the motherlode and, “jump in with two feet”. as Mr. Bronchick said.

This particular author dwells on the positives of subject to transactions and glosses over the negatives.

I understand that she is trying to sell something and its much harder to sell something when you mention the negatives as much as you should.

However, she and everyone who is trying to sell a course or book should spend at least as much time on what could go wrong as they do on what can go right. They probably wont sell as many books or courses, but the people who do bite will be much better informed.

Some people think that if its on this website, it must be true.

Here is the full article.

#19

Re: Risks involved in a transaction - Posted by GL(ON)

Posted by GL(ON) on April 03, 2002 at 11:40:05:

You’ve got an answer for everything don’t you? You really know how to put the spin on. What are you trying to cover up anyway?

#20

Re: Out of Context - Posted by Bill

Posted by Bill on April 02, 2002 at 22:11:23:

I dont think my post took anything out of context.

All I am trying to point out is that there are “Gurus” even on this site that minimalize the risks involved in this kind of deal.

They should point out that there is at least as much potential risk for financial loss doing subject to’s as the potential for substantial gain.

As long as you go into the deal prepared for the worst, subject to’s are an excellent tool for the “Experienced” investor to grow his money crop.