Ugh oh, I did steal it

Posted June 25th, 2007 by Joe Kaiser

I'm the BUYER. I have no obligation, legal, moral or ethical, to disclose anything to the seller.

Dear Rob,

Every once in awhile I end up with a ton of equity, having paid very little for the property.

Some people might even say, “Joe, you stole it.”

Riverfront

They don’t mean it literally, obviously.

In fact, we used to brag about our “real steal deals” at investor meetings back in the day, and it was a heck of a lot of fun trying to “one-up” each other with our latest “great deal!” story.

But do we actually steal properties?

Of course not.

What does happen, though, is every now and then things work out better than planned and we look up and hey, there’s more profit on the table than expected.

Nice!

It doesn’t happen often but when it does, it’s great stuff (especially when your last few deals didn’t quite go according to plan).


is it buildable?

Which brings us back to Phil’s deal last week. I had an opportunity to check it out yesterday and between you and me, I think I may have stolen it.

It’s actually a nicely wooded property on a river bend that’s absolutely gorgeous. In fact, I don’t think it’s wet at all.

I have no idea if it’s buildable or not (I’ll know sooner than later), but I’m delighted with what I’ve seen so far.

So what happens next?

I’m going to list it for $120k or so and see what the market tells me it’s worth. With any luck, we end up cashing a “monster profit” check sometime soon.

That would be very cool.

And I’ll be sure to post a copy of the check here on my website if that profit actually happens.


my obligations to Phil

As a real estate investor, do I have any obligations in terms of disclosure to the seller, Phil?

Would the ethical thing have been to tell him his property was worth far more than he agreed to sell it for?

Or should I have told him not to sell at all and instead educated him about the tax sale and why it might make more sense to let it go to auction?

No, no, and no.

I have NO obligation to disclose ANYTHING to Phil or any other seller. Phil, on the other hand, DOES have an obligation to disclose EVERYTHING to me.

What’s the Revised Code of Washington say about it?

In a transaction for the sale of residential property, the seller shall, unless the buyer has expressly waived the right to receive the disclosure statement, or unless the transfer is exempt under RCW 64.06.010, deliver to the buyer a completed seller disclosure statement . . .— RCW 64.06.020


What the law says

I’m the BUYER. I have no obligation, legal, moral or ethical, to disclose anything to the seller, and that IS the law.

If he’s priced it too cheaply or misses an opportunity to make more money by selling it to someone else or in some other manner, that’s too bad.

My job isn’t to inform him of it’s true value. He’s the guy who’s owned it for the last 10 years. I’m the guy who until yesterday hadn’t even seen it.

What would I know?

If he tells me it’s got little or no value and I can have it for a couple hundred bucks, I won’t be the one telling him he’s wrong.

I’ll be the one handing him the $200 check.


so, was it unfair?

Since county clerks are sending your office information on every deal I do, you’ll surely be getting a copy of my recorded deed soon.

Then someone like Renee will hound Phil (his name isn’t really Phil, btw,) and if history shows us anything, try to convince him he’s been victimized by a rogue real estate investor running amuck.

I understand your AAG’s don’t believe investing $200 to make $100k is fair. Or that doing so cannot possibly be anything but a scam.

Good luck with that.

Respectfully,

Joe Kaiser


10 Responses to: “Ugh oh, I did steal it”

  1. mike_mn responds:
    Posted: June 25th, 2007 at 6:42 am

    Joe,
    I have been reading your entertaining adventures of a foreclosure investor and i believe this post may be your first misstep.

    Part of your trial, I believe, will be based on that your superior knowledge of the market and system has taken advantage of people. Similar to a RE agent taking advantage of clients. Just because you are not an RE agent, doesn’t meant he courts won’t treat you the same as one…

    I am rooting for you, but this post doesn’t bode well for your case, methinks…

  2. Joe Kaiser responds:
    Posted: June 25th, 2007 at 8:27 am

    Mike,

    What would you suggest I pay Phil for his “worthless” property assessed at $111,000? (new tax values just came out).

    Particularly, since Phil may be exactly right about it and it may have no real value whatsoever. He’s owned it for nearly 10 years and is intimately familiar with all its defects. When he told me the assessed value was “way off,” I believed him.

    The issue is sewer/septic, apparently, and if unresolved it’s likely not worth the $200 I’ve invested.

    Joe

    P, S. And there’s a reason I’m discussing this particular deal here at Pushed to Shove, btw.

  3. mike_mn responds:
    Posted: June 25th, 2007 at 8:49 am

    I would suggest you do what you do. As you do it well.

    I think the thing that is hard to quantify and is troubling to the capitalism of this great nation is the court system is infallible. Whatever they decide is what is right, no matter what great argument you may have against their complaint.

    The court seems to favor uneducated idiots when it comes to a pair off against a professional. You have the upper hand, your knowledge puts them at a disadvantage, your history shows you make a lot of money on deals. As much as I may feel you are just and right in your biz, the courts see things differently.

    Good Luck in your fight…cuz truth may not pull you through on this one.

  4. Joe Kaiser responds:
    Posted: June 25th, 2007 at 2:39 pm

    Mike,

    Phil is not an idiot.

    He’s probably smarter than I am when it comes to this property and just someone who wants to be done with a property he’s certain has no value.

    We reached an agreement we both found reasonable and satisfactory and we did the deal.

    Simple as that.

    The property may be worth nothing, or it may be worth a hundred thousand dollars. In all likelihood, it’s worth something in between.

    My job as an investor is to seek out situations where there’s tremendous upside and very little downside. This is one such situation.

    Is that being unfair or deceptive?

    Not for an instant . . . no matter what you may have heard.

    Joe

  5. mike_mn responds:
    Posted: June 25th, 2007 at 6:26 pm

    I am not disagreeing with you…You are missing the point…the people you are up against don’t play with your rules…that is the point. Whether or not you screwed the guy is besides the point.

    The point is, they will try to take you down because you have perceived expertise, compared to your sought after clientèle, plain and simple…The deals as you made them will mean little or nothing.

    Good for you for finding people in trouble and helping them out when it makes business sense.

    I hope your attorney is the type that you wouldn’t wish on your enemy to be faced against…

  6. Joe Kaiser responds:
    Posted: June 25th, 2007 at 7:37 pm

    Mike,

    I understand your concerns and agree with much of your post.

    However, I’m not yet willing to let myself “go there” just yet. I do have faith in the legal system and I believe, with certainty, I will prevail in this ridiculous lawsuit.

    Joe

  7. SpyBoy responds:
    Posted: June 26th, 2007 at 11:52 pm

    While I admire your faith in the legal system, and I support your individual efforts to stand up to the violent machinations the Matrix, I hope you dont let your faith prevent you from learning the actualities of how the current version of the legal system has been turned in on itself, how it acts as the enabler and facilitator for the plundering government bureaucrats.
    A fruitful exercise would be to read “The Law” by Frederic Bastiat
    ( short but oh so sweet )
    And “How Courts Govern America” by ( Justice ) Richard Neeley.

  8. Rick Harmon responds:
    Posted: July 4th, 2007 at 5:17 pm

    Joe – Here is part of the problem that my attorneys and I have identified for the type of business that both you and I do:

    Most every deal that comes to me (and that’s important, that they come to me, not the other way around) are perfect storms of problems. And very little time to perform much due diligence, either. Essentially, most all are “pig-in-a-poke” deals with much unknown value accuracy and highly likely to have hidden costs and expenses.

    I see sometimes see myself as a hunter or fisherman. As the latter, I cast my nets far, wide and deep. Sometimes I pull up our nets and find rare, deep-water fish, all puffed-up from decompresion and eerily luminescent. Can’t eat ‘em, though.

    Occassionally I’ll dredge on the bottom and break off some coral or snag my nets, and then I make my amends best way I can.

    However, I regularly expect and DO pull up a good harvest of deals that pay the bills. I create order out of chaos; it’s how I create perceived added value and why I expect to get paid.

    I don’t consider myself any kind of predator, however bottomfeeding opportunity is a term that I can live with.

    My biggest argument is that, after I stop the seller’s pain, I don’t want to be a lightning rod for his or her dissatisfactions of life. So, I’ve reverted back to my roots as a financial guy rather than a property owner or (heaven forbid) a rehabber.

    Your Blue Pen Flip parallels that action plan that I have been implementing with much success in my state. As I see it, I still want to enjoy the thrill of the hunt or the fishing expediation, I just don’t want any stuffed game heads around (ownership).

    Whether fishing or catching, good luck to you.

  9. Joe Kaiser responds:
    Posted: July 4th, 2007 at 10:17 pm

    Thanks, Rick, and very good points.

    I like the idea of the client coming to you as well. I’m not sure I could make that argument in our arena, but perhaps.

    Also of note is the fact that the AG’s office has entered the scene after the work is done and cannot appreciate what it took to get things to that point.

    After the fact is easy, and as investors, we don’t often have the luxury of 20/20 hindsight.

    Joe

  10. Thos-MN responds:
    Posted: July 10th, 2007 at 6:48 am

    Pretty cool that you’re putting it out here for all to see. Having just been sued by a L-O tenant who stopped paying rent 5 months ago but now wants all the rent she did pay back, plus the option consideration, I can relate. Especially since she (like the state of WA) has a free public aid attorney (despite her good income), but I must pay good money for my defense.

    Yes, the system is stacked in favour of the little guy. Probably should be, cos they do get taken advantage of sometimes. This “little guy” belief is probably even a sign that our democracy is still functioning. But it’s pretty fundamental in our land that a deal’s a deal. Think about it. Why haven’t the Indians/First Nations/Native Americans tried to get Manhattan back? Shouldn’t they be entitled? It would make a great casino.

    Problem is, as I heard a sociologist put it recently, this is the generation where everyone got a trophy, thinks they’re awesome, and feel entitled to share in wealth of which they had little or no hand in creating. Knowledge is power, but it is also wealth. I’m an oddity in REI; I’m a devoted anarchist. Unbridled corporate capitalism and the war-for-profits machine?

    Yeah, take it down a notch or two. Toss the crooked politicos in prison. But free enterprise of the sort that skilled, clever, even opportunistic investors practice? That’s the stuff this nation is made of. To take something that’s idle and undesireable to a seller and turn it back into a productive asset via creative thinking is good, essential even, for capitalism and should be encouraged, not litigated against. Good luck!


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