Real Estate Investing Coaching - Brian Gibbons

Where Does Morality Fit In?

                                       

Posted by: admin, in Ethics                                

A retired four star General who once commanded operations in Iraq, who suddenly had become the proud owner of $600+ thousands of dollar in the stock of a defense contractor responded to accusations of impropriety by saying “every step of the way I consulted the legal department of the Air Force”.  This statement stands in juxtaposition to one given by my professor in a business law class.  He said, “there are 33 thousand laws on the statute books of the State of South Carolina, and every one of them were put there by someone who wanted to get around the ten commandments.”

There really isn’t any conflict between law and morality; between what is legal and what is ethical.  They aren’t at all the same thing. Consider how many politicians like our General flaunt ethics on a daily basis while remaining within the law; or conversely, think of all the people who break the law on a daily basis without being unethical. They are jay-walkers.  They pass in the right lane.

In real estate, there are serious crimes that are committed every day.  People wink at loan officers when they file fraudulent loan applications.  Appraisers accept helpful hints when it comes to property valuations.  Lenders fail to keep accurate accounts of loan balances and routinely misstate them when they foreclose, or provide loan pay off letters to borrowers.  Then there are ethical breaches which include Brokers who fail to work listings, and who provide misleading price information to unknowing buyers.  Or sellers who fail to tell buyers about unseen property defects.  Or buyers who exploit Brokers by getting them to show properties, then go around them to avoid paying the commission.

I’m certain that you would never fall into any of the foregoing categories, but what about some of the gray areas.  How many people in real estate ignore zoning codes, or charge above market rents or interest rates, or don’t get permits for work on their houses done by people without licenses, or who hire illegal aliens to do work for them?  How many really good negotiators are able to buy at much lower prices and sell at higher prices because of their superior skills.  How many lenders extort high interest rates from desperate borrowers because they can?

I’m not about to render judgments on all of the foregoing, but I’d to hear how you rate some of the practices you’ve seen as to whether they are not legal, but are ethical, unethical but not illegal, or a little of both. Let me know what you think.

Be sure to check out Jack’s brand new website at www.crewealth.com

This entry was posted on Monday, October 22nd, 2007 at 5:57 am and is filed under Ethics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Where Does Morality Fit In?”

1. Jackie Lange says:
   October 27th, 2007 at 5:59 pm

   Jack,

   Interesting that you bring up this topic because I was just thinking about it this week.

   It’s all about RESPECT.

   I was feeling a bit guilty and missing two friend that I recently FIRED. I totally lost respect in them because they were willing to cut corners, do unethical things on the internet ( called black hat), were incredible lazy, always said they were going to do something but did not get it done, had equal opportunities but never did anything, always talked a good talk but rarely performed, misrepresented their abilities, the list goes on and on….

   Interestingly, they thought there was absolutely nothing wrong with this behavior. 

   I finally got tired of waiting for something to change and just got fed up with all the excuses. 

   I lost respect for them.

   I had two choices, I could either continue to associate with them or I could TURN OFF the lies lies lies. Finally I decided that no amount of time was going to change anything.

   It is always better to surround yourself with postive, honest, successful and ethical people who have common work ethics and goals.

   Sometimes friends grow together and sometimes friends grow apart. 

   To stay successful, to be MORE successful, we all need to evaluate how the people in our lives are affecting our attitudes, values and success. It the answer is not positive, then it may be time to make some hard decisions and cut ties with people who don’t share your values.

   If there are people in your life who you don’t RESPECT and you continue to associate with them, they could keep you from reaching your true potential.

   Jackie

Liar Loans

                                       

Posted by: admin, in Ethics,  Financing                                

Possibly one of the most tempting and prevalent fatal flaws in an entrepreneur’s arsenal of techniques is loan fraud.  Most of the time this occurs because a buy/sell dealer made some financial mistakes along the way and figures out that selling for an inflated price will enable him to move on with enough money to make another mistake another day.

Loan fraud is a most tempting crime – and it is a federal crime - because it can bail out a bad deal with a profit.  It’s so easy to fall into this trap, and when caught, the perpetrator can almost bank on doing time in club fed.  How does this happen?

It’s easy.  People get lured into mortgage fraud step by step. Here’s a short trek down the path toward a criminal career: An inexperienced or unknowledgeable person pays too high a price for a property using short term expensive money or seller financing with unfeasible terms; then spends more borrowed money to cure unexpected defects in, or to over-improve a house he expects to sell.

Next, he sets a sale price that guarantees a profit without regard to actual fair market values.  Then, when qualified buyers refuse to pay the price, he sells it to a person with insufficient income or poor credit who wouldn’t ordinarily be able to get a loan, and has no choice as to what he pays.

Then he finds a culpable mortgage broker who encourages the buyer to falsify his income and job history to help him get a low down payment loan, then gets an appraiser to appraise the property at a value that more than justifies the price and loan.

Let’s say that all goes well. The entrepreneur walks away with enough money to pay for all his mistakes and the buyer moves in. Sooner or later several things happen. Something in the house could break, leading to claims that the seller had failed to disclose defects.  Or the buyer stops making payments and the lender has the house appraised only to discover he’s been duped.  Or any of the co-conspirators gets into trouble because of loose practices and turns everybody else in to save himself.

In any case, it’s easy to unravel this little plot because it has been used thousands of times before.  The judge throws the book at the miscreants and they lose everything in addition to spending time in the lock-up.  When they get out, their record is there for all to see with whom they might try to do business.

Take my advice, don’t use liar loans to bale out bad deals.  Learn enough about houses to avoid bad deals and to start making good deals and you’ll be healthier and wealthier, and hopefully much wiser.