Sharks with Halos? Investors and Foreclosures

I got a call last week from a woman who teaches people how to invest. She wanted information about buying foreclosures. It turned out that she didn't have a real estate license and had never bought a foreclosed property before. We talked for a little while, and I told her that there are implications for the realtor who is representing an investor who is buying a property that is in foreclosure. Namely, that there are so many pitfalls, and that if the seller complains that he or she has been defrauded, the agent is the first to fall. As I put it, a few thousand isn't worth losing one's license. There are special laws to protect sellers who are in foreclosure (ie., they have extra rights of rescission) due to a history of investors abusing these people, to put it mildly.

She began to explain to me that when she first thought about the subject, she had been inclined to think that it was about taking advantage of sellers in foreclosure, but she had come to see it as helping these people out. Well, I told her, while it may be true that they're getting out from under a mortgage they can't handle, the investor is generally looking to profit and prefers to pay about 40% less than the market value. Also, the seller is still ruined credit-wise and will have trouble even renting an apartment afterwards.

The way I see it, it's not too different from telling someone who is about to die that you will save their lives if he or she gives you both their kidneys. After all, they can go on dialysis and eventually get a donated kidney (perhaps from one of their own children!). Yes, you have literally saved this person's life. Will he or she love and appreciate you? I don't think so. Do you have enough self-love to make up for this deficit? Well, that depends on you. Some of us go there, others won't.