Real Estate “Systems”
They come on television late at night, often screaming out their claims, as if the louder they talk, the more likely the viewer will be to believe them. They offer the promise of quick profit, low-risk, and financial freedom. They are the purveyors of the packaged real estate “success” systems. Follow their method, they say, and riches await.
While these advertisers are some of the first proponents of house flipping, they also account for much of the negative impression many have of the practice. Typically, when someone offers something that seems too good to be true, it usually is. Get-rich-quick real estate marketers also ask up to $200 or $300 for their “proven” systems, proving there is, in fact, a way to make money flipping houses – by selling their real estate “systems.”
No Money Down
One of the promises made by most of these get-rich-quick real estate systems is that houses can be bought with no money risked by the buyer. The purveyors of these systems have various ways of managing this, but for all the information they provide in their "infomercials," it is the one key concept they fail to discuss in detail. By conveniently avoiding the details, the sellers of the systems can attract customers who have little money to put toward a business that, generally, requires a lot of up-front investment capital.
Generally, they are promoting methods by which the buyer must secure a mortgage or home loan that is then used to purchase any property. It also is one of the areas where the legitimate and unscrupulous house flippers diverge. While it is possible to flip houses without using your own money, doing so is not nearly as simple a “system” as the infomercials would have one believe.
Another of the basic selling points used by those who market house flipping classes and formulas is to take advantage of what they refer to as "motivated sellers." These are people whose houses are in foreclosure or who are in financial distress. While they usually stress "you are doing the seller a favor," generally this means taking advantage of someone else's misfortune, another reason the house flipping business has gotten a bad reputation.
Leveraging greed, by these methods, can also backfire. One way to obtain properties is to buy them at a foreclosure auction. Sellers of package systems tell their "students" to go to such auctions and look for undervalued properties. There is at least one real-life example of where most of those attending one such auction all were "graduates" of a house flipping system who kept outbidding each other until the price for the house in question was so high no one could have made a profit by reselling it.