AT FIRST GLANCE
I met this guy who owns the mortgage company that I got my loans through because he was part of a business network that I trusted at the time. He talked about how he can buy some houses out of foreclosure and sell them to me with automatic equity in the houses. He could even use ‘creative financing’ to put me in the loans if I didn’t qualify traditionally, I did not. Since he owned the company, I thought this sounded great. I bought two houses through him and on paper I had over $20,000 in equity in these houses. Sounds awesome, right? Well, here comes the reality in realty.
The houses weren’t even worth what he sold them to me for to begin with. So how did I have so much equity? Turns out he has deals with very shady questionable appraisers who can make the house look, on paper, to be worth a ton more than it actually is worth. And since he owned the mortgage company, he could do plenty of illegal things and approve the loan. I didn’t qualify, the houses didn’t qualify, but he still made plenty of money by selling them to me because he bought for let’s say $43,000 and sold to me for $58,000 and it looked like that house is worth $75,000, but it’s really only worth about $40,000. That’s just an example, because I don’t remember the exact number,s but it worked out in that manner.
Due to this situation, I ended up losing those homes in foreclosure, because I couldn’t flip them and I lost my own house as well.
MORAL TO THE STORY
Do your due diligence and research everything involved before purchasing a house for profit or for a home to live in. If you ever hear the term creative financing, run far far away and call whatever authorities you can find to investigate this person or company that said it, because chances are that ‘creative financing’ they offer is done through very illegal means. Run your own comps too, it’s easy, and there are tons of websites.