for sale

Sold Home For Sale Sign in Front of New House

House flipping has been around as long as people have lived in houses.  Flipping houses got a bad rap in the 1990s, when scammers engaged in widespread fraud using mortgages, appraisals and straw buyers.  In some cases, some “renovated” houses were uninhabitable and sold to unsuspecting home buyers.

But house flipping has regained its legitimacy because of its significant contribution in revitalizing the country’s housing stock after the Great Recession.  As a result, many investors found their fortunes.  Of course, reality TV glamourized the prospect of house flipping successes, and as more people wanted in, flipping instruction courses multiplied.

Many embarking in house flipping courses believe it’s their road to riches.  Unfortunately, what’s not understood by many consumers is that flipping houses is an incredibly risky business.  For most, it’s a full-time job that offers a modest living, and many real estate flippers lose money.

Last week, the Federal Trade Commission (FTC.gov) entered a temporary restraining order against a real estate investment seminar promoter.  You may have seen ads for these seminars, as they were promoted with reality TV star endorsements.  The FTC alleges that the seminars are misleading and make “deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.”  According to the Oct. 4 FTC press release, the promoter claims to offer consumers coaching and training on how to make large sums of money by flipping houses.

But it is not so much about making money by flipping houses, as much as the seminar ads attracted consumers to free a event that claimed they would learn how to make large profits “using other people’s money.”   It is alleged that the free event was a sales presentation for a three-day workshop that cost $1,997, and was promoted as teaching everything needed to know “to make substantial income from real estate.”  The three-day workshop was sometimes described as a “beginner’s course,” and attendees were “upsold” products and services that cost as much as $41,297.

The FTC action just did not pop up overnight.  It resulted from years of investigation.  An eye opening 2013 report highlighted complaints about these seminars (Some Buyers Call Classes By ‘Flip Or Flop’ Stars Misleading; Investors Business Daily; 10/28/2016, p 43-43).  The reality TV star who was supposed to be at the seminar, instead appeared in a video stating they were busy filming their show.  An attendee who paid $1,997 for the three-day course, $1,000 for real estate software and “thousands more” for additional classes, stated, “They weren’t really teaching at all.”

Real estate investing and flipping courses have been around for decades.  However, not all advocate house flipping as the vehicle to make riches.  There are many avenues to invest in real estate; some teach buy and hold strategies, others teach auction strategies, etc.  Before spending any money on a real estate investment course, do your due diligence. Check with the Better Business Bureau and FTC for complaints.

Andrew Smith, director of the FTC’s Bureau of Consumer Protection stated, “From start to finish, these defendants used the promise of easy money and in-depth information to lure consumers down a path that could cost them thousands of dollars and put them in serious debt.  When a company tells consumers they have the secret to get rich with little work, we encourage consumers to take a hard look at what’s really being offered.”

Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.

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