Beware ‘free’ real estate seminars – Yourhome.ca.
In the next couple of days I will be chronicling a story from two years ago where I got involved with a company who made money by selling real estate courses designed to convince consumers to invest their savings and equity in their homes in real estate backed assets. I ultimately stopped my dealings with the company because I believed that clients were becoming over leveraged without understanding the potential consequences.
In the time being, take a look at this article from Yourhome.ca that discusses the warning signs of a get rich quick scheme.
Typically, what these no-money down programs attempt, in a two-hour “free” presentation, is to convince you to attend a three-day workshop in which you’ll learn the “secrets” to become an instant real estate entrepreneur. You are then invited to pay several thousand dollars to attend this seminar, with a promise that you’ll make tens of thousands of dollars within 30 to 60 days of completing the program.
Here are some of the methods used to entice you to attend the three-day seminars:
The instructor will usually spend time telling you about all the vacations he is taking now that he is financially secure, and that he has personally purchased several hundred properties in your area using this system.
The main principle is that the seminar will help you find properties in distress that no one knows about where the owners owe more on their mortgage than they can afford.
You will learn how to place advertising in key real estate magazines to help you find these owners who are in distress.
You will then receive at least 50 to 100 calls from sellers in trouble, either through job loss, marriage breakdown or a death in the family.
These homeowners will be very happy to give you their property if you take over their mortgage payments, so they can avoid having their credit score ruined for the next 10 years.
Even if you have bad credit, you will still be able to take over an owner’s mortgage without getting approval from the owner’s bank.
They will provide you with lenders who will lend you money at high interest rates for a short period of time – usually 30 to 60 days, which is okay because in two months you can re-sell your property and make your first profit.
They have a database of properties in your area that are in a category called “pre-foreclosure,” where the bank is about to take over.
Notice the phrase “pre-foreclosure.” That’s a term rarely used in Canada, but it’s common in the U.S. Many other principles in these seminars are taken from similar U.S. seminars that have little or no application in Canada.
1st time here… interesting site. Any comments on mortgage rates moving into 2010?
Hi DS,
Thanks for joining me. I’ve perused your site a few times, and have had you in my reader for a while.
I think it will be an interesting year as far as mortgage rates go. I could see it being one of those few times in history where fixed rates and prime move sporadically in different directions.
Obviously with the bond market dictating fixed rates we will see some natural fluctuations, as we have this last week (rates will move close to 45bps in the next couple days unless there is some pullback in the bond market).
As for prime rate, I can’t take my eyes off the Bank of Canada’s inflation numbers. If the inflation rates stay low or negative, I could see the low rates lasting beyond June of 2010. On the other side of the equation I could see a big jump in inflation push prime rate above it’s five year fixed rate counterpart if Carney has to step in and slow the economy. If that’s the case then it could become beneficial to start taking fixed rate mortgages over variable.
If you want to read some interesting analysis on fixed vs. floating rates, take a gander at Moshe Milevsky’s 2001 study.
I have to say I was quite disappointed with the major banks approach to the prime rate over the past year. It simply hasn’t reflected the discounts they receive from the Bank of Canada… they take it and then charge the average Canadian more than they should. I suppose that’s why they continue to make healthy profits and they have moments of being great companies for their shareholders, depending on the momentum.
Cheers!
Yes, I can see the frustration among Canadians with the failure to follow prime. I just don’t think they had a choice. If they would have followed suit there would have been a large amount of prime minus 50-90 bps mortgages that would have had rates below the cost of funds (the cost of deposits).
If that would have been the case I think there would have been a lot of profit loss among the banks. Who knows if it would have been enough to eliminate profits all together, but it would have definitely been dangerous.
I do believe they lost money for a short period of time on some of their mortgages anyways. At one point the cost of funds got so high they had to increase adjustable rates to as much as prime plus 100 bps on new mortgages. At that time mortgages at prime minus 50 bps or better were definitely costing the banks money.
Guess I just see it from both sides – definitely feel for those who were upset by the banks failures.
Kind regards,
Nolan