Ethics and Real Estate Investing
By Desert Dog on Jun 29, 2009 with Comments 0
Originally published in the AZREIA Advantage newsletter (April 2009) by Matthew Shozda CLICK HERE to download.
In December 2008, the Arizona Daily Star reported that an ex-real estate agent in Tucson pleaded guilty to committing fraud and forgery in order to net a $100,000 commission on the sale of a Foothills home. He faces mandatory prison time and up to $2,000,000 in fines. The defendant and his partner are also facing federal charges for unrelated cases on 48 counts to include wire fraud, conspiracy, and money laundering.
There are some bad people in this business.
AZREIA takes great pride in fostering ethical conduct but we are only human and we all make mistakes. Have you ever hurried a homeowner to sign documents so he wouldn’t change his mind, failed to disclosure a water leak because it might kill the deal, or told your buyer you had a better offer (when you really didn’t) just to bump the price? It’s all too easy to get caught up in the deal and “bend the rules” when the dollar signs are flashing in front of your eyes.
Admit it, we’ve all been tempted.
The deals that the ex-real estate agent and his partner were doing seemed innocent enough at first. I know because I was “invited” to participate in one. It was a good pitch and the potential profit was great, but from the beginning it sounded too good to be true. After my partner Googled the “investor’s” name, we headed to a lawyer and he confirmed our suspicions. Sometimes the best deals truly are the ones you pass on.
So how do you prevent becoming a victim or a defendant? Arm yourself with a code of conduct and resolve to execute your business in an ethical manner. Do you believe that your profits justify your actions or that your actions justify your profits? I hope you chose the latter.
Real estate investing is not really about property, it is about people and building relationships that are based on trust, ethics, and mutual benefit. If you try to suck every red cent out of your buyers, sellers, and investors, they may sign the contract (if they have no choice) but you’ll never deal with them again. On the other hand, if they walk away thinking you are a fair negotiator, and a compassionate, honorable person, then you are likely to earn their repeat business and referrals.
Here are a few recommendations to consider:
- Learn and abide by the applicable laws. Read the Landlord-Tenant Act, get permits, follow building codes…you get the picture.
- Don’t make stuff up! I know you want to look like an expert in front of the homeowner or potential investor, but in the long run they’ll respect you more (and you’ll get more deals) if you say, “I don’t know, but I will find out and get back to you.”
- Disclose and document! If you hesitate to disclose something, then maybe you shouldn’t be doing it anyway. Documenting your disclosures protects you if things end up in court.
- Insist that your clients, partners, and investors seek competent legal and financial advice. This is for your protection as well as theirs.
- Put your reputation ahead of your pocketbook.
As investors, we should not be focusing on the quick buck. We need to remember that we provide an essential service to the community. We solve problems for homeowners that are in over their head; we provide housing; we improve neighborhoods by rehabilitating run down houses; we stimulate the economy; and, we provide profits to private and institutional lenders. Unfortunately, every time an unscrupulous “investor” is convicted the rest of us fall under scrutiny and our lawmakers put more obstacles in our way. So take a long term approach in your business, conduct your self with a sense of compassion and honor, and remember, as Zig Ziglar said, that the best way to get what you want is to help others get what they want.
© 2009, The Desert Dog Journal. All rights reserved.
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Filed Under: Investing • Real Estate
