Deal or No Deal

I was reading the newspaper the other day and came across a small advertisement that caught my eye. It reminded me of that old saying that buyers and sellers have said to me, and I have told them - "If it sounds too good to be true, then..." well, you know the rest.

The ad said, "Valuable Income Producing Properties!" Then, in small type it said "lender foreclosure". What's wrong with this picture? If this is such a great "income producing property", then why is it in foreclosure? And why are there several other properties in this ad? Just in case somebody reads the fine print on the first one?

A past customer and good friends of mine called me the other day and said that he had found a wonderful deal and wanted to know what I thought. It was for several townhomes/condos on a fairly large lot. The ad, of course, talked about income versus the expenses and that the property had made a fairly substantial return. My friend figured out his cost on purchasing the property (it was less than $150,000 - not a good sign) and handling the expenses and still believed he would be making a couple thousand dollars per month. My response? "If it looks too good to be true..." And yes, he knew the rest. Why would the seller sell this property if it was making money? Even if they were tired of it, they could hire someone and still have an income. Perhaps the seller just needed the money fast and wanted out, but I would have been more wary and less optimistic about it than my friend was.

Most of the "great deals" that I see are not really great deals when you look at them closely. I'm sure that both of these properties were bought at a much higher price than they are worth - at that time, they probably seemed like good deals to the current owners, too. But now they want out and you have to ask yourself, is buying someone else's problem for a lower price than they bought it for themselves really a good deal? If it's too good to be true...?

I'll be interested to see what happens to the next person who buys these properties. Thankfully, my friend won't be one of them.

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