Is It Live or Is It Memorex?
From Darlene Root…
Prior to my real estate career I was a musician and intrigued by the 1970’s Memorex commercial ”Is it Live or is it Memorex?” In the commercial, Ella Fitzgerald was able to break glass with the sound of her voice. Ella’s voice was recorded on a Memorex cassette tape… and when played back, the recorded version gave the appearance of also breaking the glass.
Years later Mythbusters did an episode that showed another musician doing the same thing, however, they could not validate that recorded sound had the same result – stating that sound coming from a recording would have to be amplified so much that there would be too much distortion.
This proved that there is a difference from the real to the “imposter.”
I thought of this lesson years later when I encountered an investor/buyer who said that he was able to pay cash for all of my properties and wanted to be put on my list… only to find out that he was an imposter, or what we call a speculator.
Somehow, this new breed of investing has become very popular. What most of them do is stick your property on their website, or on a bunch of other websites, and pass it off like their own. Most do not even have their own buyer’s list or funds to close. This shows me that they are not really an investor, but instead they are imposter investors who will waste precious time with no ability of closing on deals.
Although there is nothing wrong with someone trying to wholesale your property, there is a professional protocol that should be followed.
Spotting a speculator
Here are a couple of signs that any new buyer you’re speaking with has no intention or ability of actually buying your house.
1- He refuses to give you an earnest money deposit.
Any “buyer” who refuses to give you a deposit is not a buyer. This type of buyer will tie up your property while he takes weeks trying to find his buyer or funds to close. In the end, he probably will not close. I require a minimum deposit of $2,000.00, and that will vary depending on the purchase price of the property.
If someone claims that they can pay cash for your property, he shouldn’t have a problem parting with $2k for a deposit. If he does, he’s is not the real deal.
2- He wants to buy sight-unseen.
If a buyer wants to buy your property sight-unseen and asks you to just, “Send me your paperwork,” he is either inexperienced or a fake buyer. He will usually make an offer to purchase, and then upon inspection, he comes back with a low-ball offer, or worse yet, he ties up the property and can’t find a buyer and backs out.
Any investor paying a lot of cash for an investment is going to want to see the property before making an offer, especially if he says that he is a rehabber.
Once you have established a relationship with a buyer and he has done several deals with you, then you can loosen up your guidelines on this rule.
What’s an investor to do with speculators?
Well, just explain that you don’t have a problem if he offers your property to his buyers… But you can’t allow him to tie up your property while he does this. He will also need to give you a nonrefundable deposit. Or, you can make him a deal as either a % split or have him mark up the selling price.
Now, friends, you know not only how to spot a speculator but also how to deal with them should you encounter one.