How the real estate guru scam works
Real estate gurus scam people with high-pressure sales, leaving their customers with little to show for the money wasted.
When I set out to raise money to buy properties in Las Vegas in 2010, many long-time readers weren’t thrilled about the idea. One of them created the graphic above to lampoon my sales pitch. I display it as a badge of honor. Some people didn’t believe in the opportunity in Las Vegas, but most were more concerned that I might head down the path of becoming a cheesy real estate guru.
According to Dave Lindahl, real estate gurus serve as front men for high-pressure sales organizations. These groups generally care little about the product they deliver, focusing instead on how much money they extract out of each sale. The sales process often contains many levels or steps, each promising more but delivering very little.
The process begins with a free or low-cost seminar, usually marketed with ridiculous claims about making a fortune in real estate with no experience and no money. Gurus put on elaborate spectacles merely to fill a room for a much longer sales presentation — and to pre-qualify their
clients marks for deeper financial extractions. One telltale sign of a real estate scam is that the guru instructs attendees to contact their credit card companies for an increase in their credit lines, ostensibly to provide working capital — capital the attendee will need to purchase a high-priced follow-up program.
The remainder of the seminar is an extended sales pitch where the guru hypes the high-priced follow-up program. Very little, if any, useful information is actually presented at these initial meetings. Despite this fact, many people believe the bullshit and sign up for a follow-up program.
The real scammers set up multiple levels to their programs. Most people who attend a free seminar won’t buy a $25,000 deluxe package, so gurus offer a lower priced program, usually in the $2,000 to $5,000 range. People sign up believing they will get good information, but generally what they receive is a useless overview they could have downloaded for nothing off the internet — that and another high-pressure sales pitch for the $25,000 deluxe package.
Rather than catching on to the scam, many people rationalize spending the $25,000 because they believe the guru will finally share his secret recipe. When they attend the $25,000 event or private lessons, the guru spends most of the time convincing the buyer their $25,000 was a great investment, assuming the guru participates at all.
It’s human nature not to admit a mistake, and after sinking $25,000 to $30,000 into a program that provided little or no real value, most people won’t call out the scammer. Some don’t recognize the rip off because the guru convinced them their money was wisely invested, but since almost nobody who attends these events actually follows through and invests in real estate, the lack of results is hard to deny.
‘Flip or Flop’ stars Tarek, Christina El Moussa under fire after complaints about their flipping classes
For Doug Stephens, the free event seemed like a good way to learn how to flip homes. An online ad for the December gathering sported pictures of Tarek and Christina El Moussa, the Orange County stars of HGTV’s “Flip or Flop” who buy rundown homes, renovate them and try to sell them for a profit. Stephens watched “Flip or Flop” regularly, along with 2.8 million other Americans, so he went.
The El Moussas, Yorba Linda residents, did not show up.
In a prerecorded video, the couple told attendees that they were busy working and filming their show.
I fell for this once. I went to a Millionaire Mind weekend seminar expecting to see the author of the book. He wasn’t there.
Fortunately, they strike a decent balance between providing valuable information and upselling their more expensive programs. I paid very little to attend, and I felt I obtained value from the time I invested.
The sales scam of upselling more expensive programs is not black and white. The Millionaire Mind exists in a shade of gray where the perceived value outweighs the investment in time or money. I learned things at that seminar that changed my behavior. Most real estate gurus don’t deliver that.
Undeterred, Stephens paid $1,997 for three days of classes and $1,000 for real estate software. But the classes turned into a sales pitch to buy additional courses that cost thousands more, said Stephens, a pastor and teacher from Havana, Florida.
“They weren’t really teaching at all,” he said.
They never do.
The El Moussas, like many reality TV stars before them, are capitalizing on their fame by offering pricy classes.
I hope articles like this one prompt them to rethink whether or not the money was worth it. They are abusing the trust their viewers place in them by steering these people to scam artists.
At free events in hotel ballrooms, instructors tell attendees that if they pay to enroll in three-day courses, they’ll learn how the couple flips homes and also gain access to investors who will give them cash to buy properties, even if they have low credit scores or a weak job history. They’ll earn back their money quickly, the instructors say, and will get refunds if they don’t flip a home within a certain amount of time.
But about a dozen people interviewed by The Associated Press said those promises did not pan out. Although class leaders offered some instruction, a lot of time was spent pushing them to buy more classes, they said; some complained that getting refunds for the sessions was difficult.
Rule number one of the Ferengi Rules of Acquisition states, “Once you have their money, you never give it back.”
Stephens said his instructor avoided answering questions, told attendees not to speak to each other and spent a lot of time hyping the program. The homework on the first day was for attendees to call their credit card companies and increase their credit limits, he said. On the last day, Stephens said, the instructor pushed them to buy training sessions, some of which cost around $26,000. …
Gloria Pettis, a budget analyst from San Diego, paid $1,500 for a three-day small business class that featured Daymond John, a star of ABC’s “Shark Tank.” She said she paid for Daymond John’s Launch Academy because speakers at a free event in January said they could help her create a prototype for a wearable tracking device for children that she wanted to make and sell.
During the entire three days, Pettis said no instructor ever asked her about the product she wanted to make. But employees suddenly became interested, she said, after she told them she opened a new credit card with a $30,000 limit, an assignment the class was given on the first day. Workers pulled her out of class six times, she said, pushing her to buy more training in Las Vegas for $27,000. She did not.
Zurixx said it asks students to increase their credit limits and open new cards to have access to funds for unexpected business costs, but Pettis said it was made clear to her that the new card was to be used to pay for the Las Vegas classes.
A classic ripoff.
Martin, a retired bookkeeper from Chico, California, received a refund after she wrote a negative review on the Better Business Bureau website.
Two months later, she received an invite to another free event that featured a picture of the El Moussas on the front, under the sentence: “Do you have the courage to retire rich?”
“These people are so stupid that they actually invited me again after I complained,” Martin said. “Or they thought I was dumb enough to fall for it again.”
LOL! People aren’t good about scrubbing their email marketing databases. I used to get emails from the realtor I sued in Las Vegas. I stayed on their list for another two years because each time I got an email from them, their stupidity made me laugh.
If you want real information and advice from two people who aren’t going to upsell you on a $25,000 scam, come out to our presentation next Thursday.