Chances are, you've been confronted by a bandit or two in your life.
They're ugly, illegal, and
can really destroy the aesthetic of your neighborhood.
And while they might seem bold and bright, you should make no mistake,
some of them are definitely trying to rob you.
Here's a bandit sign from a company known as HomeVestors.
Signs like these are known as Bandit Signs and
according to new reportings from ProPublica, they're pretty aptly named.
ProPublica has revealed that the business practices of HomeVestors of America,
which is the company behind the we buy ugly houses bandit signs.
Are predatory and have robbed some Americans of their homes,
financial security and peace of mind.
Now, HomeVestors of America is a franchise in the so-called
wholesale real estate business, and its franchisees,
like all business owners, seek to maximize their profits.
But in this business model, profits are reliant on buying
distressed properties for the lowest price possible,
to then sell for the highest price possible.
And unlike other home flippers,
wholesalers usually don't do renovations before selling the property to a buyer.
According to ProPublica, HomeVestors of America was founded in
1996 by a Texas real estate broker who developed a system for
snapping up so called problem properties.
Since then, the business grew to nearly 1150 franchises in 48 states.
HomeVestors likes to think of its business model as somehow above the fray.
HomeVestors, the self-proclaimed largest homebuyer in the United States.
Goes to great lengths to distinguish itself from the hedge funds and YouTube
gurus that have taken over large swaths of the real estate investment market.
The company says it helps homeowners out of jams, ugly houses and ugly situations,
improving lives and communities by taking on properties no one else would buy.
But honestly, HomeVestor sounds a lot like
the YouTube gurus it seeks to differentiate itself from.
Lowballing home sellers is the name of the game, and Rick Jin,
who hosts a home flipping YouTube channel called Flip with Rick,
is pretty candid about it.
>> When you make your initial offer on any wholesale or really any investment deal.
Remember, wholesaling is about getting the absolute best price
to maximize the profit in any type of real estate deal.
When you make your first offer, it should be embarrassingly low.
How do I know it's low Rick?
Let me tell you this.
When you feel brutally uncomfortable and actually a little bit nervous and
scared, you are definitely in the right place.
If you thought making a low ball offer is gut wrenching.
If you make too high of an offer on your first one and
they say yes right off the bat, I gotta tell you, it is a helpless feeling.
I have done this multiple times, and I learned my lesson.
That feeling of making an offer too much is so much worse than that awkward,
uncomfortable, low ball offer in the beginning.
If you were gonna make $100,000 offer and you were fine with it, drop it down to 60.
Rick $40,000 that's insane.
Well, let me ask you this.
What if they take your previous offer?
Say you're gonna offer $100,000, and they say yes,
that means you left $40,000 on the table.
>> If lowballing people who are looking to
sell their homes is the main ingredient in maximizing profits,
there's inevitably going to be some gross conduct taking place.
Especially if the investors are looking for sellers in desperate situations.
Take what happened to one of the elderly homeowners who was
profiled by ProPublica named Corinne Casanova.
Casanova and her husband bought their Los Angeles bungalow in the 1960s,
and after dutifully paying her mortgage for decades, she owned it outright.
But her husband had since passed away, and in 2016,
she was looking to sell her biggest asset and move into an assisted living facility.
So she decided to call the number she saw on a HomeVestors ad.
Soon she found herself working with a guy named Corey Evans,
who ProPublica describes as well versed in the HomeVestors of America playbook.
In the two years prior, Evans executed more than 50 deals by finding
homeowners who needed to sell fast because they were in a desperate situation.
When it comes to Casanova, there was a big problem.
She was 82-years-old and was suffering from dementia.
In fact, a recent neurological assessment had found the 82-year-old
was unable to say what year it was or name the city she was in.
She routinely mistook her adult son for his uncle.
When she crossed paths with Evans in an effort to sell her home,
the deal was anything but for Casanova.
By the time he left that evening, Evans had a contract to buy the house for
roughly two-thirds of its value.
Casanova's son David decided to pay for
an appraisal after learning about the contract his mother had signed.
The appraisal put the home's value at $440,000,
a whopping $165,000 more than Evans had offered.
The contract would spur years of legal battles and heartache.
David, her son, let Evans know that his mother had dementia and
wanted to cancel the sale.
But Evans didn't care, and in fact decided to record a notice on the home's
title that prevented the Casanova's from selling to another buyer.
The family suddenly found themselves in a multiyear legal battle to keep the home.
Karen Casanova died just 19 days after she signed the contract
to sell her home for much less than it was worth.
And unfortunately, stories like these they are not that rare.
Katie Southard owned a HomeVestors franchise in North Carolina,
and candidly admitted to ProPublica that when it comes to sellers,
quote, you were always lying to them.
That's what we were trained.
There was a price that you could pay, but you would always go lower and
tell them that was the price you could pay.
There are many examples to prove this point.
A man in Broward County, Florida, believed he was signing a document for
a home equity loan.
That in reality, was a contract to sell his $100,000 house for
just $37,500, according to a lawsuit he filed but ultimately abandoned.
A woman in Arizona said in an interview,
she was told her late mother's home in a popular outdoor recreation
town would have to be torn down and rebuilt to fetch a fair price.
After paying her just $10,000, the HomeVestors franchise sold it for
55,000 without making any improvements.
One court case documented the plight of an elderly man in Florida who was
told if he sold his condo, he could continue living there temporarily.
But he spent his final days alive, waiting to be evicted.
Because after the contract was signed, the franchise owner informed him
the homeowners association rules didn't allow him to stay in the property.
As if these specific cases aren't tragic and heart wrenching enough, ProPublica
notes that some homeowners fought from hospital beds to keep their properties.
At least three died shortly after signing sales contracts.
A fourth died after three years of worrying about money.
Their families told ProPublica that they are convinced that the stress of losing
their houses contributed to their loved ones deaths, though all had been ill.
HomeVestor swears that lying is against its code of ethics and
that they specifically train franchisees to stay away from sellers
who show signs of mental decline.
But, its training manuals teach something known as the Sandler system.
Central to this sales strategy is building rapport with
homeowners in order to find the pain.
Pain is always a form of motivation, the training manual reads.
Once you find the seller's pain, you have a much better chance of buying the house.
They look for circumstances that can lead to a quick sale,
like a job loss, pending foreclosure, or overwhelming medical bills.
One former franchisee described how he found a potential Atlanta
seller's pain by asking the homeowner why he needed to sell so fast.
The answer?
His mother was living out her final days in hospice 1400 miles away.
It's not because they want to sell the house, the former franchisee said.
It's because they want to get to Colorado to see their dying mother.
How HomeVestors advertises their services also says a lot
about their business model.
In an interview, a former employee of the ad agency hired by HomeVestors.
Recalled discussions about how to serve online ads to people
in the vicinity of nursing homes and rehabilitation hospitals.
The goal was to catch families who needed to sell assets so
Medicaid would pay their nursing home costs.
The employee, who asked not to be named because they, unfortunately,
still work in the industry.
Also recalled the agency's owner bragging about the ability
of its digital advertising to find an elderly person who had broken a hip.
That injury, the employee reported the owner saying,
is effectively a 60-day countdown to death and possibly a deal.
Now franchisees also generate their own leads.
So they're advised to build relationships with nursing home administrators,
probate officers, and even divorce lawyers for intel.
They're also instructed to look for clues of distress, like utility shutoff notices,
boarded up windows, or any sign of desperation they can pounce on.
If a family's belongings are on the curb, for example, the directive is clear,
quickly pursue the property where the trash pile indicates eviction.
And if you're wondering if there are regulations to protect people from these
predatory business practices, it really depends on the state you live in.
Now, ProPublica claims that the practice has come under regulatory
scrutiny in several states.
In Philly, for example, flippers are required to provide prospective sellers
with a Bill of Rights that identifies resources to help desperate homeowners and
describes how they can get a fair price.
But federally speaking and
this should be unsurprising the short answer is largely no.
And they play by different rules compared to real estate agents.
So, unlike real estate agents,
house flippers operate in a largely unregulated space.
Real estate agents have a fiduciary responsibility to represent
a homeowner's best interest in negotiations.
Which is defined in state laws, licensing requirements,
and also in an industry code of ethics.
But in most states, flippers don't even need a license.
So, what does HomeVestors have to say about all of this?
Well, for one, they tried to bury ProPublica's reporting,
according to a subsequent ProPublica piece.
Noting that the We Buy Ugly Houses Company held a virtual meeting for its
franchisees to outline a plan to minimize visibility of their investigation.
In an official statement to ProPublica through a spokesperson.
HomeVestors claimed that the horrible and predatory deals represent just a tiny
fraction, small fraction of the company's overall transactions.
Then they boasted about their high customer ratings,
which I personally found laughable.
A HomeVestor spokesperson denied the company had targeted the elderly and
pointed to a 96% approval rating among homeowners who sell to HomeVestors.
Which was calculated internally from what the company
says was over 500 customer reviews.
They did an internal aggregation of positive reviews
saying that the company is great, awesome.
I guess nothing to see here.
Why am I even talking about this?
Obviously, I'm being sarcastic.
That's a ridiculous response to very real issues that
are now coming out of these business practices.
Now, within days of receiving questions from ProPublica,
HomeVestors prohibited its franchises from recording documents.
To prevent Homeowners from canceling sales and discourage them from suing sellers.
The practices not only affect the seller, the company noted,
it creates a paper trail that reporters and
prosecutors can follow to a franchise's doorsteps.
And if you're doing this on a serial basis,
they say you're putting the entire system at risk.
HomeVestors general counsel Anthony Lowenberg said during a national
call on April 18 to alert franchise owners to ProPublica's upcoming story.
Looks like good, muckraking reporting can really make a difference.
ProPublica certainly has, and the same, unfortunately,
can't be said of our federal lawmakers and regulators.
Who have allowed these swindlers to basically be predators and
operate with impunity.
But I don't want this story to end on a sour note because there was
one man who fought for justice unlike a lot of Americans.
David Casanova, the gentleman that we talked about earlier in the story,
had the resources of time and money to fight
Corey Evans after his dementia riddled mother was swindled by him.
After Patriot Holdings sue to hold the Casanovas to the sales contract,
David filed a cross-complaint alleging fraud and elder abuse.
Evans, he claimed, used affection, intimidation and
coercion to get his mother, Corrine, to sign the contract.
Patriot Holdings, the franchisee for HomeVestors, fought for
the house for nearly three years and just would not give up.
Until Evans ended up being the subject of a criminal investigation over
his dealings with two elderly victims in Ventura County, California.
In August of 2020,
Evans pleaded guilty to two felony counts of attempted grand theft of real property.
He received a suspended jail sentence,
dropped his lawsuits against both victims, and paid restitution.
He was prohibited from any transaction involving the purchase or
sale of real estate during his probation.
After the war was over, David was able to sell the house for
a lot more than what Corey Evans was willing to pay for it.
David sold it for $510,000 to $235,000
more than Evans had tried to pay for it.
David said he did none of the repairs Evans had insisted
under oath were necessary.
But clearly he was still able to sell the home for
quite a bit of money and quite a bit more than what Evans had offered.