The Housing Scene

Scamsters Still Pitching

The fact that television and radio pitchmen hawking real estate-related "get rich quick" schemes still fill the airways is not surprising. Not, at least, if you subscribe to the famous admonition about there being "a sucker born every minute."

But anyone considering handing over their hard-earned cash for classes, books and tapes that supposedly reveal the great secrets to using real estate to build instant wealth -- while exerting hardly any energy at all -- should ask themselves this:

If it is so darn easy to earn millions by following these get-rich preachers, why are they working so hard to turn you into a disciple?

The 2013 settlement between the Federal Trade Commission and financial guru Russ Dalbey should help answer that question.

Dalbey, who is now banned from the infomerical business, wasn't one of those buy-and-flip guys who dot the airwaves once Jimmy Fallon, Jimmy Kimmel and the other late-night TV hosts sign off for the night. Instead, he was all about buying and selling promissory notes, most backed by real estate.

But like the majority of late-night pitchmen, whether they hawk real estate, privately held mortgages or tax liens, Dalbey did not earn millions from brokering notes, as he so proudly claimed.

Rather, according to a complaint filed by the FTC and Colorado Attorney General John Suthers, most of Dalbey's "note-related income" for the past 20 years came from "marketing and selling products and services purporting to teach consumers how to find and broker promissary notes."

Dalbey's pitch, "Winning in the Cash Flow Business," featured success stories of people claiming to have earned $1.2 million in 30 days, $79,000 in a few hours and $262,216 part-time.

But over the 15 years or so he was on the air, according to David Frankel, the FTC staff attorney on the case, only 296 of the 949,000-some people who purchased Dalbey's stuff actually made money, and just 129 made more than they'd spent on the courses.

People whom Dalbey swindled paid anywhere from $40 to $160 for his "Note Network" program. But once they were reeled in, they were hounded by high-pressure telemarketers to spend thousands more on boot camps, coaching sessions and lists of potential leads.

Dalbey was fined $330 million and forever prohibited from telemarketing, selling business opportunities and producing and distributing infomercials. But he escaped jail time.

Wade Cook didn't. The former taxi driver, who made most of his money selling books and tapes purporting to teach people how to find and broker privately held mortgages, was sentenced in 2007 to more than seven years in a federal penitentiary.

But both "gurus" fared better than their fellow con-man Don Lapre, who sold, among other things, a 36-page booklet explaining how to recover a Federal Housing Administration insurance refund after paying off a mortgage. Lapre killed himself in jail in 2011, while awaiting trial for bilking more than 220,000 victims out of nearly $52 million.

Lapre was charged with 41 counts of conspiracy, mail fraud, wire fraud and money laundering.

If this isn't enough to convince folks to keep a tight fist on their wallets, then they should check out the guru-rating Web page created by former real estate investor and newsletter publisher John T. Reed (johntreed.com). Reed sells a series of booklets on his site, and also offers what he says is "logical, well-researched, real-world, real estate investment advice."

That's the direct opposite of what many real estate investment "experts" have to sell.

The idea for the ratings list grew out of a 1990 article Reed wrote called "The Real Estate B.S. Artist Detection Checklist." The piece was intended to teach people how to recognize the charlatans on their own. But his readers wanted more -- his specific recommendation on every guru who has come down the pike. And there have been many.

Since 1979, he says, "there has been an endless parade of B.S. artists coming into the real estate investment advice field... It is an embarrassment to the good people in the business."

So, Reed started rating and reviewing dozens of industry authors, experts and seminar leaders -- giving readers his opinions of which ones are worth listening to. If you can't find a specific investor on the ratings page, which Reed admits he hasn't updated recently, check out his site's general guidelines for identifying a scam artist, and decide for yourself.

Sooner or later, the charlatans always meet the same fate as Dalbey and his fellow real estate robbers, says William Mencarow, another publisher-investor.

"The wheels of justice turn slowly," says Mencarow, "but eventually grind fine."

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