Are You Ethical?

Most folks like to think that they are acting ethically and with integrity. The real test of whether you are ethically conducting your affairs is by looking from the other person’s point of view, as if what you are doing is being published on the front page of a major newspaper. I am not saying that you must act like a charity. You must feed your family, too, and you must receive fair compensation for your risk.

Life is harsh. You can make no mistake and still lose. That’s called real life. That doesn’t give you the right to exploit unfairly someone else’s bad situation. When you buy 100 shares of stock, you are buying because you believe that the price will go up. However, you are buying from someone who thinks the price will go down. If you are both informed from your own perspective as to the risks and rewards of the transaction, then you are acting ethically. If the stock price suddenly goes down after you buy it, then can you get a rebate from the person that sold the stock to you? Of course not. Also, if the price suddenly goes up, then should you offer a rebate to the person that sold the stock to you? Of course not.

Here’s another example. Suppose you find a distressed home owner that has no debt on the property. Let’s say that the house is in good condition and is worth $100,000. The tax liens are for $10,000 and there is no debt on the property. However, the owner doesn’t want to sell, but wants a loan and has been declined by several banks.

A “real estate guru” is selling an e-book for $40 that recommends offering the owner a private loan from a 3rd party private lender for $20,000 with proceeds of $10,000 to pay the tax liens. The other $10,000 goes into your pocket for guaranteeing the loan. If the owner cannot pay the $10,000 tax lien, then why would you expect the owner to repay the $20,000 loan? The intent is to foreclose on the private loan, and then resell the property for $100,000. That is an unethical predatory loan. Yet, the guru has no moral compass and cannot see how deceptive and unethical he is for recommending this course of action against a distressed owner.

When you offer to buy a distressed property from a motivated seller, you are offering a potential solution to that seller’s problem. No seller in their right mind would expect a buyer to bail out their situation by paying more than the property is worth to the buyer. Although, most sellers waste a large amount of time and money looking for a greater fool, when the seller should invite all offers and review them for efficacy and for a solution that solves the seller’s problem. Of course, you must lock-in a profit for your risk and to cover the costs. My “Property Analysis Worksheet Short Form” spreadsheet product shows how to calculate the correct offer price that is fair and ethical.

Read my Ethics article for more about acting ethically and responsibly, while earning a living and providing prosperity to society.

Be Sociable, Share!
This entry was posted in General, Real Estate Investing, Time Value of Money, Wealth Creation and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

Comments are closed.