There was a recent article on HousingWire that was posted about the state of real estate seminars. Not the typical types of seminars that we do, per say, but the ones that are featuring reality TV stars that you have probably seen on your television.
The article, which can be found here, but is re-posted below, was one met with a lot of opinions. In today's piece, we wanted to set the record straight from our perspective and share with everyone what we feel about this article.
The FTC Article As Told by HousingWire
Did you ever think those celebrity-endorsed “get rich quick by using other people’s money to flip houses” real estate seminars seemed too good to be true? Well, it turns out you may have been right.
The Federal Trade Commission and the Utah Division of Consumer Protection announced this week that they are charging a Utah-based company with allegedly lying to consumers to convince them to attend the company’s supposedly free real estate seminars. The company promised to give away the secrets to making money flipping houses at the event, but actually charged thousands or tens of thousands of dollars for said “secrets.”
According to the FTC, Zurixx entices people to attend its “free” real estate seminars by using HGTV stars and other TV personalities as celebrity endorsers and claims that attendees can learn how to flip houses to make money.
But the agency claims that the entire operation is a scam, with the company allegedly using “deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.”
The FTC claims that Zurixx uses celebrities in its advertisements to lend credibility to the seminars, including endorsements from Tarek and Christina El Moussa from HGTV’s “Flip or Flop,” Hilary Farr from HGTV’s “Love It or List It,” and Peter Souhleris and Dave Seymour from A&E’s “Flipping Boston.”
According to the FTC, the ads convinced consumers to attend free events that would teach consumers how to make large profits by flipping “using other people’s money.”
But the agency claims that the free events are actually a sales presentation for Zurixx’s three-day workshops that cost $1,997.
According to the FTC, during the free events, Zurixx repeatedly tells consumers who sign up for its three-day workshop that they are likely to earn thousands of dollars in profit, often with little risk, time or effort.
“Zurixx also represents that consumers who purchase the workshop will receive 100% funding for their real estate investments regardless of their credit history,” the FTC said in its complaint. “It backs up these representations with a money-back guarantee – consumers who do not make ‘a minimum of three times’ the price of the three-day workshop within six months will receive their money back.”
According to the FTC, Zurixx presenters have told attendees at these free events that the three-day workshop would “teach them everything they need to know to make substantial income from real estate.”
If that pitch is successful in getting someone to fork over the nearly $2,000 for the three-day workshop, the selling allegedly doesn’t stop there.
According to the FTC, presenters at the three-day workshop often claim that the workshop is “merely a beginner course,” then upselling consumers additional products and services that can cost as much as $41,297.
But according to the FTC, many of Zurrix’s claims about its system are “false or unsubstantiated.”
The agency also states that Zurixx presenters “generously” include supposed success stories into their sales pitches.
According to the FTC, presenters also allegedly “routinely” directed workshop attendees to obtain new credit cards or increase the credit limits on their existing cards, supposedly to help finance their house flips.
Beyond that, the presenters allegedly told attendees to provide the credit card companies with income information that was “significantly higher” than their current income, basing that inflation on the supposed increase in the attendees’ income from investing in real estate.
But, instead of using that increased credit flexibility obtained under questionable circumstances to invest in real estate, Zurixx presenters allegedly often suggested that attendees actually use the new credit to pay for “advanced training” from Zurixx itself.
Zurixx’s business model has come under fire in recent years, with many customers accusing the company of using false advertising to entice them to attend the company’s events.
According to a 2016 article from the Orange Country Register, Zurixx seemingly claimed in an ad that Tarek and Christina El Moussa would attend one of the company’s real estate seminars, and would teach their flipping strategy to the attendees.
But when the seminar, the “Flip or Flop” stars were nowhere to be found.
Others had similar experiences, leading to hundreds of complaints being filed with the FTC.
Eventually, Christina El Moussa ended up going on ABC to defend the Zurixx seminars, claiming that she does attend the seminars, if they are held close to her house.
According to the FTC, some of Zurixx’s unsatisfied customers have tried to obtain a refund from the company, but the company allegedly required some consumers who received a refund to sign an agreement barring them from speaking with the FTC, state attorneys general and other regulators; submitting complaints to the Better Business Bureau; or posting negative reviews about Zurixx.
The complaint alleges that Zurixx has violated the FTC Act’s prohibitions on misleading and deceptive conduct and the Consumer Review Fairness Act, as well as the Utah Consumer Sales Practices Act and the Utah Business Opportunity Disclosure Act.
“From start to finish, these defendants used the promise of easy money and in-depth information to lure consumers down a path that could cost them thousands of dollars and put them in serious debt,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “When a company tells consumers they have the secret to get rich with little work, we encourage consumers to take a hard look at what’s really being offered.”
Ryan's Take on the FTC Stance:
When I was starting out in Real Estate, probably the most famous National so called Mentoring Program was the Rich Dad Poor Dad program. Of course, as they use a lot of psychology to prompt you to buy their course, I fell for it and spent $15,000. Now I am not saying that the information was not good information. It was good information. But good information without proper coaching or mentoring will get you nowhere. So not only was it a waste of money, it was a waste of my time. Since the crash of 2008, I have seen so many Reality TV stars using their celebrity to pose as Real Estate Mentors claiming they will teach others how to become millionaires in Real Estate.
There is just one problem. NONE of the Reality Stars do any of the actual coaching or mentoring. It seems that there are marketing companies, or even the networks that hosted their show that create a marketing strategy and because they were famous on TV everyone will believe in them. The marketing strategy starts with Social Media. Every other day a different Reality Star is advertising their “secret system” of how to make you a millionaire in Real Estate. First, they come to a city near you for a free 2 hour special event. If you read the small type disclaimer, you will find that the actual stars on TV never appear at these events. What they will do is have their clever sales people make a special offer to everyone that attends. That offer will be a drastically reduce price for their 3 day Boot Camp. What they don’t tell you is that they are not done selling you. The Boot Camp is created to simply upsell as much as possible to everyone. Most of the National Reality TV Star programs start at about $25,000. The majority of them average at about $40,000.
Since my experience, and since becoming an owner of a Real Estate Investors Association, I have met hundreds of people that have taken many of these programs. Fortune Builders, Cody Sperber The Clever Investor, Christina and Tarek of Flip or Flop are just a few of these scam artists. Fortune Builders is none other than Than Merrill from Flip This House on A&E in 2008. Being a good looking charismatic ex college football player, made the perfect spokesperson for Fortune Builders a company designed to take as much money as possible while fooling them into thinking they would in turn become successful in Real Estate. The interesting thing is that they all follow the same formula. They also all have the same issue in common. Once they leave town and the training is over, there is not much support. There is also a common characteristic that all of the people that have bought into these programs have. None of them have successfully profited from any Real Estate closings. Some say the success rate is around 2-3%.
It is unfortunate that greed seems to be the biggest motivation behind these programs. So ask yourself this question; Would you see a doctor just because they played one on TV? Be smart and just use your common sense. If these Reality Stars already have your money, why would they want you to become successful?
Anish's Take on the FTC Stance:
I am not surprised the Federal Trade Commission is finally going after celebrity-endorsed companies that flip houses in real estate. The market has been immersed with companies trying to convince newbie real estate investors to spend tons of money on real estate education. Newbie investors are drawn in by celebrities on television using their fame to convince the average person they can be a millionaire overnight. As with any lucrative industry with big potential profits, people swarm to these seminars thinking they can get out of their financial situation and create a legacy for them and their family. The issue becomes the salespeople performing the seminars are never the “Stars” of the television shows that actually teach at the events on the country. We have seen that some of the sales trainers at the events actually have never done a real estate transaction and instead just rehearsing a script given to them by their team.
Near the end of the FREE event , they promote their more expensive seminars and ultimately try to get you into their “inner circle or mastery programs” which are up to $80k. The amazing thing, you almost feel coerced by the sales team and you get caught up in the euphoria of the moment and you gladly give your credit card information. Unfortunately, I was also one of these individuals that did fork over $40k to learn from the real estate gurus. Then you realize the coaches are never local, don’t know your market and very difficult to get a hold of when you need questions answered. Good luck trying to get your money back or even a partial refund if you are persistent to speak to a manager.
As a current investor, and owner of the Broward Real Estate Investors Association & Miami Dade Real Estate Investors Association I have been coaching many people that have been duped by these programs to get a refund or partial refund. Literally, I have been able to get hundreds of thousands of dollars back to these potential students on these “Get Rich Quick Seminars”, by teaching them how to talk to these companies for Free. Many of these people have taken out credit cards and drained their retirement and bank accounts for these type of programs. As there is always value in education and learning, the idea of using celebrities as faces of a program and them not really teaching skills in real estate investing is very disappointing. My colleagues and I have a saying “ We are National Real Estate Seminar Survivors!”
We have laws to avoid predatory lending and now it’s excellent to see that FTC helping out consumers in regards to these real estate programs.
You may also want to read our earlier take, “The Truth About Flipping Property Shows.”
You can download the full FTC complaint here.