Season 1,

53: How to Avoid Fraud in Business with Wendy Sweet

May 23, 2017

Wendy Sweet claims to be a recovering mortgage broker and has been successfully lending hard money through her company, Carolina Hard Money, for 16 years. Wendy and her partner Bill Fairman, who is also her brother, manage a fund of accredited investors and broker loans for non-accredited investors who are interested in generating passive income. Wendy is a 35-year veteran real estate broker in both Carolinas, a 17-year mortgage veteran, and has 17+ years of experience in flips, landlording and wholesaling. Her goal is to help others build wealth, grow family prosperity, and change communities throughout the Carolinas.

Time Stamped Show Notes

[3:32] After 8 years of loaning money, Wendy made a larger loan than accustomed, to a long time successful borrower. And though it was different than usual, there was no warning about this specific loan.

[6:08] The large loan was for a house flip and after the first inspection, suspicions started to arise when a couple things signaled that maybe the borrower was planning to move into the house, even though the loan contract specified that he could not do that.

[12:00] On the second and third inspections of the house, the borrower, who apparently had money, called the day after to pick up the check, which is unusual for someone not in need.

[13:39] After the third inspection, with perfect timing, the borrower claims bankruptcy.

[14:31] Not knowing where to start to handle the bankruptcy and the foreclosure, with help of the best attorney in the state, they had to first, get the house out of the bankruptcy to then start the foreclosure.

[15:38] After the bank didn’t refinance a commercial building that the borrower had, in order to not lose it, he filed for bankruptcy as the only solution he knew of. Wendy could’ve refinance that building, but he didn’t ask.

[16:14] The borrower moved into the house, and that made it easier to pull it out of the bankruptcy and to foreclose it.

[18:09] One week after the foreclosure, the borrower’s partner payed in full everything he owed to buy the property. But this was a 2 years process for the loaners to get their money back.

[21:00] One important lesson is that even when knowing somebody, when it comes to business, we have to stick to our guidelines. Pressure can do a lot of things to our behavior.

[26:50] Failing Forward Segment

  • What is the bottom line reason of this failure? “I was too comfortable in my borrower and too trusting.”
  • What is the single most important lesson you learned from this? “To react immediately. I should not have tried to help the borrower through this, he made the choice and he needed to suffer through it.”
  • What are the major ways you protect yourself from future failures? “I pray a lot. I try to think like an attorney, most really good attorneys have no emotion in the way that they think, it’s black and white.”
  • Who do you turn to when you need help? “I turn now to an attorney that we’re very close to but I also have a brain trust, I’m involved in pretty have duty mastermind groups.”
  • What advice would you give to someone in a similar position? “There’s a lot of really good mastermind groups that pertain to the type of business that you’re in, and that is truly the best way to connect with this people who have been in the same types of situations.”

[32:28] Her podcast The Real Estate Financing Network will touch the financing side of the real estate business. It’s launching soon and to know more about it you can reach Wendy at wendy@carolinahardmoney.com

[35:00] Guest’s final thought: “Lending money is truly an art form and you just really need to be smart about it but it’s also the best seed on the table.”

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