“We Buy Ugly Houses” Owner Pleads Guilty to Scam

It sounded good to so many people. They thought they’d receive a great return on their investment. That’s what the former owner of the “We Buy Ugly Houses” franchise — Karen McClaflin, age 58 — wanted them to believe. But this week in court, she admitted to misleading investors, misusing their money, and even forging signatures on Deeds.

Turns out she was running a real estate Ponzi scheme with fraudulent activity going all the way back to the boom year of 2005. I recall hearing about it as a “clever and effective advertising strategy” at a conference for mortgage and real estate professionals.

McClaflin and a partner opened a franchise of “We Buy Ugly Houses” and called it Trademark Properties and Trademark Realty in Colorado Springs. In 2011, when they ran up excessive debt, the partner bailed out and declared bankruptcy. McClaflin, however, wanted to continue to milk the cash cow. She opened a new “fix and flip” business called Homesource Partners, transferring the former investors to this new business.

She told her investors that some of the houses were too ugly for banks to lend on, and besides, the banks took too long. She claimed she was purchasing these eye sores at a great value and in only 31 to 90 days, the homes would be rented or resold at a handsome profit.

But alas, it was too good to be true. This smooth-talking shark knowingly and intentionally misused money by signing multiple investors to the same property, chose not to record all of the Deeds, sometimes didn’t tell investors when “their” property sold, and even forged signatures.

In the end, she used new investors’ money to pay older investors: the definition of a Ponzi scheme.

Karen McClaflin is scheduled to be sentenced on January 17, 2018.

For complete story, see U.S. Dept of Justice page here.

7 responses

  1. TransUnion is terrible. If you pull your credit score you will find that your score is always lower with TransUnion. I think they like to know they can add all kind of crap on your credit report. I hope they get fined another 25 million.

  2. Santos Garcia | Reply

    This really a sad news for Real estate investors, they will have a bad reputation on the market. There are some legit companies and they help you sell your house fast in texas. they are really good they give a great offer to the property, and also they walk with you through the process.

  3. We have an investment company in Greensboro and we mostly take into consideration the current market value, the sold properties around the area that the property is selling to us and of course the renovations needed. We cant always buy property that is being sold to us… This is a bad news for us investors doing a lot of marketing strategy to up our sales. I hope she will be the last one of her kind. Thanks and Best Regards!

    1. Your point is valid. There are reputable property buyers and investors, for sure. I think if your own signage and marketing looks classy and not like the ugly yellow signs, you will not be associated with the fraudsters.

  4. We post signage to. But not that yellow one usually we a lot some budget to does…

  5. Selling a house in Brooklyn, NY can be very stressful, especially if you have multiple people like realtors and their clients to deal with – It’s definitely not a walk in the park. There are many reasons why you would want to sell a house fast in Brooklyn, NY. If you still haven’t decided how to sell your house fast, we are your perfect partner and can help you to get the best cash deal in Brooklyn, NY, without having to go from realtor to realtor and waiting several months and several price reductions to sell your house.

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