Have you ever thought that those celebrity-endorsed real estate seminars that promise to get rich quick by flipping houses using other people's money sound too good to be true? Turns out, they might be right.
The Federal Trade Commission and the Utah Department of Consumer Protection announced this week that they were suing a Utah-based company for allegedly lying to entice consumers to participate in its purportedly free real estate seminars, where the company promised free tips to make money flipping homes, but in reality charged thousands, or even tens of thousands of dollars, for those “tips.”
According to the FTC, Zurixx uses HGTV stars and other television personalities as celebrity endorsers to invite people to “free” real estate seminars, claiming that participants can learn how to make money by flipping homes.
But the agency claims the entire operation is a scam, and that the company “lures consumers into multi-thousand-dollar real estate seminars with the promise of huge profits.”
The FTC alleges that Zurixx uses celebrities in its advertisements to boost the credibility of its seminars, including endorsements from Tarek El Moussa and Christina El Moussa of HGTV's “Flip or Flop,” Hilary Farr of HGTV's “Love It or List It,” and Peter Souhleris and Dave Seymour of A&E's “Flipping Boston.”
According to the FTC, the ads persuaded consumers to attend free events that taught them how to make big profits by reselling products “using other people's money.”
However, the company claims that the free event was actually a sales presentation for Zurixx's three-day workshop, which costs $1,997.
According to the FTC, during the free event, Zurixx repeatedly told consumers who signed up for the three-day workshop that they were likely to make thousands of dollars in profits with little risk, time, or effort.
“Zurixx also claims that consumers who purchase a workshop will receive 100% of their real estate investment financing regardless of their credit history,” the FTC said in the complaint. “The company backs these claims with a money-back guarantee, offering a refund to consumers who don't pay 'at least three times' the cost of the three-day workshop within six months.”
According to the FTC, Zurixx presenters told attendees at these free events that the three-day workshops would “teach them everything they need to know to make a decent income from real estate.”
Although the sales pitch could get people to pay around $2,000 for the three-day workshop, the sale reportedly doesn't end there.
According to the FTC, instructors for the three-day workshops often claimed the courses were “just beginner's courses” and tried to sell consumers as much as $41,297 in additional products and services.
But the FTC said many of the claims about Zurrix's system are “false or unfounded.”
From the complaint:
It is unlikely that a consumer will make thousands of dollars in profits from a real estate investment using Zurixx's products. It is unlikely that a consumer will receive 100% of the funding for a real estate transaction through Zurixx or its partners or affiliates. Furthermore, Zurixx's six-month money-back guarantee contains significant limitations that Zurixx does not adequately disclose until the consumer pays for the three-day workshop.
The company also said that Zurixx presenters “generously” include what they believe to be success stories in their sales pitches.
The FTC also allegedly told instructors “routinely” to encourage workshop participants to obtain new credit cards or increase the limits on existing cards in order to finance home flips.
Additionally, the presenters allegedly instructed attendees to provide income information to their credit card companies that was “significantly higher” than their current income, based on the attendees' anticipated increased income from real estate investments.
However, rather than using that expanded credit flexibility, obtained under questionable circumstances, to invest in real estate, Zurixx presenters allegedly frequently suggested participants actually use the new credit to pay for “advanced training” at Zurixx itself.
Zurixx's business model has come under fire in recent years, with many customers accusing the company of using false advertising to lure people into attending its events.
According to a 2016 Orange Country Register article, Zurixx alleged in its ads that Tarek El Moussa and Christina El Moussa attended the company's real estate seminars to teach attendees property resale strategies.
But at the time of the seminar, the stars of “Flip or Flop” were nowhere to be seen.
Others have had similar experiences, leading to hundreds of complaints filed with the FTC.
Eventually, Christina El Moussa appeared on ABC to defend the Zurix seminars, claiming that she would definitely attend if one was held near her home.
From ABC:
Christina El Moussa said she always attends seminars held near her home.
“I’ll definitely go if it’s within 45 minutes of my house,” she said, “especially since it’s going to be hard to get from place to place. [because] “We have two children.”
While Christina recently attended seminars in St. Louis and Miami, Zurix said even those appearances are unusual, adding that “nowhere in other marketing does it say that El Moussa will be appearing live, in person at any event.”
According to the FTC, some dissatisfied Zurixx customers tried to seek refunds from the company, but the company allegedly required some of the consumers who received refunds to sign agreements that prohibited them from speaking with the FTC, state attorneys general or other regulators, filing complaints with the Better Business Bureau, or posting negative reviews about Zurixx.
The complaint alleges that Zurixx violated the FTC Act's prohibitions on misleading and deceptive practices, the Consumer Review Fairness Act, the Utah Consumer Sales Practices Act and the Utah Business Opportunity Disclosure Act.
“From start to finish, the defendants lured consumers down a path that promised easy money and detailed information that could cost them thousands of dollars and get them into serious debt,” said Andrew Smith, Director of the FTC's Bureau of Consumer Protection. “When companies tell consumers they have the secret to getting rich with little effort, we encourage them to carefully consider what is actually being offered.”
To read the FTC's full complaint, click here.