House flippers in San Antonio have discovered a creative way to find properties to buy: going after homeowners who have had water service shut off.
Real estate investors are using Texas open records laws to obtain lists of people who have had their water service disconnected by public water utilities, according to information the Rivard Report obtained through an open records request. The investors then use these lists to generate sales leads.
Between July and mid-September this year, the San Antonio Water System received 84 requests under the Texas Public Information Act for lists of customers who have had water service disconnected. The vast majority of those seeking records appear to be real estate investors interested in reselling existing properties. Many of them target rapidly developing neighborhoods near Loop 410 on the city’s near East, West, and South sides.
San Antonio Mayor Ron Nirenberg, a member of the SAWS board in his official capacity, called such marketing practices unethical and said he hopes State legislators can work to shield such information from “profit-making, predatory businesses.”
“These are people that are being deliberately targeted because they’re either enrolled in affordability programs or they’ve been disconnected,” Nirenberg said. “Just from a right-wrong perspective, that’s not right.”
Texas law considers public water utilities to be government agencies subject to disclosure requirements under the State’s open records law. The law requires utilities to provide information on which addresses had been disconnected, though it’s not clear whether the law requires them to provide names and other identifying information.
While the information may be public, some say that the tactics house flippers are using to find customers are predatory, with investors aggressively pushing people who are already struggling financially to accept cash offers that are well below market prices.
“That’s targeting people who are in desperate circumstances,” said Cherise Rohr-Allegrini, president of the Lavaca Neighborhood Association. “I can’t even describe my level of disgust with that.”
SAWS is a municipally owned water and sewer utility serving 1.8 million people in the San Antonio area. Water and sewer bills have been going up in recent years, with a 50 percent increase in the average residential customer’s bill between 2015 and 2020, though the utility has simultaneously expanded its customer assistance programs.
In an email, SAWS officials confirmed Friday they provided data on shutoffs to those who requested it.
“SAWS is not permitted to ask the purpose or reason why a requestor wants the information, and the Public Information Act specifically states that SAWS does not have the right to decide what is good for the public to know or not know,” SAWS stated.
However, Gavino Ramos, SAWS’ vice president of communications, said in an email that “SAWS would certainly not condone the use of customer information purely for economic gain.”
Nirenberg said SAWS lawyers are likely concerned about running afoul of State law by withholding data, adding that State legislators could amend the State’s open records law.
Real estate investors aren’t the only ones who seek address-specific data from SAWS. Journalists in San Antonio have frequently requested and published the names and addresses of SAWS’ top 100 water users.
“In the case of high water users, when the story will likely result in media coverage, SAWS attempts to provide a letter to the account holder as well as an offer to provide a conservation consult,” SAWS stated.
A spokeswoman for the Texas attorney general’s office, which oversees the open records process and has authority over which records are public, was unable to find any official opinions by the agency on requests for water shutoff lists from public utilities.
Under State law, anyone can request information from a water utility, and government entities are forbidden from asking requesters how they plan to use the information.
Since moving to the Lavaca neighborhood just south of downtown in 2004, Rohr-Allegrini has seen investors marketing aggressively to longtime residents, many of them low-income, to sell their homes. She herself receives countless postcards in her mailbox asking if she wants to sell.
“A neighborhood is always evolving and changing, and that’s not a bad thing, but when it happens organically,” Rohr-Allegrini said. “Our elderly neighbors passed away; their children moved away and chose not to move back. That’s how a lot of houses have turned over in Lavaca. That’s organic. But when you have folks like that pressured to leave, that’s artificial.”
But investors who rely on the water shutoff lists to generate sales leads say that they’re often doing a property owner a favor by smoothing the way for them to sell a home they’re no longer interested in owning. That’s especially true if it’s in bad shape and needs to be rehabilitated.
“Ultimately, we’re just looking for signs that there might be some reason they want to sell,” said Michael Eronini, a Realtor who filed three such requests with SAWS in July, August, and September. “I don’t think anybody buys a property to have it just sitting there.”
Eronini first started getting involved in the San Antonio real estate market around four years ago while attending college here. Water shutoff lists are far from the only public documents that can provide valuable lists of potential sellers, he said.
“There’s so many different things you can get from the county, the city, different things like that,” Eronini said. “It’s an indicator there might be some reason somebody wants to sell the property.”
In a phone interview this week, Eronini said he always treats the people he contacts with respect and leaves them alone if they say they’re not interested in selling. He talked about a house he purchased this week from a man who lives five hours from San Antonio but inherited the property from relatives and didn’t know what to do with it.
“He had a bunch of misinformation from lawyers,” Eronini said. “They told him he had to go through this crazy process to sell the place. … I reached out to him, made it a super simple process, got him money, and [had it] sold in 10 days.”
The use of water shutoff lists as sales leads seems to have become a common tactic for house flippers around the country. On YouTube and on real estate investment advice sites like BiggerPockets.com, investors offer advice on how to negotiate state open records laws by filing proper requests, haggling with lawyers and staff of the water utilities, and appealing denials of their requests to higher authorities.
Asked about their views on such practices, officials with the San Antonio Board of Realtors (SABOR) responded in an emailed statement advising anyone approached about selling their home to contact a licensed Realtor.
“Not every agent or investor is a Realtor,” SABOR stated. “A Realtor pledges to abide by a strict code of ethics … [that] requires that realtors identify and take steps to eliminate practices which may damage the public or discredit or bring dishonor to the real estate profession.”
In Texas, the water shutoff technique appears to have been popularized, at least in recent years, by a Dallas-based real estate investor named Daniel Moore. Moore did not return phone messages left at numbers listed for one of the companies he directs, i35HomeBuyers.
In multiple YouTube videos, Moore lays out his method for filing hundreds of requests to public water utilities and then streamlining the process. Moore told his viewers he had filed such requests to 200 such utilities in Texas and has trained people to use his techniques in Houston and San Antonio.
“I understood if I figured out how to make these requests work, I would receive some of the freshest lists possible,” Moore said in one video posted April 29. “And that is how I wanted to create my edge as a real estate investor.”
In that video, Moore gave details on how to negotiate the open records process, using techniques familiar to lawyers and investigative journalists. He shows his audience how to file requests and then teach the process to lower-paid assistants.
“I don’t want my $11-an-hour in-house assistant being consumed with $3-an-hour busy work I can outsource to the Philippines,” Moore said in the video.
Along with the video, Moore published boilerplate legal language that other investors could use to send to water utilities in cities they’re targeting. Nine of the 84 requests submitted to SAWS used Moore’s format.
Moore said he had honed his techniques in 2015 and 2016, when he was sending thousands of postcards a week to addresses where water had been shut off in the greater Dallas-Fort Worth metroplex. He advised his viewers to skip the postcards and go straight to calling their leads directly.
Moore also pointed out that vacant properties can often become a liability for property owners. Animals can create holes in the roof and walls that then lead to water damage. Copper thieves and other looters can strip the property of valuables. Homeowners insurance often doesn’t cover damage to vacant homes, which require a little-known specialty type of insurance product, he said.
“I do want that person to be sure they understand the risks they are putting themselves in,” Moore said of homeowners he approaches. “If they would just be willing to take a fair cash offer today, I could handle all the process of paperwork … and I can do everything necessary to transfer that title to put a very healthy sum of money in their back pocket and help them move on down the road.”
Such aggressive marketing techniques aren’t necessary to succeed in the real estate industry, said Realtor Lynn Knapik, who recently served on the Mayor’s Housing Policy Task Force, which recommended a 10-year, $3.9 billion investment in affordable housing in San Antonio.
“I have not heard that one, but that is really despicable that they’re going after people that have problems,” Knapik said when told about the water shutoff list technique. “It just amazes me the things that people will come up with.”
Knapik has been selling homes in San Antonio and surrounding areas for 15 years and said she typically gets sales listings and other business from word of mouth. House flippers and rehabbers are having an “extremely negative” effect on the city’s housing market, she said, by unnecessarily driving up sales prices that then trickle into appraisal values and property tax rates.
“These flippers come in, they buy these houses, then they do so much to them that they’re selling them so much higher than anything else in the neighborhood,” Knapik said.