I got a call from a potential buyer who wanted to buy their first investment property. They were a referral from a past client of mine. I offered them to meet at my office for initial buyer consultation to understand their investment goals & criteria.
After 10 minutes into our meeting, they start unraveling where they got their idea about investment.
They recently attended a seminar about "How to become Rich by Investing in Real Estate." They met some of the past investors at the seminar who advise them to go and find a good deal!
These buyers did not have any CASH to purchase an investment but if I found them a good deal they have hard lenders that will finance them.
Like NFL referee, I started throwing red flags in my mind as they were sharing about their experience from the seminar.
I told them I would love to help them, but they will need to get a letter & proof of funding guarantee them funds before we can preview/write an offer on any homes. Our meeting ended with an agreement that they will speak with their hard lender and get back to me. As expected, I did not hear back from them till one day....
Fast forward few months later I got a call from them. They end up bidding on a property in the Northern Virginia area. They put down $10000 deposit (which they took a loan from their 401K) with not contingencies. The reason, for their call, was they were strangled in a situation.
Their hard lender cannot back them up to purchase this dream investment property. They don't qualify for a traditional mortgage due to their debt to income ratio. They wanted my advice. If I knew a magic trick to get them out of this contract without loosing their hard earned $10000 deposit.
Unfortunately, we are just real estate agents. I asked him to hire a real estate attorney. Have his Realtor speak with his broker & see if they can renegotiate the terms and void the contract.
Out of my curiosity, I asked him "How did their Real Estate agent got the sellers to accept their offer without proof of funds?"
I could sense regret in his voice, They submitted an a strong offer that was non-contingent and closing in 10 days with the deposit at risk if they did not close. Well, another red flag.
I feel sorry for these folks about a very hard lesson learned.