Real Estate Red Flags - Cash buyers but no Proof of funds

By
Real Estate Agent with Samson Properties VA0225077251

After working over a decade in the real estate the industry, the freshness of the new challenges keeps us young.

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. 

 

 

 

 

Posted by

 
                             
Associate Broker
MRP, ABR, ePRO

NVAR, Life Time Top Producer
NVAR,Multiple Million Dollar Sales Club Member
Samson Properties
Cell - 703-625-4949
Email - info@eNOVAHomes.com
Web: www.eNOVAHOMES.com
 
Residential real estate agent serving Northern Virginia in Fairfax & Loudoun county over a decade and almost $100+M in sales volume experience. 


 

Comments (8)

Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert

 I don'tfeel sorry for people like this, they simply don't listen to sound advice that professional Realtors give them 

Dec 21, 2015 08:57 PM
Ritu Desai

Joe Jackson I know I wish these sneaky investors were honest about their deals. 

Dec 21, 2015 09:11 PM
Susan Laxson CRS
Palm Properties - La Quinta, CA
Local Knowledge & Global Network

"After working over a decade in the real estate industry, the freshness of the new challenges keeps us young." Love this! I can say the same after three decades and am always surprised when other agents don't prequalify their clients, get the deposit verifications or whatever is needed and avoid the red flags all together. You did the right thing by asking and letting them go when they didn't want to hear what you suggested.

Dec 21, 2015 09:01 PM
Ritu Desai

Susan Laxson so true. Unfortunately, many of the real estate agents want to get the deal under the belt rather than knowing the complexity to the seriousness of playing with others life long savings. 

Dec 21, 2015 09:12 PM
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Ritu Desai ,.... and this couple will be another in line for bankruptcy...hard money lenders loan to anyone at 14+ percent.... 

Dec 21, 2015 09:01 PM
Ritu Desai

So true! I wish them the best but I don't think they will ever again invest in any real estate. 

Dec 21, 2015 09:13 PM
Mark Neighbor
A O Home Solutions - Sell House Georgia - Buy House Georgia - McDonough, GA
Sell House Fast In Georgia

Hard money is just that hard. The hard money lender will gladly take the money or the house if you do not preform on the deal. Using hard money for a deposit to buy a house without securing the money to buy the house is not the thing to do ever. I agree with Barbara, these people will be in line for bankruptcy thinking this way. So Sad. What was anyone thinking when they let the buyer put down money with no proof of funds. 

Dec 21, 2015 09:08 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the post. I feel sorry for such people. 

Dec 21, 2015 10:31 PM
Rob D. Shepherd
Windermere/lane county - Florence, OR
Principal Broker GRI, SRES

Let me play a Violin and sing for them! The number is called Greedy Greedy.

Dec 21, 2015 10:51 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

This is not hard money, it a hard lesson. Unfortunately many learn the hard way when it comes to get rich quick ideas, that in most cases, just don't work.

Dec 22, 2015 05:11 AM
Pat Starnes-Front Gate Realty
Front Gate Real Estate - Brandon, MS
601-991-2900 Office; 601-278-4513 Cell

I've often said, if it was easy, everyone would do it. There is a right and wrong way to invest in real estate, and if it sounds too good to be true, it probably is.

Dec 22, 2015 07:45 AM