*CONSUMER WARNING: KNOW WHO YOU ARE WORKING WITH!!!*

By
Real Estate Agent with MavRealty

I just took a heartbreaking call....

A lady contacted us via our website about a home we have available for lease-purchase.  They have a home in Phoenix, but wanted to move into a larger home.  In March, she called off of an ad she saw for a "lender", who told them their credit was too poor to move up - but he could "help" them.  For $2,000 cash, he could improve their credit in 2 months - enough to be able to purchase a home!  And wouldn't you know it, he knew JUST the home for them - he referred her to a "client" of his, who had a home in Queen Creek that they could lease-purchase.  Here are the terms of the lease-purchase:

Sales price:  $330,000

Rent:  $2,000/mo

Down Payment:  $4,500 at move in; $3,000 in 60 days

Must close by June 8th - no extensions, no contingencies

So they give him $2,000 CASH, and move into this home;  they put their home in Phoenix up for rent.  It is still vacant, so they are making that payment.  They are cash-poor, paying 2 house payments AND putting out $4500 down AND $2k cash to him. 

Guess what happened?  The "Lender" has disappeared.  Number disconnected, nowhere to be found, with their $2k.  Bad enough story, but wait - it gets worse.....

They had the Queen Creek home appraised.  It came back at $236,000(!).  There is NO stipulation in their lease-purchase agreement regarding appraisal; the seller has told them he will sue the appraiser, which they believed he could do.  Uh, no.  He said he would lower the price to $307,000, but not a penny less - if they can't qualify for a loan - for +/- $70k MORE THAN THE HOME IS WORTH, they are out all of their rental payments AND deposits!!!  Keep in mind, they also have until June 8th to close, or else lose all their money, anyways....and their credit is NOT improving THAT fast!

These poor people had blind faith in the "lender" to do what is right.  He absconded with their money, and put them in a situation he KNEW wouldn't work out, to benefit an investor client of his.  These buyers had NO representation - no agent in their right mind would allow their client to enter into such an upside-down contract.  Come June 8, they are out over $12k, and will have to move back into their Phoenix house.  THANK GOODNESS they haven't already rented it out...or else they would be homeless.  They have NO MONEY for a deposit on ANY home.  Totally over the barrel.....

PLEASE PLEASE PLEASE!!!  If you do not personally know a lender or anyone else asking for financial info or CASH (WHICH SHOULD IMMEDIATELY BE A RED FLAG), DO NOT WORK WITH THEM!!!  Ask family, friends, or co-workers for referrals.  Check a company's standing with the BBB.  If you are a buyer, GET A REAL ESTATE AGENT TO REPRESENT YOU!!!  It costs you NOTHING in Arizona - sellers pay their commission - and they can protect you from predators like this!!!

Sharon Kotula, ABR
Adam Tarr, e-PRO
RE/MAX Excalibur

Comments (6)

Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

That is absolutely despicable.  It's so difficult for me to even believe there are scum buckets like that on the loose.  Sure do feel badly for those folks and there's nothing you can do to help them. 

Apr 12, 2007 01:31 PM
Kelley Eling
Fathom Realty Group - Sonoma, CA
Realtor Extraordinaire

The Seller pays the commission (split between the brokerages that represent the buyer and the seller) in California too.  All the unsolicited mail, email, pop up ads etc. from lenders should be illegal.  There are at least as many lenders as there are Realtors.  Everyone knows where to find one.  Just as with any other profession, you should always check references.  Or better yet, as someone you know and trust who they would recommend.

Apr 12, 2007 01:34 PM
Richard Parr
ADT Security Services - Slidell, LA
Home Security Specialist - Greater New Orleans, Louisiana

Yes, there are and will always be crooks out there who take advantage of people.  It stinks, but it is part of life. 

I just can't get over people who are that trusting.  Get a second opinion, a third even.  Don't give cash to anyone.

Apr 12, 2007 01:47 PM
Johnnie Taylor
CFB - Lexington Park, MD

This is a truly sad and unfortunate situation. For the most part I agree. 

I will have to take exception with one small issue though. Sometimes the people who can help you the most you may not know or may have never done business with any of your friends or family.

There are other ways to find out about the people. Inquiring with the BBB is about as useful as putting butter on a burn.

As a lender, I do find that the first thing I must do is establish credibility with clients. This can be done in a number of ways.

  1. No one should ever ask you for cash for anything.
  2. Monies to be paid for appraisals, inspections, or deposits should never be paid to the lender. they should always be paid to the service providers.
  3. When you are told your credit report is bad, you should ask to review it with the loan officer. If they say that they cannot do this, run. Fast.
  4. Above all....never enter into a binding agreement for real estate or a mortgage without an appraisal. It may cost you $250-$400, but, it could save you thousands.

One other thing I would take exception with is the characterization that a buyer should look to a RE agent for salvation from the big bad lender. There are crooks in all facets of this business. I have run into some really crooked RE agents, appraiser, and loan officers.

The real key should be to test everyone involved until you feel that all the major players in this transaction have YOUR best interest in mind.

Apr 12, 2007 02:31 PM
Anonymous
Sharon Kotula

Johnnie -

Some good points; I am not trying to throw lenders as a whole under the bus, and there are certainly bad seeds in all facets of business.

As a safe bet, EVERYONE knows SOMEONE who has worked with a lender.  You don't HAVE to use them, but if someone you know had a successful transaction, why not start there?

Real Estate agents have individual licenses, rather than blanket brokerage ones; you can research a real estate licensee to make sure they have no outstanding complaints, verify that they are in fact licensed, and if they DO cheat you, you can at least fall back on their broker, who is responsible for their actions.  Anyone with a home printer and card stock can represent themselves as a lender or agent; if it doesn't SEEM right, RUN. 

SK

Apr 12, 2007 03:39 PM
#5
Johnnie Taylor
CFB - Lexington Park, MD

This is an interesting thing you just brought up. I was a little aggrevated when Maryland and several other states changed their laws to require individual loan officers to be licensed, but, this presents a good argument.

Also, when I joined my present mortgage company, I felt like I was back in my early days in the Marines when they were reciewing everything for my security clearance. They did background checks and credit checks and so forth.

If more states would license individual LO's, I think that people would be less likely to be as fraudulent. The costs are way too much and since they are now fingerprinted and registered, you can't run too far. Every time someone does a background check on me I am thankful that some of my wilder youthful adventures didn't result in serious consequences.

Not only do I know that I wouldn't defraud someone like that, but, it would be WAY too risky to cheat someone for just $12,000.  Way too stupid.

I just hope that people take the time to really educate themselves before deciding on who to go with.

Apr 12, 2007 04:39 PM