Scammers are everywhere. Every day it seems we get another new scam in either our email inbox or the text messages on our phone. Since there’s no way to avoid the scam solicitations, it’s important to know what to look out for. This week I received an email from someone who wanted to purchase one of my listings. Here it is:
Subject: Property Address
Body: Hi, we the investors are offering full asking price, contingent on appraisal, closing in 20 days, with 50% of the purchase to seller in escrow, if, seller is able to carry a 50% note in 2nd position for 12 months, (The hedge fund lender would be in 1st position), secured by a 2nd deed of trust, with no prepayment penalties, 50% note will earn 5% annual interest. 50% note will be paid as a balloon payment on or before the 12 months period.
Length of carry back negotiable
Please advise
The email was signed with a name and phone number, with no indication of any company affiliation, much less a title for the sender. The email was also sent through a Gmail account too. The whole thing had my spidey senses tingling.
I Googled the phone number and came up with what seemed like a fairly reputable investment company, but who knows these days right? Anybody can put up a website and say anything about themselves and their company. According to their website, this is a real estate management company that specializes in multi-family and retail properties, and manages over $3 billion in assets according to them. The property they were inquiring about was a townhouse, which seemed entirely incongruent with their business model.
I sent the email to my transaction coordinator for her feedback, and she replied with one word, “Run.”
I like to think the best of people, so maybe the ‘offer’ was legitimate? However, there was no purchase agreement attached to the email. In effect, it was not really an offer at all, just a proposal. I did a little research into the company and found out they recently defaulted on a large commercial loan. The loan default was where I figured a scam might occur in our situation.
By putting the seller into second position, with a hedge fund in first, if the investors stopped paying the mortgage the hedge fund could foreclose on the property. In foreclosing, my seller who would be in second position would end up with nothing except the original 50% she received at closing and any payments prior to foreclosure. Basically, it looked like there was a clear cut avenue for the hedge fund to swipe the property out from under my client at a 50% discount. That's one of the ways they accumulate $3+ billion in assets.
I basically responded to the email saying not to bother contacting us further regarding the property. The next day we got a great offer and we are now on our way to closing escrow with a buyer who is getting a loan from an actual bank, and my seller isn’t carrying back any sketchy note. I’m glad I looked into this ‘offer’ a little bit. If nothing else it was an interesting intellectual exercise
.