It’s idiots like this that give us ethical and honest Investors a bad name! This came from a friend of mine:
Hey Lamar,
Please pass this email on to any real estate investor that you know. Particularly new investors just getting started. The following scam has been attempted on us twice in the last 30 days.
Since it seems to be popular right now I am getting the word out to everyone on our list.
The Setup
An investor is interested in purchasing one of your investment properties. He will always be out of state (a component of the scam). He needs to wire funds, or send you a check for the earnest money deposit.
The Accomplice
This investor will always have someone ‘local’ that he needs you to pay out of the money he sends you. In other words, the earnest money deposit will always include additional funds for you to give to his local partner (this local partner can sometimes even be an “attorney.” This is to lend credibility to the scam. Whether or not the person is an attorney remains to be seen).
The Delay
There will always be a reason for a payment delay that will necessitate you paying the accomplice in advance. This too is a critical element of the scam. In some cases the investor will actually send you a UPS or FedEx tracking number to assure you that payment is on the way.
The Scam!
The check, if it arrives, will never be real. The hope is that you will pay the accomplice in advance of getting your check. This is the money that they will make. In both cases they tried to get $1,750.00 from us in advance (for the accomplice).
Telltale Signs
The investor will rarely use a real name and never supply a contact phone number. You will never be able to reach the accomplice (attorney or otherwise) to speak with them in person. If you do receive the payment it will always be a check drawn on a bogus account, from a fictitious branch of the bank. The bank may be real (in these cases it was Wachovia and SunTrust. But the contact on the check or the bank will never be real.
Avoiding the Scam
Obviously, the easiest way to avoid this scam is to make sure you request a Cashiers Check (which I did not receive in either case). Also NEVER pay anyone from the check until it clears and the funds are in your bank.
Variation of this Scam.
Another variation is the investor asking for your account information to do a wire transfer of funds into your account. This will really have to be your call. I’ve heard of many Investors who have no problem transferring funds via wire transfer to complete deals. Bottomline, if you don’t trust the Investor you’re doing business with, then don’t do business with them. Build a genuine relationship!
In many cases these guys are not just out of state but out of the country. From what I’m being told these scams proliferate when the market is slow and investors are willing to go out on a limb to get new investors.
Message from Lamar:
While there are many great deals to be done out of state and I’m sure out of country, you need to be wise and use good judgment upfront. By doing so, you’ll build your confidence, eliminate fear, and execute more deals whether local or out of state! Personally, I love out of state deals! But I never drop my guard, no matter how sweet the numbers look!
This is not legal advice, it’s simply information that was passed onto me and I wanted to pass it onto you!
If you’re in control of a deal, then remain in control at all times and make it happen!