Over the Telephone: 5 Precautionary Tips
On November 24, 2014, the FBI Detroit Field Office issued an official press release that it had arrested 16 people in a telemarketing and real estate ponzi scheme, netting the offenders over $20 million from 290 victims nationwide who thought they were investing in bank-owned homes. According to authorities, telemarketers lied about the values of the homes, telling investors that they were purchasing homes worth many times more than the current sales prices.
It seems that every year, law enforcement exposes an unscrupulous real estate or mortgage scam, but even more incredulous is that people are willing to purchase real estate over the telephone.
Here are five things to seriously examine before purchasing an investment property.
Visually Inspect Property
In real estate, variables such as property location and structural integrity affect value. A physical inspection of the property is imperative. If it’s inconvenient to visit an asset, hire an independent, licensed professional appraiser to assign a property value.
Order Property Title Search
Every property comes with a unique title history. Mortgages, delinquent taxes, assessments, and judgments are but a few types of liens that will directly impact a purchaser’s ownership rights. Order a title search from a reputable title company or get a “title opinion” from a real estate attorney.
State and federal law require licensing for most real estate services and activities that involve real estate investments, sales, or loans. When in doubt, contact state licensing authorities to see if an activity is regulated or contact a real estate attorney for an opinion.
Disburse Funds by Title Company
When purchasing property, use a title or escrow company to disburse purchase funds to a seller, even in a cash transaction. Title companies will also provide title insurance to verify property ownership, address property liens, confirm property taxes, and itemize money disbursements in a transaction.
Review All Documents
Real estate transactions involve many documents that include, but are not limited to, sales agreements, deeds, mortgages, discharges, liens, settlement statements, authorizations, and resolutions. Review these documents with a real estate agent or a real estate attorney.
Do Not Sign Incomplete Documents
Most importantly, never endorse any documents that are blank or contain incomplete or blank fields.
Keep Document Copies
Never relinquish original documents without retaining copies.
Successful real estate investing requires patience and reliable information. Rushing into a transaction without thoroughly performing one’s own due diligence or hiring experienced professionals to do the same is an open invitation to deep financial disappointment.
About the Author: Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 24 years, he has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients.
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.
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