A long time associate of my mother's recently came to him with "an exciting opportunity." Red flag, of course. But based on our history with the fellow, my mother heard him out (oh no!). This man has been traveling around the state and scoping out sheriff's sales. "Over the past year I have watched several commercial properties get sold at substantial discounts. A couple examples is a strip mall in Lake Placid which had a defaulted loan of 3.9M and the banks opening bid was 1M and no one else bid, so the bank got the property back. The property was worth approximately 4MM. An office building in Victor had a defaulted loan of 11.2M and was sold back to the bank at 2.6M. The building conservatively is worth 8-9M. An apartment building in Lake Placid with a defaulted loan of 12.6M went back to the bank at 4.7M. This property was worth 8-9M and has historically had 96% occupancy. Not as much upside in that deal, but still a decent investment." He came to us because if such a deal arose in the future he would need 20 percent down to get a temporary loan. After 60 days or so we would either flip the property secure long term financing. "There is no way of knowing what the banks opening bid will be, but if they were to open it below 7MM, this would have ample upside for a quick flip or cash flow for a longer term investment. Once it is bought I have lined up a bank to do permanent financing for 100% of the purchase price, so any money would be tied up for a very short timeframe of less than 60 days. As I have already engaged an appraiser and started getting a title policy. At the sheriff sale, the winning bidder, has 4 hours to return with the funds. So if won, I would need to funds wired to my local bank immediately after the sale. From there I will have my bank draft a cashier’s check for the sheriff. If this is something that you would be interested as an investor or if you have a hard money you would want to lend let me know one way or another." On an initial read-through it seems like in most cases the banks would bid these up much higher, it just seems like such a great deal since they were completely uncontested. What do you think? This fellow is a CPA, so it's not like he's planning on running away with the cash....or is he?
I would say, if you need to ask people you don't know over the internet if you should trust someone people over the internet doesn't know...then I would pass.
likely is that you will be saddled with some significant liability : unpaid property taxes, repairs, etc. The world is full of property vultures who look for these types of opportunities. Why aren't they bidding?
I have seen cases where banks set the initial bid way low and then nobody bids it up and it absolutely screws the former property owner. Although if nobody bids it up, is it really worth the higher amounts? I would say be cautious but do opportunities like this exist...absolutely.
It's the part about wiring funds to his account I don't like. There's gotta be a way to deal directly with the bank and just pay him a fee. This thing stinks and I'd check his background. Also ask for references. If he's clean there will be legit deals he has done.--Swimr
Sounds too fishy to me. Wouldn't want to deal with someone like this ''fellow'' with his ''exciting opportunities''.
Many, many real estate scams highlighted on "American Greed". The complexity of these "deals" makes them ripe for fraud.