Expert: liznarr - 2/15/2011

Question
Hello,
I have a friend who owns a home in a well to do neighborhood, however she has been going through tough financially times recently and is in jeopardy of having her home foreclosed.

To avoid foreclosure, she posted the home for sale on the Internet.  The home is in an nice part of town that many people have an interest in, however her home has not been well maintained and requires allot of work.

She was approached by a buyer interested in the home for a flip, however the terms he has given are sketchy.  He requires a quit claim deed in his name, and then he will make the mortgage payments for 6 months while he does the flip.  At the end of six months, he will sell the property and pay her the agreed amount that she is selling for and he would pocket the profits.  

She does not know this person.  She has visited a lawyer and they told her that everything is legal.  This all sounds a little fishy to me and I know that she is desperate at the moment and a prime target for a scam.  She is going through enough at the moment and I would hate to see her lose her home to a scam.  Can you provide any advice?  Thanks is advance!

Answer
Hi Robert,

I agree with you, something sounds a little fishy.  We both see all the red flags being violently waved.  There are many bad people out there who constantly troll the internet every day looking for situations to be able to swoop in and take advantage of unsuspecting, trusting people.  It’s called a scam, just as you said.  It happens every day, and it’s in the news every day.  Your friend is allowing her emotions to override her intellect.

Just because a lawyer has said the process is “LEGAL” does not make it moral or okay to do.  I would want to know WHY this man says he needs to have the property in his name for six months.

If he simply wants to do a flip, that can be handled very simply with a Contract of Sale, ASSIGNABLE to another person; and your friend will retain title and not risk losing her property via a scam.  This would be the ONLY way your friend should agree to this offer of “help.”

Your friend should also not allow anyone to do any work on her property, even if this person claims she will not be liable for workers on the property or the cost of any cleanup and/or repairs/improvements.  I would be very afraid that something would be slipped in the paperwork somewhere along the line that your friend will not pursue and end up being taken, literally, for a joy ride.  If any work is requested to be performed on the property, DO NOT ALLOW it, period, exclamation point!  Nor should your friend allow any early possession of the property prior to closing.

I had a client of mine several years ago in a very similar situation who was in financial distress and did something eerily similar.  He lost his house (which was also in a very nice subdivision), and there was nothing, absolutely nothing, anyone could do to help him.  He was at the mercy of the so-called “angel” who stepped in to “help” him.  By the time this man called me for help, it was too late; he had already transferred his title to a crook!  The paperwork in that process was deemed to be “legal,” and my friend did not have the money to pursue the scammer in the court system.  He lost it all, including his dignity.

One of my agents recently completed a transaction like this.  The original paperwork submitted and was totally unacceptable to the Seller, but we insisted on NUMEROUS revisions to the offer submitted, and that deal recently closed – with NO risk to the Seller.

If your friend is truly bent 360 degrees on seriously considering this offer of help – and as a test of whether or not this offer and person are legitimate -- she should request, in advance of anything being signed, a copy of ALL paperwork proposed in connection with the transaction.  She should also require a separate agreement, detailing the entire plan of the transaction, along with what happens “IF” certain things happen, or do NOT happen.  Before transferring title, she should have a GUARANTEE for this flip; with a certain amount of money being guaranteed to your friend and detailing when she will receive the money in a lump sum; and what happens in six months if the property has not been flipped.  If property has not been flipped in six months, I would want payment at that time from this “nice” person, and I would want WRITTEN proof in advance of signing anything that funds for this purpose are readily available from a reputable banking institution or stock firm and will be set aside for that purpose, only.  In addition, I would want verifiable references with names, addresses and telephone numbers of people this man has “helped.”  And these should be VERIFIABLE people and addresses, with recorded documents as proof of a completed transaction; and she should check out at least three or more of any references provided.  Don’t just rely on a phone call to someone who could be someone other than a person your friend “thinks” she might be calling.

I am not a betting person, but I would bet anyone a penny to a Thousand Dollars that there would be unacceptable terms in any such agreement, if this person even agreed to put it in writing, and that he would not be able to provide verifiable references.  

If your friend goes this route, I would then take all the paperwork back to the attorney.  If the attorney still says it’s okay, I would get a second opinion from another attorney.

Maybe your friend could enlist some help from her church for cleanup and repairs and then list her house with a reputable real estate agent.  She should also contact her bank about the possibility of a short sale if she owes more than she might net out at a closing.

I hope the above is helpful and provides some insight for you and your friend.  Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth