I Almost Lost $35,000 To a Scam Lender!

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Follow These 5 Steps in order to Avoid Getting Scammed!

The last two months have been a blur. Between RIMPAC2018, Last minute business trips, a sick family, and Hurricane Lane I haven’t had a chance to breathe.

In the midst of all this chaos, we have been working to close on the largest purchase I have ever made! Don’t worry, I’ll be posting about this deal soon!

I like to learn the hard way, always have, and probably always will. This lesson almost came at the expense of $35,000 lost to a scammer. I realized this before it was too late, luckily. I decided to share this difficult, and embarrassing, story in order to hopefully save you from replicating my mistake(s).

Let’s ensure this doesn’t happen to you!

1. Have your escrow (title company) contact the lender.

The first red flag I should have noticed was that the lender didn’t want to talk with my escrow (title) company. In the future, this will be the first step to verify the legitimacy of a lender.

When we first started talking about financing I suggested that I would have my escrow call them to discuss when/where funds will need to be deposited. The “lender” stated that they hadn’t worked with title companies previously, because they were lending to the person. This raised a bit of a red flag to me because I thought they would have wanted to use the building as collateral for the loan.

Going forward, if a lender doesn’t want to work with my escrow (title company) I will immediately stop working with them!

2. Qualified Intermediary

I hadn’t come to this decision yet and was still set on learning the hard way. A qualified intermediary is a third party that will hold my money and the lenders, and ensure both amounts of money are funded before releasing to the other parties. Required for things like 1031 exchanges, qualified intermediaries provide a professional place to hold your cash during a transaction.

I told the lender that I was going to send my origination fee ($35,000) to a qualified intermediary in order to keep it safe and he balked. He told me that his company required the money to be wired to their account to “verify funds.” Luckily, this triggered my Spidey-senses and I had the common sense to pause everything and begin researching his company.

Never send money directly to a lender via wire transfer. Make them work with your escrow company or at the very least a qualified intermediary.

3. Verify contact information matches the websites “contact us” information.

At this point, I went to the lenders’ website and attempted to contact them via email and phone call. I noticed that the email listed on the website was different from the email address that I had been discussing loan details with. The address was only off by one or two letters. The difference was so subtle that I didn’t notice until I went to send them an email and realized the address wasn’t populating as a previous contact.

I realized that the phone number on the website was slightly different from the phone number listed as a contact number in the original E-mails. At this point, I contacted the email and phone number from the companies website hoping to get some clarification. I attempted to contact this email and phone number in order to see if this guy actually worked there. My contact attempts were never returned.

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4. Don’t wire them money!

Do not wire transfer anybody money. I told him about my doubts, and he seemed to get offended by my “accusations” and told me to trust him. This made me more skeptical so I resumed my attempts to verify he was legit.

*It is important to note that if the lending terms hadn’t been so enticing I would have walked already.*

If it sounds too good to be true, it probably is!

5. Call the state to verify their business license is in good standing.

I Asked the lender for a copy of his business license in order to verify. He surprised me by immediately producing a scanned copy of the business license for his LLC. This guy knew what he was doing, and that was very convincing.

Ever the skeptic, I decided to research the LLC through the state of Florida. The county informed me that the LLC in question had let their business license lapse the previous year.

At that moment I finally realized that I had been duped.

6. Don’t wire them money!

Throughout the entire ordeal, this gentleman was fairly convincing, and I almost fell for it. DO NOT WIRE MONEY to anybody!

This guy tried convincing me that I could recall my wire transfer if something went wrong (not the case). Even after I walked away this guy kept contacting me, trying to “earn my trust.” For the heck of it, I asked for his wire information, and the address wasn’t even in the same state as the LLC was registered. This confirmed my decision even more and would be a good screening question to ask prior to wiring money to anyone.

Don’t wire money to anyone outside of friends and family!

Any professional business will understand and respect your need for a third party to handle the funds.

Summary

My saving grace was a conversation with my friend Cory Nemoto a few months prior. He and I were discussing hard money lenders, and he mentioned that if they don’t want to talk to his escrow he drops them. Without having this conversation in the back of my head I may have fallen prey to learning the hard way!

This scam artist was very convincing, and it is scary to think about what could have happened if I had wired the money to him. Unfortunately, learning this lesson took time and has overly-complicated the acquisition of this property.

Do your research, and remember that your lender should never get frustrated about your fears, but rather work to ensure your comfort. They should be just as concerned about keeping your money safe as you are.

Click HERE to learn more about financing real estate purchases!

The bottom line

-If it sounds too good to be true, it probably is!

-Legitimate lenders will work with your title company (escrow).

Any professional business will understand and respect your need for a third party to handle the funds.

-Don’t wire money to anyone!

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David Pere

David Pere

David is an active duty Marine, who devotes his free time to teaching personal finance and real estate investing for service members, and the working class!

Leave a comment trooper!

3 Responses

  1. Great story Dave. I had a similar situation with a lender and managed to cancel the wire after the fact. Felt good to follow intuition!

    1. That makes me feel so much better about this mistake! Glad I’m not the only person that has almost fallen prey to this scam. Also glad you were able to cancel the wire transfer in time to learn it without losing cash!

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