Market Warning

Posted on 10/11/10 in General, 3 Comments

Tough financial times bring out the worst in some people and over the last few days I’ve been contacted by two people who have been ripped off by the same scam.

It goes like this.

You find a really great deal at way under valuation and all the vendor wants is a healthy deposit, so you pay the deposit and go unconditional.

The vendor gets the deposit cleared through and paid out to him/herself without paying the agent and leaves the country with the money!

You can’t settle because the amount the vendor has accepted for the property is less than what the bank is owed, and so the bank forecloses and takes it to the open market and you are an unsecured second creditor or worse totally ignored at settlement all together.

There is a more or less “easy” way to stop this from happening,  put a small clause in your contract when you make the offer saying that your deposit will be paid and you will go unconditional once the vendors bank agree that the amount on the offer will clear all mortgages over the property.

“Get it In Writing”

Also consider making sure your deposit can’t be released until settlement, because the two times I’ve seen this happen in as many weeks one vendor has taken the money to Australia and one to China.

Either way your money has gone and you have to either write it off or chase it, neither option is all that appealing.

There are always great offers out there and now is as good a time as any to make the most of them, but be sure not to let the deal get in the way of your common sense.

Protect yourself with good advise from a good lawyer.

3 Comments

  1. Gavin

    I have a good lawyer. When my last deal started getting tricky he negotiated to hold the deposit in his trust account. When the property was finally settled I got the deposit back less fees but plus interest. It pays to have a good team when dealing with dipstick vendors.

    Posted 10-12-2010

  2. Steven

    Good point Gavin,

    A lot of good lawyers will use a retention account and hold the funds in trust while they sort any issues out.

    Most lawyers can deal with the “Dipsticks” it’s the blatantly fraudulent that they sometimes get tripped up by.

    Steve

    Posted 10-12-2010

  3. Brendan

    Steve,

    Thanks for sharing my story with everyone, hopefully it will stop it happening to anyone else. I have learnt some valuable lessons which is the most important thing, it is unfortunate it cost so much to learn them!

    It has made me more determined than ever so i am ‘back on the horse’ hunting for the next opportunity.

    Posted 10-19-2010

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