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We own a short-term vacation rental that we are in the process of selling. About 3 weeks in we got a full price offer and was told by the buyers agent it was going to be a cash offer. That this guy is a millionaire investor. Well the offer comes in and it is full price, but now he wants financing through a private lender. We were kind of annoyed but it was still a full price offer and with some back and forth on a few things we signed the offer. In-between this time my agent received the buyers "proof of funds" in the form of a signed bank account (signed by the bank) statement from a company that the buyers agent says his client owns. There is 995,000 in this bank account. Closing is set for July 14th. This all happened the beginning of June. We are also told by buyers agent that if lending takes to long he plans to just pay cash and be done with it. We were told this several times.
We are asked to hold the home open so the buyer can do an inspection and an appraisal and we also stop taking future reservations for the home because we are selling. We also move a friend out of the house for a future booking and pay for her to move to another home because she is a zero revenue booking and don't feel that would be right to do to the buyer.
During this last month my agent kept asking about the status of lending because we have not heard anything and have not been provided with any lender information. We keep being told everything is good and still on track for closing. Well, Tuesday morning (a week before closing) my agent gets a notice from the buyers agent that he wants to cancel the contract because he cannot come to terms with the lender and expects his full escrow money back. My agent pushes this agent and tells him that she has no denial letter from any lender saying he cannot get lending and so we will be fighting for the escrow money.
That night we do some digging into this buyer and find out several things.
1. the proof of funds he submitted is from a company the he does not own, and further more a company he has never even worked for. It is a company in another state (that seems very shady itself). So this guy and his agent presented this bank account and HIS company and this was HIS money.
2. After some more digging we find him on an investor website saying he has a contract on a vacation rental that is fully turn key (MY HOUSE) and is asking for people to give him money so he can buy this house.
3. Facebook is a magical thing and we found him. He is not a millionaire investor. He is an unemployed single guy in his 40's who lives in his parents basement. And no, I am not making this part up.
His agent is claiming that he has every right to this escrow money because he could not get lending and according to the contract he is allowed to cancel if this is the case. He also lets it slip that he was denied for THREE loans for this house. We were provided no lender information for any of these lenders and still have no denial letter from any lender and it has been 48 hours now since the wanted to cancel. He says his client is "working" on getting the letter. My guess is he is doctoring up some letter because he is clearly a fraud.
The part that makes me the most mad is that I am pretty much being told there is nothing I can do here and that he will most likely get all his money back. I spoke with several agents who said it is not the agents job to make sure that his client is telling the truth. I have the email from the buyers agent with the proof of funds and the agent wrote this "here is the POF for my buyer, he owns this LLC". So that is how it was presented to us.
So now I am out thousands of dollars because I had to pay to move my friend to a new rental, I lost rental income keeping the home open for inspections and appraisals and I lost rental income by not taking anymore reservations. And it seems this fraud is going to walk away with all his escrow money and probably turn around and do this to someone else. I honestly do not understand how this guy cannot be in breach of contract by producing fraudulent information! And my agent is STILL trying to get the lender contact information from the agent so she can call them herself and he just keeps telling her that the buyer is working on it. Which in the contract it states he is supposed to provide my agent with lender information and keep us up to date on what is going on with the loan. We asked several times about the loan and were always told everything was moving along well and on track for closing. NEVER were we told he was turned down 3 times by 3 different lenders. So that to me is again, deceitful! If I would have been told once this guy was turned down for a loan I would have immediately wondered how a person with a million dollars in the bank is being turned down for a $154,000 loan. And I would have canceled the contract immediately because something would have seemed off.
So honestly - why even bother with escrow money? It does not protect the seller in the least! I am just so frustrated and I appreciate everything who made it to the end of this!
Last edited by hammy5; 07-07-2016 at 08:48 AM..
Reason: new wording
Does the contract say that the purchase is contingent on financing? Does it say anything that indicates if financing can't be arranged that the buyer would pay in cash? Did you get a pre-approval letter from the buyer before you signed the contract? And, is there anything in your contract indicating that the buyer will make all attempts necessary in a timely manner to secure financing?
I suspect that the company holding the earnest money is going to want a paper trail before releasing the funds back to the buyer.
I'm no expert, but to me it sounds like several people dropped the ball. And to be fair to the buyer's realtor she probably believed the proof of funds the same way you and your realtor did. If the buyer didn't give him/her any reason to believe he was lying then why would the realtor dig any deeper?
It stinks though. But, it's also part of the selling process. Deals fall through at the last minute.
Does the contract say that the purchase is contingent on financing? Does it say anything that indicates if financing can't be arranged that the buyer would pay in cash? Did you get a pre-approval letter from the buyer before you signed the contract? And, is there anything in your contract indicating that the buyer will make all attempts necessary in a timely manner to secure financing?
It is subject to financing yes, and he is saying that he could not come to terms with the lender. But my agent keeps telling them she wants a letter from the lender stating he has been denied (because we have a feeling he is lying and just did not like the terms of the loan) and they keep blowing her off saying they are "working" on it. They also have tried to say that because it is a private lender, they don't issue denial letters. She has asked several times for the contact info herself so she can call them and they are not giving that to her either.
There is also wording in the contract that says he would make all attempts necessary and in a timely manner to secure financing and I think the contract reads 10 days. It also states that he will keep both us and our agent informed on the status of said financing. When buyers agent was asked several times what the status of the loan was we were always told it was moving along well and on track for closing. There was never any notice that he has applied for and been denied for 2 loans before this last one. If I would have heard about the first one, I would have walked from this deal. But I feel like we have been lied to this whole time by the buyers side and we are just being told "oh well, not our problem!"
I would encourage you to have a pre-approval letter next time you review offers with financing contingencies. Obviously, that sort of financing can fall through, but at least you know that the buyer is already working with a potential lender.
And depending who holds the earnest deposit monies, they may require a denial letter. From what I understand (and hopefully one of the experts around here will correct me if I'm incorrect), it's not actually the realtors who decide if earnest monies get returned. It's the title company who holds the funds in escrow who make that determination, and they make that determination based on the contract language.
So the buyer can request the money back, but if the title company requires a denial letter they may be SOL if they don't provide one.
I would encourage you to have a pre-approval letter next time you review offers with financing contingencies. Obviously, that sort of financing can fall through, but at least you know that the buyer is already working with a potential lender.
And depending who holds the earnest deposit monies, they may require a denial letter. From what I understand (and hopefully one of the experts around here will correct me if I'm incorrect), it's not actually the realtors who decide if earnest monies get returned. It's the title company who holds the funds in escrow who make that determination, and they make that determination based on the contract language.
So the buyer can request the money back, but if the title company requires a denial letter they may be SOL if they don't provide one.
I know and we always have required an approval letter from any home that we have sold. But this guy presented his "proof of funds" as an alternative to that saying he would pay cash.
In retrospect we were totally dumb for not requiring a pre-approval letter. I totally know that. I am just so angry that someone can fraudulently make an offer on a house and walk away a week before closing with no repercussions.
We are going to fight for this denial letter and also the clause that says he was to keep us informed, which he did, but they were all lies as well.
I found out myself that a friend's buyer was crowd funding for the down payment.
Her Realtor had sent, as her credit report, a tenant's report. Not from a landlord but just basic enough to get an apt.
So it showed her vet bills, her dept store bills paid in full. Till you got to the back.
The realtor said it was a great report. I pointed out....did you read to the end.
Turns out the reason she was all paid up with the vet and dept stores was because she was not paying her rent, had not at several places, and was in court over this being sued by several management companies and landlords.
This person was additionally selling shares in the house....as in 'put your name on a brick' or 'put your name in the patio' for a few hundred kind of thing.
Sadly, she fooled people by claiming a good cause. Did not get the money needed.
Of course, a lawyer was needed. Between lawyer and realtors the contract did not continue.
And...word to the wise...she continued to collect money and sell names in those bricks and stones for quite a while afterwards.
Can you get a lawyer involved?
See if you can write a book (seriously, sounds like a great beginning to a movie) and , for now, contact a newspaper with your story. Maybe you'd have to leave his name out.
Wow. Now I got my topic for lunchtime meeting. Wow again.
Just out of curiosity, did the buyer actually pay for and get an appraisal and an inspection?
Sorry this happened to you - but thank you for sharing the cautiinary story.
As far as I was told, yes he did. We saw part of the inspection report and I was given days that the inspector and appraiser would be at the house and I could not rent it during that time.
I know and we always have required an approval letter from any home that we have sold. But this guy presented his "proof of funds" as an alternative to that saying he would pay cash.
In retrospect we were totally dumb for not requiring a pre-approval letter. I totally know that. I am just so angry that someone can fraudulently make an offer on a house and walk away a week before closing with no repercussions.
We are going to fight for this denial letter and also the clause that says he was to keep us informed, which he did, but they were all lies as well.
Does your contract require a denial letter?
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