It’s Buyer Beware with Out-of-State & Out-of-Country Real Estate Transactions


It’s Buyer Beware with Out-of-State & Out-of-Country Real Estate Transactions

Here’s a great example of the multitude of issues most real estate investors rarely consider when doing business away from home!

We’ve recently been hired by a property owner that, in our opinion, was taken advantage of by a so-called “real estate guru” they trusted.

Interestingly, both the guru and our new client reside in northern California, but the property is here in a northern Detroit suburb.

Here are the basic public record facts about the property in question:

  • 09/14/2010 the property was purchased via Quit Claim Deed (QCD) by the California real estate guru for $1,000.
  • On 04/23/2010 the property was sold on land contract for $40,461.
  • On 11/11/2010 the property was sold to our client for $18,995.

See anything interesting in the public records?

Before we even looked at the property, we pointed out to our client the following:

  • There was something seriously wrong with the property if it was acquired for only $1,000. Even a bulk acquisition was unlikely at that amount.
  • Someone was playing games with the deed as the land contract from the guru to the buyer, was recorded BEFORE the recording of QCD to the guru. This could lead to title issues for the buyer.
  • The extreme jump from $1,000 to $18,995 & $40,461 made us very suspicious, especially if no major repairs were done to the property.
  • Why would our client buy a property and assume a land contract that was only 6 months old? That’s not a reasonable payment history length to set a value on the land contract.

Then our client emailed us a copy of the land contract (LC) they assumed when they bought the property – more red flags!

Here are the facts from the land contract:

  • This was a replacement property for one the guru sold to our client 01/20/2010.
  • Buyer put down $1,000, with a monthly payment of $550 – $400 to principal & interest, $150 to property taxes. Payments to start 06/01/2010.
  • Buyer assumed all delinquent property taxes and water bills, which the seller estimated to be $0.00 at the time of the sale.
  • Buyers are to obtain their own hazard insurance to cover the amount they owe.
  • Buyers are to also execute a 15 year Note at 8.99% and a corresponding Mortgage – after they make their first 24 land contract payments on-time.
  • If buyers are late on any payment during probationary payment, owner may serve them a Notice to Quit and buyers shall have 10 days to cure or immediately vacate property. If buyers fail to vacate, owner may evict them under owner’s landlord rights.
  • The LC package also included a generic loan application, copy of Alabama electric & gas bills, a guru verified rent & employment verification forms and a buyer credit report.

What do you think of the land contract? How many issues do you see with it?

Here’s what we saw and discussed with our client:

  • Only $1,000 down on a LC? To recover possession & full ownership of a property sold on LC in the state of Michigan one has to go through a LC Foreclosure process which can take 3-6 months. The $1,000 down doesn’t come close to covering this time.
  • Michigan law does not allow a LC to be treated as a lease as the guru’s contract states. If the buyer doesn’t make the payments on the LC, a foreclosure action is the only way to recover possession and full ownership.

So, even before we went and looked at the property there were abundant issues and red flags we saw.

Our client then told us the buyers hadn’t made a payment in almost a year and no one knew if they were even still occupying the property. We drove by the property and noticed two cars in the driveway, snapped a pic of this and emailed it to our client.

We should mention that up until this point we hadn’t actually been hired by our client. They were very cautious about hiring us (or anybody), understandable given what they’d been through already. We were requested to knock on the door of the property to verify occupancy and discuss a “cash-for-keys” offer, but we had to insist at this point that our management contract be executed.

Once our client officially hired us by signing our management contract, we went to the property to determine occupancy. We found the property vacant, so we asked a neighbor what they knew about the situation. They told us that back in 2010 the property had been purchased the Friday before its scheduled Monday demolition by the city. No repairs were done on the property until the buyers moved in and started fixing it up. The buyers then had numerous issues with the city about bringing the property up to code.

Now it made sense why the guru sold the property on land contract – it was the only way to get the property off the city’s demolition list. Furthermore, it allowed the guru to transfer the cost and responsibility of bringing the property up to code to the buyers. The buyers probably had no idea what they were getting themselves into! Then the guru flipped the property to our client by misleading them about the situation, the terms of the LC, etc.

So where are we now with this property? This past week we had the doors on the property rekeyed so we could access. It appears the LC buyers left just about all their belongings when they left. The property is full of clothes, furniture, toys, etc. and is a mess. The exterior furnace is missing and some of the repairs that have been done will need to be undone and redone the right way. We’ve taken video of the property and forwarded to our client. Our client asked us for our best guess at the cost to get the property rent-ready and we said $8,000. We’re now getting quotes to confirm our guess.

We’ve advised our client to contact their attorney in California to explore legal action against the guru as the representations the guru made and language in the land contract are not valid. Our client will also have to eventually perform a “quiet title” action for the property to remove the recorded land contract of the buyer that has disappeared. We’ve ordered a title search for our client and fully expect there to be other title issues as well.


Buying real estate in other states or countries, that you can’t drive by regularly and may never actually see, should be done cautiously. As this story and numerous others on the internet illustrate, it’s a buyers beware market. How many of you reading this article would have caught all the issues we’ve identified? Too many investors are looking to get rich quick and leap before they thoroughly look. Finding people you can trust is also difficult, especially if you only focus on cost – you invariably end up being penny-wise and dollar-foolish.

Our client in this example initially thought we’d do everything listed above for free and with no contract. As we pointed out above there was a limit to what we’d do without either.

Yesterday, we received thank you emails from our client and their assistant. We’ve exceeded their expectations so far and will do our best to continue to do so.

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