Buying Property Over the Telephone: 5 Tips for Aspiring Investors

You can't read the news without learning about another unscrupulous real estate or mortgage scam. The FBI says there has been an increase in rental and house flipping scams this year alone.  Last year, I represented real estate professionals who unwittingly got sucked into an $200 Million international house flipping scam. Incredibly, the victims were overseas investors who purchased real estate sight unseen --over the telephone. The old adage is true: “A fool and his money are soon parted.”

Here are 5 things to seriously examine before purchasing investment property:

1. Visually inspect the subject property. In real estate, variables such as property location and structural integrity, affect value. A physical inspection of the property is imperative. If it’s too inconvenient to personally visit an asset, hire an independent, licensed professional appraiser to assign a property value.

2. Order a property title search. Every property comes with its own unique title history. Mortgages, delinquent taxes, assessments, and judgments are but a few types of liens that will directly impact a purchaser’s ownership rights. Order a title search from a reputable title company or get a ‘title opinion” from a real estate attorney.

3. Investigate participants. State and federal law require licensing for most real estate services and activities that involve real estate investments, sales, or loans. When in doubt, contact state licensing authorities to see if an activity is regulated or contact a real estate attorney for an opinion.

4. Funding. When purchasing property, use a title or escrow company to disburse purchase funds to a seller, even in a cash transaction. Title companies will also provide title insurance to verify property ownership, address property liens, confirm property taxes and itemize money disbursements in a transaction.

5. Documentation. Real estate transactions involve many documents that include, but are not limited to sales agreements, deeds, mortgages, discharges, liens, settlement statements, authorizations and resolutions. Review these documents with a real estate agent, or a real estate attorney. Most importantly, never endorse any documents that are blank or contain incomplete or blank fields. Never relinquish original documents without retaining copies.

Successful real estate investing requires patience and reliable information. Rushing into a transaction without thoroughly performing one’s own due diligence or hiring experienced professionals to do the same is an open invitation to deep financial disappointment.

About the Author: Since 1990,  I have represented numerous  investors, lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 25 years, I have been involved in thousands of real estate transactions and have successfully negotiated and saved millions for my business clients. 

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.