Too good to be true?

[Maria Murphy]

Hello,

Trying to source deals, I've been reaching out to many RE pros in my market (Spain) and came to be in touch with a family office that offered to sell me, among other overpriced assets, the whole fifth floor - subdivided in 2 apt - of a building they're renovating in the city center. The building has 8 units, all the other units have been sold.

The renovation work will be done by April 2025. The deed of sale is to be signed at the end of the year as the seller won't be able to sell it legally beforehand as it bought it at a judicial auction and the judge order will come in November.

The price agreed is €450K, that is less than €3K/sq. meter. Renovated or new residential units in the neighborhood sell at €4K+/sq. meter. I've had 4 different local RE agencies assess the asset at €580K, €650K, €730K and €800K. 

Regarding payment terms, the seller wants 10% at the reservation of asset (this month), 10% in a couple of month, and the balance at the signing of the deed of sale in December. I am not too kin to pay it all before the renovation work has been completed and have negotiated to keep 15% to be paid when renovation work has been completed, so that the seller has an incentive to complete the work adequately. But I am having second thoughts and think this might not be enough.

The seller tell me they are willing to sell it at a significant discount because they need to rotate assets and redeploy capital. I'm generally skeptical and only half convinced by this explanation. I don't see why the seller would accept such a large haircut only to have the asset sold a few months before.

Am I missing something obvious?

Thanks,

[Rene Hosman]

Is there any way to hire a third party to hold the funds even if it's not required by law? If the seller needs the cash upfront to finish the rehab I would be skeptical, and if they're not willing to use a third party it might be suspect. 

I was nearly scammed by a seller in the US who I met in person, met his "associates", toured the property with and everything, but my tip off to do more research was that he was against using a third party to hold funds in escrow even when I said I would personally pay all associated fees and noted that it would not delay closing at all. 

His negative reaction and aversion to wanting a neutral third party to play referee was a tip off to me to do more research and after paying $25USD for an online background check on the seller I discovered he had multiple judgements against him for business fraud even though the title to the property was clear.

My personal lessons from my scammer were

1. Have a good attorney who is familiar with the laws in the local area so they can tell you what your options are to mitigate risk in the deal

2. Always do your own due diligence on the project and the seller (as much as you can)

3. If things seem potentially too good to be true, they just might be