It is not illegal to fail in real estate investing, but it is illegal to take money then fail to try. Tara Bonelli of Santa Cruz, California was arrested by the FBI on Friday for wire fraud, mail fraud and money laundering[1]. She took money from investors, allegedly to put into distressed properties that could be sold at a profit, and convinced distressed homeowners to sign blank real estate contracts that could be filled in later to make properties that she did not even have a real interest in look more appealing to other investors. Bonelli faces decades in prison and hundreds of thousands of dollars in fines if she is convicted.
This just shows how important it is to do your due diligence on every investing opportunity. How do you make sure that the deals you are presented with are legit?
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[1] http://nationalmortgageprofessional.com/news25009/california-woman-arrested-foreclosure-assistance-scam
May 8th, 2011 at 5:25 AM
steven ruza unbelievable
May 8th, 2011 at 11:49 AM
WeLL This Is The Way The World Turns With Dishonesty Among those of us that really want to put a dent in the housing crises and make business Work and as for our reputiveness of good kind in turn…thank ya for the awareness !!Parick
May 8th, 2011 at 5:36 PM
Using a good real estate attorney, who will do a title search prior to closing, and will issue a General Warranty Deed at closing will prevent the vast majority of these problems. The good news is that they are relatively inexpensive.
Jim Myers
May 8th, 2011 at 8:04 PM
Wow! Creative real estate investing at its worst. There are states that have cracked down on real estate investors. In WA State, I saw a code that forbids investors from doing lease options. It is ‘illegal’ to sell a property unless you hold a license to do so. Hmm…?
Andrew
May 9th, 2011 at 4:33 AM
Although the FBI alleges that this accused woman is a huckster, I wonder if she was actually an inept wholesaler or syndicator. It’s entirely possible that she might have intended to do conduct legitimate business, but botched the execution horribly.
A thoroughly conducted due diligence will expose most (if not all) of the warts of a deal. Although I could recommend a litany of items to check, the most important thing to do is to build the right team. I like to have a great Realtor, real-estate attorney, inspector, appraiser, escrow/title company (or closing attorney), CPA, GC, insurance agent, and lender for starters. It also can be a good idea to have another investor partner involved with the deal. Plus, I’ll work with a great, forensic accounting service on some deals too.
I admit that I’m anal about the details. Yet, I already know that if I were to forget to ask any important questions (which rarely happens), one of my teammates would pick up the ball, and would run with it.
The point is any deal, that can withstand our relentless beating, is one that we’d eagerly close.
BTW, the only way that I’d sign a blank P&S is if I were paying with Monopoly money.
May 10th, 2011 at 11:24 AM
I just might know where she got that idea. I have seen a guru recommend that procedure. The explanation on a short sale is that “we don’t know the sale price until it is negotiated. Also, the price means nothing to you because we will be negotiating with the bank and you can’t get any proceeds anyway”. “So just sign the P & S and we will take care of your problem”
May 17th, 2011 at 11:46 PM
Thank you so much for sharing.