by Tam Cordingley

Buyers beware! We've recently been made aware of some investment scams out there. BE CAREFUL.

With the recent tightening of bank lending standards—and the tight money market in general—there have been many predatory lenders come to the front. They pose as investors, or as Angel investors. In the last two weeks I’ve heard of two of them targeting the kennel buyer market.

The way they work is to get you to give a deposit upfront, to “cover their expenses”. Sometimes they really have offices, sometimes their office is just a cell phone. They frequently do not need an appraisal; they will work only off your business plan. They do not need loan approval, and there is tons of cash available. They are not too concerned with your credit; they are willing to help the underdog.

To many people wanting to buy an existing business this sounds like heaven. Instead, it may be the beginning of a frightening loss of whatever down payment you may have saved. No legitimate investor wants to lend money on an unverified business. If no legitimate lender seems to think you are a good risk, why would someone loan you the entire amount, with no guarantees, in many cases without even having seen the property, much less have a good appraisal?

These people are good at making their investment sound real. They don’t call them “con men” for nothing. They are your salvation, and your best friend, at least until they have your money. Then they are mysteriously unavailable. No phone calls are returned, and they have changed business addresses.

In one recent case, the investor kept saying he’d sent the local real estate broker the contract; the check for the earnest money must have gotten lost in the mail. The contract was indeed sent, after numerous requests, with none of the pertinent information filled out. No check ever arrived. The closing attorney contacted this investor, and was told it was to close in a few days. How was this to happen? There wasn’t a contract on the table! No funds had ever been sent. No phone calls from either the real estate broker or the attorney were ever returned. The “investor” kept lying to the buyer until the very last moment. Even up to the point that the buyer left his home and put his stuff in a U-haul to move to his new home and take over his business. He had put his faith and confidence in this scam artist. Charges are being filed with the FBI for Interstate fraud, and with the Attorney General of the State involved. That doesn’t help the poor buyer or the seller, who was kept on the hook and was ready to move at the time of the promised closing.

If you are dealing with an investor or investment group, be careful! If they want a deposit up-front, be even more wary. If they don’t want an appraisal, don’t care about past credit, or aren’t concerned about how you are going to pay back the loan, don’t deal with them. It is better to put off your dream until you can save sufficient funds, than to lose what money you have to a scam—and still not have your dream property.

We have a list of kennel lenders we’ll be happy to share with you upon request.