Seeking legal advice - purchased a property from scammers

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Seeking legal advice - purchased a property from scammers

Dor Sarig
Member since 2019 · 3 posts · 2 votes

Hi everyone,

Long story short, my partner and I purchased a home in Cleveland but unfortunately now we are facing a problem. I'll explain the situation:
We found out that the seller of the home forged documents indicating that the current tenant, who used to own the home, was paying $950 in rent each month. Last week our property manager told us that after talking to her (the tenant), she revealed that she hadn't paid any rent in months, except one payment of $500 (she also provided us with the receipt she received from the sellers). Ultimately, she is most likely unable to pay the rent we were expecting.
Not only did the sellers give us the wrong impression, they provided us with a fake history of payments dating back to July, and a forged receipt of payment for the month of October. They also provided us with a lease agreement signed by the tenant agreeing to pay $950 a month. She told our property manager that she was coerced into signing it. We are looking for advice on how to proceed with the sellers, and what our rights are in this situation. 

We have all the documents the seller forged in order to trick us to sign on this deal, since they knew we wouldn't sign otherwise. 
Beside proceeding with eviction, what would the best-case scenario look like for us legally?
Have anyone encountered such situation before?

Thanks,

Dor

2Reply
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Robert Matelski
Rental Property Investor · Austin, TX · Member since 2018 · 214 posts · 270 votes
6y
Originally posted by @Dor Sarig:

Hi everyone,

Long story short, my partner and I purchased a home in Cleveland but unfortunately now we are facing a problem. I'll explain the situation:
We found out that the seller of the home forged documents indicating that the current tenant, who used to own the home, was paying $950 in rent each month. Last week our property manager told us that after talking to her (the tenant), she revealed that she hadn't paid any rent in months, except one payment of $500 (she also provided us with the receipt she received from the sellers). Ultimately, she is most likely unable to pay the rent we were expecting.
Not only did the sellers give us the wrong impression, they provided us with a fake history of payments dating back to July, and a forged receipt of payment for the month of October. They also provided us with a lease agreement signed by the tenant agreeing to pay $950 a month. She told our property manager that she was coerced into signing it. We are looking for advice on how to proceed with the sellers, and what our rights are in this situation. 

We have all the documents the seller forged in order to trick us to sign on this deal, since they knew we wouldn't sign otherwise. 
Beside proceeding with eviction, what would the best-case scenario look like for us legally?
Have anyone encountered such situation before?

Thanks,

Dor

I'm going to field a guess that the house is a 1080 sf 1940s cape near the intersection of Lee and Miles in Cleveland, and that you paid a whopping $28K for it. Assuming I am right, $950 is not a realistic rent for a house like this in a location like this. Some basic due diligence surrounding rental comps should have sent up some major red flags and caused you to quadruple check before proceeding. A name like "A-Z Auto Sales" should have sort of been a red flag too. Honestly, I would not even bother with pursuing the seller... it's unlikely that you'll ever recover anything, and it will just be a time and energy suck.

You need to register the rental with the city (and pay a fee) and with the county (no fee) first off. Then provide the tenant a 30-day notice that indicates the terms of the rental going forward (probably would be wise to set the rent at a reasonable amount rather than $950). If the tenant so chooses to remain, they will have to pay rent and abide by your rental terms. Otherwise they are free to leave. If they stay and don't pay, serve a 3 day notice on day 31, then file for the eviction on day 35. Once the tenant is out, prepare to spend a hefty sum to get the house back in order and rent-ready. Or make it look really decent and make sure it will pass an FHA inspection so you can market it for sale to first-time-buyers in spring of 2020... you might actually achieve a decent gain from that. (DISCLAIMER... I am not a lawyer and this is not legal advice... it is just what I would personally do in a situation like this.)

A property that I bought in 2015 had a non-paying tenant in one of the units (it's a duplex)... was a short sale and the seller was a hot mess, so I figured there was a good chance of there being drama with the tenants, but I proceeded anyhow because it was an outrageously good deal. Turns out one of the tenants was paying, and one had not paid in ages. About 2 months into owning it the non-paying tenant ended up leaving on her own once she realized she could not stay for free anymore (eviction was about to be filed). Spent $5K on a rent-ready redo of the unit after her departure (I got off lucky), and it has been performing solidly since then.

Oh yeah, also... closing thought: Your situation is one of the many reasons why I generally only buy properties listed on the MLS, with licensed brokerages, rather than pursuing "hot off market deals"... there is a lot more accountability and credibility when someone's license is on the line.

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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    6y

    Wow. You need to talk to an attorney ASAP.

    3Reply
  • Bob CollettPro Member
    Property Manager · Brecksville, OH · Member since 2014 · 486 posts · 464 votes
    6y

    Dur

    First, I would say don’t assume the tenants are telling the truth. Tenants lie about payments all the time... especial with a change in ownership or a change in management. 

    I assume that both your realtor and your property manager advised you that the expected rent was unrealistic. Did you talk to the tenants during your walk-through before closing? Did you get a lease ledger for the past year? Did you personally visit the property? Did you hire a 3rd party inspector? Did you get a residential property disclosure form? Was there proper rental registration on file?

    What city and zip code is the property? What does the signed lease say?

    Answers to the above my shape my response. Feel free to PM me

    Bob

    4Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    6y

    I HIGHLY recommend verifying any rent payments/rolls with deposit statements. 

    2Reply
  • Igor T.
    Cleveland, OH · Member since 2018 · 61 posts · 21 votes
    6y
    Originally posted by @Dor Sarig:

    Hi everyone,

    Long story short, my partner and I purchased a home in Cleveland but unfortunately now we are facing a problem. I'll explain the situation:
    We found out that the seller of the home forged documents indicating that the current tenant, who used to own the home, was paying $950 in rent each month. Last week our property manager told us that after talking to her (the tenant), she revealed that she hadn't paid any rent in months, except one payment of $500 (she also provided us with the receipt she received from the sellers). Ultimately, she is most likely unable to pay the rent we were expecting.
    Not only did the sellers give us the wrong impression, they provided us with a fake history of payments dating back to July, and a forged receipt of payment for the month of October. They also provided us with a lease agreement signed by the tenant agreeing to pay $950 a month. She told our property manager that she was coerced into signing it. We are looking for advice on how to proceed with the sellers, and what our rights are in this situation. 

    We have all the documents the seller forged in order to trick us to sign on this deal, since they knew we wouldn't sign otherwise. 
    Beside proceeding with eviction, what would the best-case scenario look like for us legally?
    Have anyone encountered such situation before?

    Thanks,

    Dor

    To move on. There is no guarantee that you win the case. But if you lose, you will be liable for juridical expenses of other side and maybe more.  

    2Reply
  • Mike McCarthy
    Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    I’d agree - don’t trust the tenant. I’d reach out to an attorney though to write a letter to the seller and sellers realtor inquiring about the documents and if they can provide past deposit statements to prove that the documents weren’t forged.

    Then see how to proceed with eviction. If the lease is valid, you probably need to wait until the first month isn’t paid. But I have no idea how to handle a lease that was supposedly signed ‘under duress’. If in fact it was, it can be nullified - thus the reason for a lawyer.

    Get one now - you’ll be kicking yourself in 6 months if you don’t.

    0Reply
  • Robert Matelski
    Rental Property Investor · Austin, TX · Member since 2018 · 214 posts · 270 votes
    6y
    Originally posted by @Dor Sarig:

    Hi everyone,

    Long story short, my partner and I purchased a home in Cleveland but unfortunately now we are facing a problem. I'll explain the situation:
    We found out that the seller of the home forged documents indicating that the current tenant, who used to own the home, was paying $950 in rent each month. Last week our property manager told us that after talking to her (the tenant), she revealed that she hadn't paid any rent in months, except one payment of $500 (she also provided us with the receipt she received from the sellers). Ultimately, she is most likely unable to pay the rent we were expecting.
    Not only did the sellers give us the wrong impression, they provided us with a fake history of payments dating back to July, and a forged receipt of payment for the month of October. They also provided us with a lease agreement signed by the tenant agreeing to pay $950 a month. She told our property manager that she was coerced into signing it. We are looking for advice on how to proceed with the sellers, and what our rights are in this situation. 

    We have all the documents the seller forged in order to trick us to sign on this deal, since they knew we wouldn't sign otherwise. 
    Beside proceeding with eviction, what would the best-case scenario look like for us legally?
    Have anyone encountered such situation before?

    Thanks,

    Dor

    I'm going to field a guess that the house is a 1080 sf 1940s cape near the intersection of Lee and Miles in Cleveland, and that you paid a whopping $28K for it. Assuming I am right, $950 is not a realistic rent for a house like this in a location like this. Some basic due diligence surrounding rental comps should have sent up some major red flags and caused you to quadruple check before proceeding. A name like "A-Z Auto Sales" should have sort of been a red flag too. Honestly, I would not even bother with pursuing the seller... it's unlikely that you'll ever recover anything, and it will just be a time and energy suck.

    You need to register the rental with the city (and pay a fee) and with the county (no fee) first off. Then provide the tenant a 30-day notice that indicates the terms of the rental going forward (probably would be wise to set the rent at a reasonable amount rather than $950). If the tenant so chooses to remain, they will have to pay rent and abide by your rental terms. Otherwise they are free to leave. If they stay and don't pay, serve a 3 day notice on day 31, then file for the eviction on day 35. Once the tenant is out, prepare to spend a hefty sum to get the house back in order and rent-ready. Or make it look really decent and make sure it will pass an FHA inspection so you can market it for sale to first-time-buyers in spring of 2020... you might actually achieve a decent gain from that. (DISCLAIMER... I am not a lawyer and this is not legal advice... it is just what I would personally do in a situation like this.)

    A property that I bought in 2015 had a non-paying tenant in one of the units (it's a duplex)... was a short sale and the seller was a hot mess, so I figured there was a good chance of there being drama with the tenants, but I proceeded anyhow because it was an outrageously good deal. Turns out one of the tenants was paying, and one had not paid in ages. About 2 months into owning it the non-paying tenant ended up leaving on her own once she realized she could not stay for free anymore (eviction was about to be filed). Spent $5K on a rent-ready redo of the unit after her departure (I got off lucky), and it has been performing solidly since then.

    Oh yeah, also... closing thought: Your situation is one of the many reasons why I generally only buy properties listed on the MLS, with licensed brokerages, rather than pursuing "hot off market deals"... there is a lot more accountability and credibility when someone's license is on the line.

    6Reply
  • Garrett MayPro Member
    Investor · Cleveland, OH · Member since 2008 · 67 posts · 14 votes
    6y
    Dor,

    I had a similar situation happen to me when I purchased a duplex in Cleveland last year. The seller provided me with bogus rent receipts from one of its tenants, who happened to be related to him. When I closed on the unit, I had them sign a new lease. They paid the first month of rent, and that was it. That second month, I served them with a 3 day notice, took them to court, and had them evicted. The eviction process didn't take that long.
    I realize that I didn't properly do my due diligence, but it was learning experience for me. Life goes on.
    Good luck to you!

    Garrett
    1Reply
  • Dan Sarao
    Investor · Cape Coral, FL · Member since 2019 · 135 posts · 41 votes
    6y

    Due dilligence, due dilligence, due dilligence. I have to agree with Robert, it’s not worth the time, money or hassle to pursue legal action as you will spend a lot more than a few months lost rent if you are even successful. Maybe try working with them out of court while kindly letting them know you are prepared to bring legal action against them and see if they make any concessions.  Short of that evict them and start fresh. 

    1Reply
  • Bob Prisco
    Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
    6y

    @Joshua D. nothing you can do except waste money on attorneys . But shame on you for not speaking / meeting with the tenant. It happen to me ONCE, and will never happen again. Also when I buy a property already rented I get 3 months rent credit on the HUD from the seller unless it is a Govt tenant then I simply get the HAP agreement . I tell them I do not want to inherit a headache. IF such a great tenant whats the problem ? Also when I sell/ flip a property that is rented I provide a 3 month credit on the HUD. Lastly ,do NOT assume the tenant is telling the truth, after all this is Cleveland, get the tenant to give you their receipts Its ALL about your team and knowledge .

    Good Luck 

    0Reply
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