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Was he all out of bridges?
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@billy: With scrap metal prices down, bridges are not selling like they used to so conventional real estate is a better target for scamming people...
Was he all out of bridges?
@billy: With scrap metal prices down, bridges are not selling like they used to so conventional real estate is a better target for scamming people...
This sucks, but it is very easy to verify a piece of property, I cant imagine buying anything with the word \"million\" in the price tag and not paying a lawyer to make damn sure its going to be mine in the end.
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@xtc46 - thinksmarter on twitter:
\"The Road Runners ...wasted $300,000 in attorney and consultant fees.\"
They had the right idea...but you would think it should only cost $100,000 in consultants and attorneys to tell you who REALLY owns a building.
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@RedCatLinux: @xtc46 - thinksmarter on twitter: @legwork: @lehrdude:
The $300K was not title search it was due diligence costs, probably for financial analysts to run scenarios, environmental assessment of the property (soil contamination tests and core samples) zoning change exploration, best use scenarios (consultants exploring whether the property is most profitable as retail, office, industrial, apartments) and attorney's fees for due diligence. It was not just money spent on a \"title search.\"
Regardless, on a title search the owner would probably come up as an L.L.C. not a person's name. Further research has to be done to find out who the L.L.C. is made up of. People generally don't buy commercial property in their own name, for liability and legal reasons they set up a side company and put it in the company name, to protect their personal assets if the investment fails.
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@lehrdude: Dude, land and property ownership records are public domain. An afternoon in the county/borough records office would net you the same info on a title search. I'll even cut the Road Runners a break - $50k.
I just got an offer from some company in the midwest to do this at my local courthouse and send me a certified copy of my land records for $60.
It'll take me 20 minutes to drive to the courthouse, 10 minutes to complete the search, and $10 to get a copy myself.
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@RedCatLinux: heck, before buying my house i was able to verify current ownership online for free on the county's property tax website. from the comfort of my own laptop in the middle of the night.
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@RedCatLinux: Redcat, it's a lot easier than that. Go to the county assessor website. Even small counties (such as Island County, WA) will list property owners for every property in their county online. Then call the county and ask them to mail the deed.
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@lehrdude: \"$300K\"... $100K...
????
Ah, so THAT's where all our money went.
Seriously, walk into a title co cold and a search might cost $200. If you're doing much with them it's often free, and fast. Real estate/business attorneys just farm searches out to them anyway and bill for the pleasure.
@xtc46 - thinksmarter on twitter: It is really interesting though because a lawyer most likely does not do that type of thing. (They can help you out with other parts of the transaction but they generally do not do title searches on their own.) Best bet is go to a title insurance company who will do a title search. If that is screwed up you will get money from the title insurance company.
@RPHP:
No need to do a title search, you can do it yourself. Ownership and deed transfers are public record, and about 85% of the counties in the US (and 99% of the ones that have actual urban areas with people in them)have deed information online on the recorder's office webpage, or the assesors office (which is usually the easier way to search if you are simply looking to see who owns the property).
For the few counties that aren't online, you can call the recorders/assesors office and they will almost ALWAYS tell you.
I investigate mortgage fraud (and garbage like this) for my day job, and free public records is one of my best tools.
www.netronline.com links to public records in every county in the US.
@RPHP: I always assumed commercial property required the same type of title and closing a residential property did.
@bohemian: It does. I am not sure if I implied or said otherwise but commercial property would require the same title and closing as a residential property. In fact, as Julia points out there may be significantly more work to do in a commercial context on due diligence etc.
@bohemian: It is usually much more in depth than residential, with the investment in research in a due diligence being much higher as the cost of the property increases into the millions. The Road Runner's $300K due diligence is probably how the scam was found out. See my other post for where the $300K likely went. :)
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@RPHP: A lawyer certainly WILL do this sort of thing. They do it all the time as part of typical record searches.
See, most general-practice law firms have someone on the payroll who is a Real-Estate attorney. Those attorneys handle closings for sales of homes, and as part of the required title insurance policy on those sales, the lawyer or his staff must perform check for all potential liens and claims regarding the property
@zacox: A lawyer if they are \"doing a title search\" is just hiring a title insurance company to do it. This is for multiple reasons including that the title insurance then protects them and the buyer (that is what insurance is!). I know very few Real Estate lawyers who do it themselves because for less money, time, effort you can have the third party title insurance company do it AND get the insurance. I can only assume you misread my original post where I said a lawyer would help you out but not do it on their own.
@Anachronism: It is agreed you can do it on your own. However, some records are complicated and you want to make sure there truly is clear title. Based on the recording statute etc there could be problems someone not experienced with this may not catch. When I say not experienced with this I mean doing title searches meaning even a lawyers who, in general, do not regularly look at the books could miss something. Further, if the property is worth a good deal of money you always are advised to get title insurance and they do the title search.
@RPHP: No idea what state you are in, but in my state, I can confidently say, as a practicing real estate attorney, that we do it all the time. Yes, we do often have a title agency search for us, but a lot of the time it's faster and cheaper to do it ourselves. We probably do 75% of our own searches, and I see tons of other attorneys doing their own.
One comment on the whole situation - ownership isn't usually searched at the time a deposit is made. It's a waste of time and money. BUT, I'm puzzled as to why an escrow agent of some sort wasn't used. Unless the escrow agent was in on the scam.
And didn't someone successfully \"sell\" the Eiffel Tower twice? Or was that the Brooklyn Bridge?
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@diasdiem:
Sounded interesting so I Googled. :)
Victor Lustig sold the Eiffel Tower twice.
George C. Parker \"sold [The Brooklyn Bridge] twice a week for years.\"
@dohtem: Ah, what did we do before the Internet? The next generation will have to look up \"encyclopedia\" on Wikipedia because they won't know what it is.
@diasdiem: \"Interactive\" in the World Book were the sections of clear overlay pages for the human body internals and frog internals. And nothing else smelled the same as an out of date World Book and its yearly updates.
A major score for my parents was getting a free World Book set from someone moving away or overseas- all the better if it was from the same decade. We never had enough money to get a new set nor did the salespeople seem to hit the East Coast- maybe it was too easy to get to the library where we lived.
And if your parents somehow scored a free Encylcopedia Brittanica set then you were set for your entire high school years...
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I'm no real estate attorney, but don't these things typically go into escrow?
Or did you just hand him a sack of cash in a bag with a dollar sign on the side?
@Darrone: Depends on the jurisdiction. California uses escrows. Most of the Northeast does not but it would seem reasonable to do at least a rudimentary title search before paying anything.
@H3ion: A title search would be a waste at the deposit stage. I've never seen anyone do that, from the simplest residential closing to the $20 million deal I worked on a few months ago. The search always comes after the P&S agreement is fully executed and the deposit is made. So many deals fall apart before that point that a basic search would be a total waste.
We don't use escrow agents in CT in the same way people in CA and FL do. But the real estate agents or attorneys will act as escrow agents as far as holding on to the deposit. I wonder if one of the agents or attorneys was in on the scam - I've seen it happen a lot in residential closings, and there's no reason why it wouldn't happen in a deal of this magnitude as well. If they didn't use some kind of 3rd party agent, well, that doesn't make any sense and it's obscenely stupid.
@Karita: No disagreement with most of what you've written but before I let a client put a deposit up for a property I obtain an abstract. I've never paid more than $50 for an abstract and it gives me some comfort to have that information in hand. The actual full-bore title search and preliminary title reports do wait, as you've said, for the contract to be executed. Here in the DC area (Maryland, Virginia and the District) we'll generally lodge the deposit with the title company that we're going to use to write the policy and in hundreds of real estate transactions I've never agreed to let the seller have access to the deposit before closing. None of these were residential deals except to the extent that land was being acquired for residential development but the concept still holds true. For residential contracts involving resale housing, it's fairly common in our area to let the real estate broker hold the deposit.
The only issue I've seen here is subdivision builders insisting on receipt of the deposit at time of contract and being able to use the deposit for construction. That's usually spelled out in the contract but it still stinks because if the builder goes under, which has been known to happen once or twice, the deposits are not recoverable. I don't work in that market so I don't really worry about it but it is an issue at times.
@H3ion: Interesting. Abstracts are definitely not common practice in my state. I'm sure there are people that do them here, but I can't recall ever seeing one done. Of course, by the time I'm involved, the deposit stage is usually long past - in the almost-eight years I've been doing this work, I can recall only maybe a dozen times I handled a transaction without real estate agents. And I don't know any agents that do searches/abstracts before listing a property or helping someone put in an offer. I suppose an agent would notice if something is really off, as they do put tax info in the MLS listings. But if the property was owned by a corporate entity, I doubt they'd go search the Sec. of State records to confirm the corporate membership.
If we are not doing the search ourselves, we don't even put in an order until the bank issues a commitment. There is one lender that requires title work before they will issue the commitment, but that's rare, at least for now. That's a new policy for us - we have been burned too many times in the past year, when people end up not being able to get a commitment, despite having preapproval. They are not usually happy to pay our fees, even the low cost of a title search, when they have just learned they can't buy a home.
Another difference between our states - title companies never hold the deposits. But attorneys are title agents, so I suppose we hold deposits on behalf of the title company. I'm not sure if our company would even be willing to hold a deposit if we asked them to. We just put it in our IOLTA account if the real estate agent doesn't want to hold it.
Regardless of the differences between states, the general ideas are the same across the board. I just don't see how someone could get in a situation where they lose a $1 million deposit, unless they were really really stupid, or they were using a crooked real estate agent or attorney. And even $300K for due diligence seems high in this type of a situation - did someone order the search at the beginning, but never bother to look at it until the end of the process? If I were the attorney for the nonprofit, I'd be putting my malpractice carrier on notice the moment I sent out that bill.
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@Darrone: They probably did hand him a proverbial bag of money, to avoid the hassles and fees involved in putting it into escrow.
There's an old saying, about it being impossible to con an honest man. It's not true, but a mark wanting to get something for nothing sure does make conning him easier...
My question is, how did the independent developer ever manage to amass any kind of wealth with this kind of carelessness? They must have already had title company contacts who could do an express title search. Someone's still living in 2007.
The first dingbat just gave the guy his million dollars on a handshake, doing no due diligence.
When purchasing commercial buildings and development sites, people generally take 30 days due diligence time, to verify all the site plans, zoning information, title, searches, they have teams of people on due diligence and attorneys checking everything. They also investigate the history of the property, who has owned it, how it transferred before, who bought it previously, how much. They verify all information independently, not what is provided by the seller. City records are always gotten directly from the city - to be verified - never from the owner.
Road Runners club was doing the right thing - putting their deposit in escrow. They lost their out of pocket expenses on their due diligence. Attorney fees, consultants, etc. but their million dollar deposit was safe in escrow. They knew what they were doing, and would have discovered the ruse (if they are not the ones who discovered it) during their investigative period.
This other guy who got scammed, well, not too smart. Even if he did not have a team of employees to research the property, he should have at least had an attorney go over the paperwork and visited the city to get copies of the paperwork himself.
I took a beginner real estate law course in college for fun. We read about 10,000 times more than you would ever want to about wacky real estate laws. Our professor told us a few stories how this happens much more often than we hear about in the news. Mainly because there are so many parties that are involved in a single home purchase, fraud can happen in numerous places (loan, contract, title, deed, ect.)
@arguewithme: I read about the guy in a rural area of the Southeast who basically lived off of non-refundable earnest deposits on his beautiful \"For Sale\" lake house. Problem was that the huge \"house\" contained a single wide trailer buried inside of it and no mortgage company would touch funding its purchase since the house was not able to be recorded on a deed. People would put down the deposit and then lose their money when research showed the house did not exist.
Still, $300K seems kinda steep, considering that checking whether the seller owned the property should be first thing to do ... I'm not familiar with NY (or US, for that matter) process of checking, does it take long? Here it can be researched on Internet (unofficial but usually correct) or checked directly at city hall (and some other agencies) for 4 dollars a query, instantly...
@premek: They are not just paying for a title search or tax records, for that kind of money they pay to have financial scenarios run by analysts, zoning experts to see if they can change zoning to more favorable use, analysts to gauge best possible uses for the property, lawyers tracing the history of the property (probably how the scam was uncovered) a LOT of environmental assessments are done, and that is also very expensive, soil samples, digging, core samples depending on previous uses of the site.
They put a deposit down and then have their 30-days to do this research (due diligence) and then back out if they find something during their research that makes the property much less profitable or problematic (like contaminated soil, underground tanks, if a building is on the property structural problems, etc.) Then they can either renegotiate their price or back out. Some, all or none of the deposit may be refundable, depending on the individual terms of the contract they have worked out.
This is how professional real estate investors conduct their business, however there are some \"handshake guys\" who just walk through the property and say \"Looks good to me!\" and give away their money. (They usually lose all their money when problems are discovered later on.)
If the property was currently owned by an L.L.C. a quick search with the city would not have alerted the buyer, he would have just assumed the scam artist one one of the people invested in the L.L.C. This is where further research comes in, too.
Most commercial properties are not owned by individuals in their own name, they set up corporations to purchase the property. This separates the business venture/real estate investment from their individual assets, protecting them and their personal assets in case the venture fails.
@Julia789: Thanks for the explanation. Makes me kinda happy for the system we have here - everything (ownership of properties and even companies) can be checked almost in real time, on the internet (with notarized printouts available at multiple places).
I work in real estate, but luckily the research here never cost me more than $5000, even for land and buildings in major cities. Of course, when NYC has as many people as our whole republic, it should be \"major\" cities...
@premek: I'd bet a most of their $300±K was environmental assessments, attorneys, and analysis of possible uses. Lots of consultants. Possible that the attorney fees ran really high when they realized there was a scam going on, and had to start serious damage control and digging for answers. :-)
@premek: you can see who pays a property tax for free in most counties here, and that is a pretty good indicator of the owner. no idea how this happened.
Also, what happened to plummeting realestate prices?
\"By May 2008, an independent developer agreed to buy Mr. Vargas's share for $4.8 million, giving him a $1 million down payment.
Five months later, New York Road Runners, the nonprofit organizer of the New York City Marathon, signed a contract to buy the same 60 percent share for $8.5 million\"
This is a very popular Nigerian scam. You see buidlings with the sign \"beware of 419. this propery is not for sale\" all over Lagos. people have paid for buidlings only to find out the owners know nothing about the sale.
This is why you buy title insurance...
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It took Daily News only 90 minutes to steal Empire State Building in 2008. They forged paperwork and registered a deed in their name, and guess what - nobody noticed...
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@azzie: You may recall from history that Count Victor Lustig once sold the Eiffel Tower in the great grandaddy of this here scam.
PT said there is one born every day.
Same thing happens in.... wait for it.... Nigeria. You'll see houses that say \"THIS HOUSE IS NOT FOR SALE\" because scammers will try to sell a house that they have no connection to. If you get scammed, too bad. The government's theory is caveat emptor.
@PatrickIs2Smart: It is nice to see that Nigerians scam each other too. Not much difference then in them pulling rental scams on Craigslist...
Spoilers: This is part of the plot to Zack and Miri Make a Porno.
Funny movie.
Wait a minute. So Vargas \"sells\" the building to the developer for $1 million, but hangs around NY for 5 months, trying to also sell it to the Roadrunners...
What did Vargas think was going to happen? He didn't try to leave town after the first sale, and even took pictures in front of the property? Did Vargas not expect the developer to ever find out the truth?
I can't get over a non-profit group having 8.5 million. Things really ARE bigger and better in New York.
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Two words: \"Title Insurance.\" Besides which, it is drop dead simple to verify ownership of real estate at the county courthouse or your local equivalent. In New York City, it is online at:[www.nyc.gov] Caveat emptor
In California the deposit goes into an escrow account. The escrow company does all the title searches, checks for liens etc. and won't release the money until everything checks out.
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It reminds me of when Travis Cole tries to sell Kirkpatrick's building. \"But, Mitch, I don't even own the building at 99 Franklin. Well, I told you I did, but I lied. Good luck trying to prove it.\"
Movie anyone?
@kingtimm: Note to self: find college roommate who stole this movie from me, accost online.
@kingtimm:
Well, if you ever saw that show on TNT, with Timothy Hutton... can't remember the name, they tried pulling that same \"scam\" to help one of the team members father. They acted like they owned a building and tried to sell the entire thing for $10 million. That dude probably just watched that and the light bulb went on.
@kingtimm: Dirty Work. So many dead hookers!