Investors are always on the lookout for a good deal, but even with a keen eye, sometimes a deal really is too good to be true. There are a few things that investors should be aware of, to make sure that they don’t run into issues, even when they are able to sign the contracts and close the deal.

First, and probably most importantly, always use a title company and don’t rely on quit claim deeds to transfer title. This is really two parts of one rule. You should always rely on a title company to check that the person you are buying from has the power to transfer the property free and clear of any other liens. This is especially a problem when a trust is on title – make sure you are dealing with the trustee, not just the beneficiary of the trust. We regularly see investors get stuck in litigation when, for example, a husband and wife are getting a divorce and one of the spouses signs away title. While it may appear that they were authorized to sell the property, it may take a long and expensive lawsuit to find out if that is true.

Also, a quit claim deed gives you no more interest in a property, than the person signing the deed. In other words, if the person doesn’t have any interest in the property, that quit claim deed is meaningless. We know many investors that pass around quit claim deeds with little recognition that the last person holding a quiet claim deed, may not be holding anything at all.

Second, if the floorplans do not match county records, check for permits. We have seen too many times where a property was sold as having four bedrooms, but it turns out that the “4th bedroom” is merely an unapproved, converted carport. While you may have claims against the seller, your problems with the city and their permitting department may just be starting. Cities can send demand letters that the structures be permitted or removed and can fine owners that do not comply. Even though you didn’t build the structure, and weren’t aware that it wasn’t permitted, is not a defense to a claim from the city code enforcement division.

Third, check your wiring instructions. With homes selling fast, scams are never far to follow. Buyers have been caught wiring money to incorrect banks because they received a fraudulent wiring instruction. If you are being pressured to send money to secure a property, be careful. As they say in contracting – “measure twice, cut once.” When it comes to wiring money, it should be “confirm twice, pay once.”

Fourth, if a person wants to sell or buy a property using an alternative transfer method, such as selling an LLC instead of a property or using a land trust, be very careful. This doesn’t mean that such vehicles can’t be used to transfer title, but it is uncommon in Arizona and thus serves as a red flag. Sometimes, when a deal is too good to be true, it really is.

by Mark B. Zinman, Zona Law Group