Rushing is the Enemy of Discernment: How Patience Prevented a $40,000 Loss

scam

I was recently discussing the importance of patience relative relationships with a group of women. We went over some of the sources of failure in relationships and one of the things mentioned is how people often are not who they claim to be. That’s when I mentioned that no one can keep up a pretense forever. With enough times, everyone will reveal their true colors. This then led me to thinking of the time I saved myself a lot of heartache because I did something that was completely against my nature: showing patience in the face of what at the time seemed to be a fantastic opportunity when in reality it was a well-dressed scam.

In November of 2015 I met a Real Estate Broker who offered to take me under his wing. It was a working relationship where he would play the role of mentor and trainer. Everything was going as planned until he made me a new proposition in January of 2016: Investing in a new construction project in a high end neighborhood. According to him, the 4,000 square foot house would sell for $4.5 million, $4 million minimum. He already had the land, which his largest investor put $1 million towards purchasing. He was looking for additional investors to fund the actual construction. He was offering a 10% return on investment for every $10,000 invested. This was the most tempting investment opportunity presented to me yet because at the time, my husband and I had $40,000 in savings. According to him, the project would be complete in May or June and would hit the market in July or even maybe late June. This offer meant that I could turn $40,000 into $56,000 before Thanksgiving.

But there was one problem. The money was not easily accessible. It was parked in a CD that would not mature for another month, in late February. It normally would be a no brainer to break the CD, pay the bank a couple hundred dollars in early termination fees to access the funds and hand them over but I decided  against it. It simply did not make any sense to rush so quickly into a project. It was only a month away and if it was that great of an opportunity, and meant to be it would still be there in 3-4 weeks. I thought that the delay was a unique opportunity to fully evaluate the offer and weigh the pros and cons.

I often hear that patience is a virtue. Thankfully there are other characteristics that are also virtues because patience is not one of my strong suits. But this time, there was something keeping me grounded. Maybe it was how large the sum was. Maybe it was the financial security I was experiencing. Yet, I was in no rush to take the offer. I told him I’d think about it and get back to him. I explained that I not only needed to discuss it with my husband, but that the money itself was tied up. He agreed to wait and the days ticked by.

However, instead of being excited at the new opportunity that was fast approaching, I became increasingly uneasy. The more time I had to think about the project, the less attractive it seemed. Not the numbers, but the circumstances.

A) This man who had been a real estate broker and investor for more than 30 years and has never moved out of his hometown, somehow decided that a couple that he met only a few months ago should benefit from this opportunity. I know that many people will give a stranger a shot, but I think a deal that great should have been offered to and taken up by his friends first. The fact that it was still available to us made me wonder if it was as good as he made it out to be.

B) He gave me a contract outlining the terms of the agreement, claiming the contract was drafted by his attorney, but it was shock-full of spelling and grammatical errors.

C) He embellished/oversold some aspects of the project. While the real estate market in Boston is very strong and there are a lot of wealthy people in the area, a multi-million dollar home is still only accessible to the 1%  and would not sell very quickly. He kept insisting the deal would be done fast and that made me wonder what else he exaggerated and/or straight up lied about.

D) The calls… The bloody calls… He kept calling, texting and emailing asking when the money would be available. I don’t know about you, but I never heard of someone who has a great opportunity that will make someone else money and he has to beg others to take it. It reeked of desperation and made me suspicious. He was contacting me in some manner at least once a week wanting an update. Finally, a few days before the CD matured, I got a “reminder” text about how he’s gathering investors because he needs to move forward and I needed to make a decision.

I did make a decision: I turned him down.

Fast forward to November 2016…

I am waiting on a $4,000 check he owes me for a real estate transaction. Meanwhile I have a lunch date on a snowy Saturday with a mutual acquaintance who happens to be his former assistant where I discover a series of interesting tidbits:

  1. The house had still not been built (months after it was supposed to have been sold). There was only a fence around the land and he didn’t even have building permits yet. There was no money. None. In fact, the temporary fence they normally put around construction sites had collapsed and the company that put up the fence refused to come out and fix it because he had not paid them for putting up the fence in the first place. The extremely past due account made him ineligible for any additional work.
  2. He owed a long list of people money and the sum was astounding:
    1. 5 “investors” from each he took $10,000 for that new construction = $50,000
    2. A commercial real estate buyer $50,000 (that particular deal cost him his license since it was part of a transaction. In Massachusetts mishandling of client funds is the fastest way to get your license suspended or revoked)
    3. A different investor he owed $30,000
    4. Agent 1 he owed $31,000
    5. Agent 2 he owed $20,000
    6. Agent 3 he owed $12,000
    7. Agent 4 he owed $7,000
    8. An other real estate company he owed $5,000
    9. He owed me $4,000
    10. A lumber company he owed $2,500
    11. Fence company (sum unknown)
    12. Wages to his former office manager (sum unknown)
    13. Wages to his former assistant (sum unknown)
  3. There were 3 pending lawsuits against him in 2 different district courts
  4. He had grossly inflated the potential for profit. The new construction would not sell for $4-4.5 million. The assistant herself had worked on the market analysis and said the house would likely sell for $2.5 million, maybe $3 million at the most.
  5. His initial investor who bought the land wanted not only his first million back but an additional $200,000 in returns. With an estimated cost to build of $800,000, he would be in for at least $2 million, not including an additional $125k for commission, $15-20k for staging and marketing. Which means he understated his expenses, and with all the “investors” waiting in line for their 10-50% ROIs, someone was not going to get paid.

Well, it turns out that “someone” really was a whole lot of people. All of his accounts had negative balances and all the checks he began writing to appease people were bouncing. While the land and the project are real, the money he collected from people were really to pay off others that he had swindled in recent years. He had no intention of using the money towards the house. Which means, I wasn’t going to get my money by Labor Day, Thanksgiving or ever. I wasn’t even going to collect $4k let alone $40k or even $56k. In other words, my rare patience making an appearance at that critical time gave me the opportunity to carefully evaluate and reject something that would have been a costly devastating mistake. My decision to wait saved us from being ripped off.

Maybe I should make a meme… I don’t always wait, but when I do, I save $40,000.

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