[ HTJ Podcast ] U.S. Real Estate Forensics “ESCROW” – with Jay Knight, Hanna Musidi & Derren Joseph

 

 

HANNA MUSIDI:

Hi, my name is Hanna and today we have our US tax expert, Derren. We also have our US real estate and legal expert, Jay. We will be discussing Us real estate forensic.

 

VOICE-OVER:

This podcast channel it's about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax

 

HANNA MUSIDI:

Hi, my name is Hanna and I'm based in Indonesia and currently, I'm working in a US tax firm. And today we will talk about your US real estate forensic with Jay Knight and Derren Joseph. Would you please introduce yourself, Derren?

 

DERREN JOSEPH:

Thank you, Hanna. So this would be the third installment series on US real estate for Asian investors. My name is Derren Joseph and I'm a tax professional, doing international tax in general but US international tax in particular. And in this context, we're talking about investors in US real estate.

 

HANNA MUSIDI:

Jay?

 

JAY KNIGHT:

Alright, thanks, Hannah and Derren, thanks for having me here again. It's great to be back. My name is Jay Knight. I'm a licensed real estate broker from the State of California, and I work with Asian investors who want a pathway to deal with someone in America to help them purchase the property. So that's a little bit about my background and looking forward to our discussion tonight.

 

HANNA MUSIDI:

Would you please introduce the case, Derren?

 

DERREN JOSEPH:

Right. So we did some searching in some online databases, legal databases, where you can, because when a matter is taken before the court in the US, for the most part, it's exceptions, of course, but for the most part, they're a matter of public record. So we're going to talk about a relatively prominent Indonesian family who invested in the US real estate attempted or has invested into the US real estate. We won't name names. We don't want to embarrass anyone. Everything is freely available online, but we don't want to use any names in this conversation because it will be distracting. What we want to do is focus on what happened and perhaps the lessons that would be learned that will be applicable to anyone.

 

HANNA MUSIDI:

Do you have anything to add Jay?

 

DERREN JOSEPH:

Okay, cool. So, Jay, I mean, you know, this is your wheelhouse, so do you want to paint the scene?

 

JAY KNIGHT:

All right. Yeah. This was a very tragic situation, although it probably isn't all that uncommon. If we did a little bit more searching, I'm sure that we would find quite a few of these, and basically, it is a real estate scam. One-on-one maybe not be that egregious because we don't know the actual intent of, of the, of the, in this case, the defendants, but it sure seems like that from an outside look. And basically what happened was, was a very well-to-do Indonesian family had invested some money after going to a real estate seminar that was held in Indonesia, and they were convinced to basically invest some money in what would be a limited partnership, which that limited partnership would then buy bulks of properties in the state of Michigan and America. And as a result of this limited partnership and the amount that they invested, which was going to be over a million dollars, they were promised that they would be granted some sort of visa that would allow them a pathway towards a green card and then future residency. So that was really the impetus to this whole case was they wanted to invest the money and they wanted to, they were very enticed by the fact that they were promised high returns and good investments, and also that they would have a pathway to this residency in America. So that's kind of like the outlining area of what happened, right. So maybe you want to add a little bit more, but that's kind of in a nutshell in terms of the overview.

 

DERREN JOSEPH:

Okay. Sounds good

 

HANNA MUSIDI:

And now we will talk about escrow. So I think in this problem Jay, know more about it. So, Jay, please.

 

JAY KNIGHT:

Yeah. Okay. So escrow, we did a whole segment on escrow in one of the last video. So if you haven't seen that one go back and check it out, but escrow is a really critical component of a real estate transaction. And especially when you're talking about people that are trying to invest from overseas, and why is it sold? Vital is because escrow, as I alluded to before, it is actually a third-party component to the transaction. So you have the buyer, you have a seller, but then you have a third party. That's not related to either one party and they have their own fiduciary responsibility to both parties. So in this case that we've talked about, it was really something that was overlooked because the investors, in this case, they're probably not that familiar with how real estate works in America. And they kind of got bamboozled in a sense, because what they did was they were talked into, by the investment company to wire the investment funds directly to them, to the investment company, which again, yes, they were under the idea that this investment company was going to take those funds and then buy properties. But the way properties are actually bought, even if you buy them in bulk, is that they have to go through, or they should go through an escrow company. And as such a key component that I can't overstate, that if they would have sent the monies directly to an escrow company that asks for a company has a legal obligation, don't hold those monies in a separate account that that investment company couldn't touch. And so if the investment company didn't live up to what their agreement was if they had a written agreement, which in this case they did if the investment company didn't live up to that obligation, whatever it was that escrow company would then have a legal duty to send the monies back to the investors. But that's not what happened in this case. And that was really the crux of how they lost their money because there was no escrow company. They sent the money directly to the investors who did whatever they did with it and took the money or whatever it was. And so when they wanted to get the money back, they didn't really have any real way to get it back because they had, those were scammers or at least, you know, the ideas that they might've been scammers. So understanding that escrow was an extremely important part that the escrow company works for both parties, but as an independent party, that's not hands and hand working with one or the other. So this is really important. And this was the key element to this case. So red flag, I guess that the point to take away from this is, that if you see any kind of advertisement and they're enticing you, and they're asking you to send the money that you're investing directly to them and not to an escrow company, Derek said earlier, don't walk, run. Okay. Because that is going to be a red flag for a scam.

 

HANNA MUSIDI:

Okay. So, Derren, do you have anything to add?

DERREN JOSEPH:

No. Jay, said it all.

 

HANNA MUSIDI:

Okay. Thank you to you both. We see you again soon.

 

VOICE-OVER:

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