When a Real Estate Deal Is Too Good to Be True

A cautionary tale for real estate investors chasing unicorns

Every real estate investor dreams of finding a deal that seems too good to be true—a rare opportunity with massive upside and minimal risk. But as this real-life Potomac, MD story proves, those irresistible profit margins often hide dangers that can cost investors time, money, and sanity.

As real estate investors, we are wired to hunt for margin. We sharpen pencils, run numbers, stress-test exit strategies, and still secretly hope for that deal. The one-time opportunity. The life-changing acquisition. The deal of a lifetime that launches us into the next financial stratosphere.

That is exactly why deals with jaw-dropping profit margins are so intoxicating. They whisper sweet nothings to our spreadsheets. They almost make sense. And sometimes, that’s the most dangerous part.

The hard truth is this: those once-in-a-lifetime deals are like unicorns. Frequently discussed. Rarely seen. And when you think you’ve spotted one grazing peacefully in the wild… it’s often something else entirely, wearing a very convincing horn. This is where investor due diligence separates disciplined professionals from expensive lessons. Before emotions take over, every assumption needs to be tested, questioned, and verified—no matter how good the numbers look on paper.

The Potomac Unicorn

Recently, a deal crossed our desk that made the entire team stop mid-sip of coffee.

A young, out-of-state investor had a property under contract in Potomac, MD for $120,000.

Yes. Potomac. Maryland.

The backstory sounded plausible enough. An older owner had moved south and could no longer care for the property. The house itself was old, tired, and destined for a full gut renovation. But even as-is, the appraisal came in close to $1,000,000, with what appeared to be reasonable subdivision potential.

Would we fund a deal like that?
Sure.

Would the borrower need to bring cash to closing?
Not really.

In fact, this was one of those rare cases where a lender would happily consider financing 100% of the transaction, a perfect real-world callback to our earlier article on The Myth of 100% Financing. These situations exist, but they are exceptionally rare, and always scrutinized.

Yet one question gnawed at us relentlessly:

Why is the seller letting this go for a rock-bottom price?

That question is where discipline lives. And it’s also where many investors get hurt.

When Big Discounts Do Make Sense

Before we get to the twist, let’s be fair. There are legitimate reasons sellers accept tremendous discounts. Savvy investors make their living navigating exactly these situations.

1. Severe property condition
In distressed property investing, what looks like an irredeemable structure to a retail buyer may represent untapped value to an experienced investor with the right vision, contractors, and market timing.

2. Crushing time constraints
We are currently involved in a deal where the seller is in a nursing home, unable to maintain two payments. The house has good bones but is owned by a hoarder. As part of the transaction, the investor is carefully cataloging belongings and prepaying for a storage unit.
In another case, two middle-aged brothers face imminent foreclosure. No time. No patience. They just want liquidity and a clean break to start a new life elsewhere.

3. Title defects and legal oddities
Strange encumbrances, rights-of-way, or historical easements can scare off retail buyers. For experienced investors, these issues are solvable… for the right price.

4. Zoning, permitting, flood zones, environmental concerns
All of these can shrink the buyer pool dramatically. With proper experts and a sufficient discount, they can still be viable paths to profit.

There are many legitimate reasons deals trade far below market value.

But then there’s the other category.

When Discounts Are a Distraction

Sometimes, sellers dangle unbelievable profit margins not because the deal is brilliant, but because they are hoping the buyer is blinded by it.

To his credit, our young investor did not blindly charge ahead. He was exhilarated, yes, but also skeptical.

Was the acreage actually subdividable?
He hired a zoning expert. Some portions were unbuildable, but subdivision potential remained.

Was the creek behind the house an environmental nightmare?
Environmental testing found nothing alarming.

Was there a hostile occupant?
Yes, but nothing competent legal counsel couldn’t resolve. Eviction costs would be negligible relative to the upside.

From our side as the lender, we ran our own checks.
Borrower background? Clean.
Title company? Well-known and local.
Seller competency? A “youngish” senior who had already met with a public notary and included her niece on emails.

And yet… the numbers still felt too perfect.

My attorney advised walking away. But how do you turn down a deal simply because the profit margins are too high? Curiosity, and a small hope for a nearly bulletproof loan, kept us going.

The Reveal (No Yacht, Sadly)

If this were a real estate seminar pitch, this is where the story would end with applause. A grateful grandma pockets her easy $100K. A lucky young investor sails into the sunset while AI manages his portfolio.

Reality is less cinematic.

Right before disbursement, the title company did what good title companies do: they re-pulled the title.

And there it was.

The seller had transferred the property as a gift to a relative a month and a half earlier. The transfer simply hadn’t surfaced in the public record yet.

When confronted with undeniable evidence, the seller claimed she “didn’t know.” The unicorn quietly trotted off. In its place stood an old donkey with a papier-mâché horn.

Lessons Worth Paying For

My heart genuinely goes out to the young investor. He spent thousands investigating this opportunity. But in retrospect, he got off easy.

The takeaway is not “don’t chase big deals.”
It’s this:

• Extraordinary margins demand extraordinary skepticism
• Due diligence is not optional, no matter how good the story sounds
• Fraud doesn’t have a look, an age, or a zip code
• Even a coastal grandma can run a sophisticated scheme

As investors, we are paid to balance optimism with discipline. When a deal feels like magic, slow down. Ask the uncomfortable questions. Pull the title again. And remember: unicorn sightings almost always deserve a second look.

If you want to talk through a deal, sanity-check assumptions, or understand when 100% financing actually makes sense, that’s exactly what we do at New Funding Resources. We’ve seen the unicorns. We’ve met the donkeys. And we’re happy to help you tell the difference before it gets expensive.