We have written many articles about REITs and REIT fraud. A REIT is a Real Estate Investment Trust. While a good way for some folks to invest in large real estate projects and portfolios, they are not for everyone. One of the largest downsides is the lack of a secondary market for many REITs. That means they can be difficult to sell if an investor later needs cash.
Unfortunately, many stockbrokers and investment advisers have placed clients in thinly traded or non-traded REITs. Many of the clients who purchased these products are elderly or retired. The investments seemed great until they needed their money.
Brokers like REITs because they carry above market commissions. With commissions often 7% or more, they are very popular with brokers.
Common REITs are Behringer Harvard, Apple & Cornerstone. There is nothing wrong with these products. The fault is with the brokers who fail to properly explain them.
Brokers have a responsibility to understand their customers’s needs and only recommend investments that are suitable. Unfortunately many investors purchase these products not knowing they can’t be sold for years. The result is they suffer huge losses or find their capital locked up when they need it most.
Who are the brokers selling these thinly traded REITs? There are hundreds of them and many work for big brokerage firms such as Merrill Lynch, Ameriprise, LPL Securities, Morgan Keegan and Morgan Stanley.
Not only are many REITs illiquid, some are also very risky. Once again, this suggests that conservative and elderly investors and those who need access to their funds should stay away.
REIT Fraud Cases Increasing
REIT fraud claims have become so common that some states such as Massachusetts now place limits as to how much of a person’s portfolio should be invested in REITs. Although customers can invest however they wish, brokers now must be careful what they recommend.
Investors who find themselves saddled with illiquid or frozen REITs may be able to recover their money from the firms that recommended the investments. Most cases can be handled through arbitration and resolved in about year. They can also be handled on a contingency fee basis meaning no fee unless the lawyer recovers money for you.
If you feel like you are a victim of REIT fraud, call us. Our investment fraud lawyers can help you get your money back. For more information, contact attorney Brian Mahany at (202) 800-9791 or by email at Services are provided anywhere in the U.S.
Need more information? Our Due Diligence blog has dozens of helpful articles. Simply type in the keyword “REIT” in the search box located in the upper right corner.
Post by Brian Mahany, Esq.