The wholesale deal that netted $266,000

[Jared Vidales]

Some of you already know the story, but for those who don’t I wanted to share how this deal came about.

As a brand new acquisition company located in Arizona, this was our second contract we ever locked up, the first one being a 8k referral deal from an estate attorney. This monster deal came from Hubzu.com while my business partner was scrolling through properties located in Phoenix. It was an 8,000sqft house on 30,000sqft lot on the hottest street in Arcadia (Phoenix). We expected bidding to reach 1.2-1.3m, however no one bid on the property ad we ended up locking it up at $893,000…..or $110/sqft, mind you finished product in that area is currently selling for $350-450/sqft.

Risk #1 -putting down 15k non-refundable EMD, which Is hardly ever part of a wholesalers business model, but it was a smoking deal we figured we couldn't lose. We immediately identify a buyer at $1,175,000, contractors out of California. This particular transaction was assigned to a Hubzu transaction coordinator based out of the Middle East, so communication happened 1-day at a time due to the time difference. The property had an existing 100k mechanics lien that was guaranteed to be wiped once we took possession. Long story short, this deal was in escrow for over 2 months trying to pull together all the necessary documents from the bank who was selling the property. When time came to close, the Hubzu transaction coordinator informed us the bank refused to sign our double close addendum.

Risk #2 – Taking down the property to make the deal happen, leveraging 80% @ 12% interest only payments which were around $7,100 per month. But why not? We were closing with these California buyers. 3-days before we were to close on the property, the CA buyers cancel due to financing

Disaster #1- . Turns out there was an open C-file with title, meaning they were daisy chaining this deal to another buyer. Our contract with the CA was ambiguous regarding whether their 20k EMD was refundable or non-refundable, so we were required to put this case in the hands of our attorneys….we ended up setline for 10k.

Everyone wanted a piece of this deal because there was so much built-in equity. Just about every wholesaler in town had this deal on their website marked up anywhere from 50k-200k. We held this deal for over 2 months, paying over 20k in interest payments before we identified a buyer. The buyer came from another wholesaler that we met at Sean Terrys annual wholesaler conference here in Glendale Arizona. The deal was at 1,175,000, 75k EMD contingent upon acceptable appraisal (or 10 days), 45-day close. Reason for the long close- the buyers were developers out of Canada, and had to move their CND over to USD, and pay exchange rates on top of that, which was a time intensive process.

Disaster #2 -Appraisal comes back well below their acquisition price, and the buyers try to use that as leverage to knock 100k off the purchase price… we settle at 1,150,000. The transaction is on cruise control at this point.

Disaster #3- Me and my partner are driving down to Hollywood to celebrate new years, 2 days before closing. She gets a call from the buyers stating the property got broken into, and a majority of the finishes were stolen, and they wish to push back the closing date. Things couldn’t have gone worst. A couple hours pass, and the buyers decided to proceed with the transaction, and are still on schedule to fund the deal on the COE date. New years eve, we see the incoming bank wire coming into our account….this thing finally closes.

Overall the transaction took over 4-months, tied up a TON of our working capital, and was an emotional roller coaster. Would we do it again? Absolutely.