Due Diligence on Roofstock SFH Purchase By July 25th

[John Neville]

Hello BP'ers,

My $100K offer on a SFH in Montgomery, AL has been accepted. This is my first time buying on Roofstock, which feels riskier than buying turnkey.

What kind of due diligence should I perform besides inspection and appraisal to make sure everything's kosher?

I read JC Wu's Roofstock post about her unpermitted roof. Jeanne G mentioned buying a property later deemed unrentable by the HOA. How do I protect myself against 5-figure losses like these?

The house seems too good to be true: 1,750 square foot 5BR/2BA on a 30,000 square foot lot. The rent is $995. Laminate floors inside that look like nice wood. 

It's been on the market for 75 days and I offered the listed price. I'm not even buying all cash: I'm using financing.

How did I get this property? Why is no one else interested? I have three potential reasons:

1. It's on the west side of Montgomery, where property values are lower and crime is higher, though my agent said that this particular neighborhood is good.

2. My agent listed the house as needing $4,000 in repairs. When I asked where he got this number from, he said, "My own head: it was just a guess. I made it up. I've never been inside the place."

3. The house does not have a 30-day Roofstock buyback guarantee.

I would like to hire a lawyer to write an agreement that protects me if the seller and title company neglect to pass on important information about the condition and rentability of the house. Do you think they would sign such a thing? Should I be suspicious?

Best,

John

[Ankit Garg]

@John Neville - I have brought one deal from roofstock in atlanta metro area which turned out to be a great deal but here are some suggestions. 

1. Find some reputable turnkey companies, I know of several which post deals weekly and you can make offers on them

2. Highly recommend always putting a financed offer and an inspection contingency. There are 2 parties which will protect your investment as bank will do an appraisal before they will lend and home inspection will reveal any major issues. 

3. Lastly, if you have identified Birmingham as an area, find a good realtor. It is going to be invaluable as they will tell you which areas to stay away from and can give you their opinion on properties. 

I have realized after doing my first deal on roofstock that real estate is purely a relationship business. You need a strong network. If you don't want to go build one, find a strong turnkey company which is highly reputable.