Is This Normal Language in Sales Contract?

Question

After attending a webinar last night with Maverick Investor Group, I was connected with a company called America's Housing Alliance out of Utah.  There was a property I'm interested in in St. Louis, MO, so I placed a reservation through Maverick's website and was immediately connected with the seller, America's Housing Alliance.  Someone from their organization promptly sent me several emails including wiring instructions for a $5,000 earnest money deposit and a link to DocuSign the Sales Contract.  Upon reviewing the contract, I am quite uncomfortable and noted the following points of concern:

1.) 3 calendar day inspection period - I feel this is far too short.

2.) $5,000 earnest money release clause: after inspection review period (currently at 3 calendar days), both parties need to sign a release to return funds to buyer if deal does not go through.  To me, this seems very one-sided and not in my favor.

3.) Property Condition: This is supposed to be a turnkey type of model, yet there is a clause in there that states:

“It is further agreed that the Seller has not warranted, and does not hereby warrant, that the Property or any improvements located thereon now or in the future will meet or comply with the requirements of any safety code or regulation of the state, city, county, or any other applicable jurisdiction or authority in which the Property is located or having authority over the Property.”

4.) Waivers:  It says that: "Buyer waives the following: (i) all rights to and obligations on the part of the Seller to provide to Buyer any and all disclosures, including any and all formal disclosure documents required by applicable state or federal law."  This just seems like me agreeing ahead of time to let the seller get away with things they otherwise wouldn't/shouldn't be able to.

5.) Risk of Loss: Pretty much says that buyer assumes all risk of loss after inspection period and this isn't a reason to back out of deal later.

Are these standard items/clauses in a sales contract?  Should I be concerned?  Part of me is thinking RUN now while I can, don't sign anything, and don't wire money.  The other part of me is wondering if I'm being too paranoid.  I've read mixed reviews about Maverick, haven't really had much time yet to research America's Housing Alliance, and cannot find any information about the property management company they're currently using, Vaughn Investments & Property Management, which is concerning.

Thanks in advance for your opinions.  I take what most BP members have to say quite seriously.

Chris Clothier · Answer

Hey Mark,

There is no need to continue to move forward with this contract.  You already know how this ends up.  This is a turn and churn company and all of the language is included to keep you from suing them when your expectations are not met.  There is no need for that language other than to prevent you from coming after them when you realize you have purchased a property without renovations and whatever has been done was not up to code or permitted.

If you are looking to passively invest in real estate, you can do much better than this.  You do not need to rely on a promoter to introduce you to "opportunities".  Promoters will often simply promote whomever is willing to pay them a fee and this is an example of a promoter that may not even be aware of what is in the providers contract.

With a little due diligence on your side, you can find quality providers who offer a better turnkey experience that the nonsense you posted above.  Best of luck to you.

Kyle J. · Answer

No, those are not standard.  And yes, you're right, those are very one-sided (not in your favor).  I mean come on, the one you posted that says:

4.) Waivers:  It says that: "Buyer waives the following: (i) all rights to and obligations on the part of the Seller to provide to Buyer any and all disclosures, including any and all formal disclosure documents required by applicable state or federal law."

This is trying to get you to waive their obligation to provide the disclosures that they are LEGALLY required to provide.  That should tell you something right there.  Let's call it RED FLAG #1.

And who exactly would you be wiring the $5000 to?  The company directly?  Or a third party like a title company?  Or do you even really know who it's going to?  Personally, I wouldn't wire the company anything directly.  That's RED FLAG #2.

I've never heard of either company you mentioned, but a 5 minute internet search revealed that Maverick Investor Group is just a marketing company that refers people to so-called turnkey providers.  There's several posts on BP about them.

So I would look at who they're referring you to....in this case, America's Housing Alliance.  On several sites (i.e. LinkedIn, Connected Investors, etc) a man named Nate Heaps from Utah advertises himself as the owner/principal of this company.  A further internet search reveals an online complaint about someone with the same name, also from Utah, who is reportedly associated with other real estate companies that someone is claiming ripped them off: https://www.ripoffreport.com/reports/property-23-nate-heaps/american-fork-utah-84003/property-23-nate-heaps-green-clover-properties-retiree-ripped-off-of-retirement-savings-a-828667.  That's RED FLAG #3.

Now, as I previously mentioned, I've never heard of these companies before, or the people that run them.  I am not connected to any of them and have no dog in this fight.  So what you end up doing is up to you.  I just hate to see another BP user get scammed out of some money, and I think anyone can see there's enough red flags here that should indicate you need to do a thorough vetting before proceeding, and certainly before you wire anyone $5000.

Deborah K. · Answer

I appreciate you posting this. Been exploring the same marketing company and market. I sent a request to connect with you, hoping to learn more about what has happened since. Thank you.

Rob Hakes · Answer

Yes Utah is the MLM hub of the United States, and has a ton of scary real estate investing guru programs.  I think it is safe to say you should NOT be buying from a Utah based turnkey company because Utah is not a good turnkey market.  I think as a rule, if you can get your turnkey properties directly from the company that is based in the market you are buying in it makes more sense all around.

There are plenty of good Utah based real estate companies, but I am wary of any that would be trying to broker an out of state deal. IMO

Mike Palmer · Answer

All of you saying to not deal with any company based in Utah need to get a grip. Avoid doing business with ANY person or company ANYWHERE that is unethical, shady, doesn't seem right, or does not offer the product or service you desire at a price that works for you. There are perfectly legit companies (and people) in Utah, and there are also bad people and companies in Utah, just like there are anywhere else. Stop with the bias and do your due diligence on every person, company, and deal, regardless of location.

Mark S. · Answer

Thanks @Larry Fried, I’ve done what you suggested in the past and this was a time where I wasn’t going to do that.  Big mistake.  Never again.

Larry Fried · Answer

I can't really add anything to what others have already said, but agree, lots of red flags here. I would also agree that avoiding companies out of Utah is probably a good idea.  What I would add is that you should plan on visiting any market and TK provider you are considering working with before you close on the first deal with them.  There is nothing like a face to face and seeing what neighborhoods and their rehabs are like.

Mark S. · Answer

@Kyle J., thank you for your feedback.  This is what I needed to hear.  I believe the wire was supposed to go to a title company.  Maverick has been a HUGE disappointment.  More on that later in my post.   I read the information in the link you posted.  Not sure whether or not that's the same individual, or even if it's true, but if it is, that's horrible.

@Donald Shaver, thank you for your feedback as well.  I took your advice, among others, and did just that.  Needless to say that they're not happy about it, but it's not like anyone was looking out for anyone else but themselves in the transaction anyway.

@Albert Severino, yes, I agree and that's what I did.

@Scott Bowles, I have been in touch with, and now can certainly appreciate even more, turnkey providers themselves that do everything in-house.

@Chris Clothier, thank you so much for writing.  You may not realize this, but I have tremendous respect for your opinion and was thrilled to see you chiming in on this thread.  Again, what you said is much of what I needed to hear.  The promoter in this case has been super unprofessional and condescending towards me since I sent an email letting everyone know that I wouldn't be moving forward.  The first email was pretty much trying to bully me into setting up a phone call to "review ordinary procedure for reserving and purchasing turnkey properties to be able to avoid reserving and then backing out of properties as you have done twice so far."  I did reserve two properties on their website and couldn't "undo" the first one.  Within minutes of doing so when they contacted me via email to confirm, I immediately told them I didn't want the first one and it appeared to be a non-issue.  With the one I thought I wanted before all these red flags popped up, I let them know within fewer than 18 hours that I was no longer interested.  It wasn't malicious on my part at all.  Anyway, I digress...  I basically voiced my dissatisfaction with the condescending tone and politely asked that they get rid of my contact information as there's no need to communicate further.  I shortly thereafter get a response saying, "With pleasure Mark" and wishing me luck on my future investing.   Within a couple of hours later, I get another email (likely intentionally) which was supposedly likely intended to be between the promoter (Maverick Investor Group) and the seller, stating that Maverick just so happened to speak to my lender to touch base and asked about what I was like.  Apparently Maverick inferred through their conversation that, "what I heard basically says the guy is a jerk!  Good riddance!"  How unprofessional.  I would NEVER do business with anyone that would speak of others this way (whether true or not).  I guess this just goes to show their true colors.  Anyway, Chris, are you still planning on offering turnkey properties in Louisville, Kentucky any time soon?  If so, I'd love to connect about that.

@Rob Hakes, I'm glad to hear things are going well with Spartan.  I've actually personally met them and their team on a 1/2 day tour in Birmingham.  Great people.  I wasn't all that impressed with the properties on the other hand, though.  I still get occasional emails from them, but the numbers just don't seem to work for me.  Below 1% rule, older properties, etc.  How are your numbers looking with them?

@Blair Poelman, thank you for your feedback.  I'm glad to hear that what you're saying is in line with what others are saying on here.  Seems like I avoided stepping on a potential landmine.  I am still being contacted by the seller - who, at least up until this point has appeared to remain professional, although getting annoying - who keeps asking why I didn't move forward and what they could have done better/differently.  Maybe I should have been more specific, but honestly, I have such a sour taste in my mouth right now from this process, from Maverick, and from all the feedback I've been getting about this contract, that I don't want to waste any more time dealing with them.  What's the use at this point anyway?  It's not going to change my mind or the situation.

Everyone, thank you so much for the feedback.  You have no idea how grateful I am for BiggerPockets in general, but especially in situations like this.  I am glad to say that I did not sign anything, did not wire any money, and will not be doing business with the promoter or the seller.  Lesson learned.

Blair Poelman · Answer

@Mark S.  The contract is completely one-sided.

1. 3 days is unreasonable.

2. 5k is too much. And the release clause is just lame.

3. This is semi-normal.

4. I'm pretty sure the waiver is illegal - disclosure on residential property is required - even when it's across state lines. Seller can't break the law even if the buyer says it's okay.

5. The liability for Risk of loss is should be transferred upon closing.

Seems like a typical REPC for a turnkey reseller out of Utah.  Buyer beware.

Rob Hakes · Answer

@Mark S.

This does not look right.  I agree with the above comments.  I just got a few turnkey properties under contract and purchase docs were nothing like this.... and no earnest money.

I have more details on one of my details.  Check out my post titled 'Another Spartan Invest Turnkey Review' or something like like that.

PM if you want some more details on my experience.

Hopefully its not too late.

Is This Normal Language in Sales Contract?

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