"Networth Realty" any thoughts?

[Carol Donaldson]

All,

I was looking at a potential property posted by Networth Realty in Tampa.   I was just curious if anyone has worked with them?  I found a few things, and my attorney did too, that seemed risky about the deal, and I was wondering if this is the norm

The deal seemed awesome with a fix and flip potential of over $60K net to be made.   However when I ran the contract past my attorney, he was concerned about the high $ for a non-refundable earnest and no allowable contingency for inspection.  Plus there was a $500 fee that had to be paid to them for their fee and I was to cover all closing costs (their's and mine).

Do you know if this is the norm for this company?  Is it still good to consider them?  It seems like a lot of risk and I was wondering what other's experience has been.

-Carol   

[Seth Teel]

@Carol Donaldson

The concerns you raised are par for the course when buying wholesale real estate. There are companies large and small with almost the exact same business model.  All will require a non-refundable deposit (usually $2000 - $5000), most have a "transaction fee" or "admin fee" (usually $295 - $600), and all with require you to pay for the double closings costs unless they can assign the contract to you.  I would definitely ask if they can assign the contract. It's a much easier transaction for you and them.  

If you plan to buy from wholesalers you will need to get used to the "as-is" purchase and on refundable down payment.  This is just part of the business.  This is why it's important for you to make sure you do your due diligence prior to contracting the property.  Often times with wholesale deals, speed is the name of the game, so taking time to conduct lengthy due diligence is not an option. This is where educating yourself  and building your team becomes so important.  If you work with a good wholesaler or good agent, they should be able to help you make quick decisions.  

A lot of newer investors get hung up on the items you mentioned. I don't find any of them to be a big deal. The most important thing you can do is check their numbers. Is the ARV accurate? Does the rehab budget include everything needed to meet that ARV plus a 10% contingency? Does the price, rehab, and ARV meet your percentage requirements after holding costs, closing costs, commissions, hard money fees, permits, & other soft costs?

If your answer is "yes" to those questions, then it's a deal and there shouldn't be a worry about a non-refundable down payment...after all it is applied to the purchase price of the property and it is refunded if they cannot provide clear title.  This shows your intent to purchase and protects the wholesaler should you get cold feet and they're stuck losing their front-side earnest money, or heaven forbid, actually close on the property.  

When I was a full-time wholesaler most of clients were able to pull the trigger within minutes of entering the home, some trusted me enough to buy sight unseen on my recommendation, and some always wanted to get a contractor in there or run the contract past their lawyer. Most that fell into the last group are no longer "real estate investors" or they chose to purchase at retail prices from the MLS. There is money to be made buying from wholesalers, there is money to be made buying at retail off the MLS. It all just depends on your level of comfort and strategy. For me, I much prefer to purchase from wholesalers or directly from the owner. I like the exclusivity of it and feel I get better deals than those offered by real estate agents.

Lastly, if you are truly worried about this specific company, I would first check the BBB, and second ask one of their agents if they have any references.  Feedback good and bad will definitely be prevalent within your local RE community.  

I hope this was helpful.