All Forum Posts by: JC Wu

 Ohh, that's what you meant. I thought you were saying buyers have an option to opt out of agreeing to the "seller disclosures" section on the Roofstock drafted PSAs. 

While we're at it, do buyers have that option?

Are Roofstock PSA terms negotiable? 

Although there's a disclosure form embedded in the PSA I signed for my NC property, the seller checked "no representation" for all of the questions and stated, "has never occupied the property" - it was as though the disclosure form was never filled out. In that case, would you make Roofstock ask the seller to select either "yes" or "no"? 

I'm pretty sure MLS agents are expected to request seller disclosures on behalf of the buyer without being asked by the buyer. If the buyer has to remind or ask the agent to do so, the agent is most likely a lousy one.

Nonetheless, I wasn't aware buyers can ask Roofstock to send diclosures to sellers several times. That's helpful information. Thanks, Jason. I wish I knew it earlier. 

@Nina M.

Did the 2nd property come with an inspection report or inspection contingency? I wonder how the leaky water and gas pipes were missed before closing. What were the turn cost and capital expenditure estimates on the inspection report? 

$1450 for replacing all pipes is not bad at all. The quote I received for replacing all the pipes in my 1320sqft Jacksonville property was over $3K. 

$325 to replace a garbage disposal does sound a bit overpriced. I know it's around $250 in CA, including labor and parts. 

I've never talked to anyone from Roofstock customer satisfaction department. Must be a new thing. I bought my 1st Roofstock property in 2017, 2nd in Feb 2018. 

Thanks for sharing! 

@Jason G. What do you mean by "with respect to the PSA, a buyer CAN insist the disclosure are fully filled out"? I wasn't aware it was an option. By the way, why would any buyer want to insist that if given an option? 

What does OP stand for?

@Charles Kao I feel that the majority of the discount goes to sellers rather than the buyers. For MLS transactions, sellers typically pay all the commission around 5-6%, right? Roofstock charges a much lower commission, but the buyer has to pay part of it. Whether there's really a discount or not, I think it largely depends on the final sale price. Some sellers may be willing to pass on some of the savings from the commission to buyers.

@Guy Gimenez Yes I've come to the same conclusion. Not all newbie investors are lucky to have seasoned investors help them out though. Sometimes newbie investors have to either jump in with both feet or not jump at all. 

@Brian Ploszay Very helpful insights. Proving the seller knew about it can be tricky. I think most of the time there's only indirect evidence. Also, as out of state investors, litigating against seller in another state is probably a hassle and expensive. Don't the litigations have to take place in the state the property is located? 

There's something I'd like to point out after reading some of the comments.

It's my opinion that Roofstock's business model is flawed, because Roofstock targets newbies for advertisement (see the attached screenshot of their Google ad). If Roofstock didn't target newbies, I would have thought their business model is fine. 

Furthermore, on one hand, Roofstock says these sort of stuff on their website:

"when it comes times to finance or manage your property, we’ve found providers you can count on.”

"rigorous certification means you can focus on your investment strategy rather than due diligence.”

“enjoy long-term, expert support: Our team is here for you all the way. We set you up with a vetted local property manager, and continue to work on your behalf to help everything go smoothly.”

“if there’s a dispute or disagreement, Roofstock is always there to step in.”

All of that gave me the impression that Roofstock provides lots of support and assurance to newbie investors, especially newbie buyers.

On the other hand, there are the "Property Managers", "Indemnity", "Limitation of Liability" sections in the Terms&Conditions that seem to conflict with the statements on their website, to some degree or another.

It makes me wonder, does Roofstock abide by or own up to those statements on their website or follow provisions in the Terms&Conditions? My personal experience makes me guess it's somewhere in between. If that's the case, where does Roofstock draw the line? Is it a case to case basis? Then how can investors determine the amount of support they can expect to receive from Roofstock before they make investment decisions? 

 Hmm, interesting. I'm sorry to hear that. You probably saw one of my previous posts about how my Jacksonville property sat on the market for 81 days after I spent five figure on rent ready repairs. Not a single approved application till I sold it. It may be helpful to check your property's price history on Zillow. Often times, you can tell at what price and at what time it was listed for rent, how long it sat on the market each time, whether the list price had to be reduced, market rent trend over time, etc to judge its rental value. 

By seasoned buyer, I mean experienced buyer. 

I look forward to your review and good luck. 

@Susan Little@Tony Kim@Natalie Schanne@Jason G.@Jay Hinrichs@Engelo Rumora@Account Closed 

Not sure if people can see my update without being @ed. If you got two emails, sorry about that. Looks like I can only @ people who've left public comments under this thread. Anyway, Please feel free to criticize and give your feedback. I always appreciate views from different perspectives. 

Here’s the second half of the long story focused on Roofstock. Sorry about the delay, I've been busy moving to San Francisco. Thank you all for taking the time to read my posts and leave public and private comments/messages. I appreciate you impart your knowledge and share your wisdom with me. I’m glad that quite a few investors find my posts helpful.

Did you require the seller to complete the disclosure form prior to executing the PSA?

No. I believe Roofstock sends disclosure forms to sellers to complete prior to listing the properties on their website.

A disclosure form was embedded in the PSA for my other property (in Charlotte, NC) acquired through Roofstock.

The two Roofstock PSAs I signed were different in terms of the content and format, perhaps due to different states have different requirements, or Roofstock revises the PSA over time, or both.

Why don’t I seek recourse?

First of all, there’s a difference between “loss of profit” and “loss of principal/original amount invested.” Even though I got screwed over by the seller, the evicted tenant and illegal occupants, the Roofstock certified PM, undisclosed material fact, sell after only owning for ~1.5 years, I managed to barely break even - appreciation saved my ***.

The property damages and various other costs were offset by rent and capital gain from the sell. The loss of profit is as high as 60K, but little loss of principal amount. If I made that profit, great; if I didn’t, not the end of the world.

Running into problems isn’t always a bad thing. I find myself learn the most when I’m forced to face and tackle problems. I had a bad feeling about this whole thing when I was in the middle of this ordeal. Now it’s over and I look back, I consider it an overall positive experience.

The main reason is that I don’t feel like jumping over tall hurdles.

Did you retain an attorney upon discovering the permitting issue?

Investors have to click to agree to the Terms & Conditions before gaining access to the service and certain features of the website. An attorney looked over the Roofstock Terms & Conditions, pointed out the Indemnity, Limitation of Liability, Arbitration Notice, and Arbitration of Disputes sections. The document is publicly available at the bottom of the Roofstock website, next to "privacy policy."  I can't copy and paste the terms here. 

So those are the hurdles. Doesn’t mean I have zero chance of jumping over; doesn’t mean the provisions are always enforceable. I just don’t think it’s worth the time and effort. If I suffered considerable loss of the principal amount, then I would be more motivated to make the effort.

Some people are ok with arbitration as the method of resolving disputes, but some find waiving their right to go to court when things go wrong offputting.

For MLS transactions, can licensed realtors and brokers be absolved of legal responsibilities, professional duties, and liability for misrepresentations made in conjunction with the sale of residential real estate by language contained in contracts?

According to the Florida attorney general, the answer is NO.

The FL attorney general website says:

“A licensed real estate broker or salesperson cannot be relieved of a professional duty or shielded from liability for a violation of the professional practices act by language contained in a sales agreement between a seller and a buyer of real estate. Any provision of a contract that purports to remove a real estate broker's or salesperson's liability for misrepresentation or other wrongdoing undermines public confidence in a regulated profession and is contrary to public policy and, therefore, void.”

The Florida Association of Realtors once came up with a version of PSA that contained Indemnity provisions without the approval by the Florida Bar. It circulated among realtors. Then the attorney general published a letter on their website to clear it up.

I consulted a Florida broker and a California broker about this. Their opinions are in line with what the attorney general office put out.

On a side note, Indemnity and Limitation of Liability clauses aren't something novel that Roofstock came up with on their own. Lots of legitimate companies insert these types of clauses into their Terms & Conditions - if they could, they would.

It’s my fault that I didn’t read the Terms & Conditions before registering a Roofstock account. That document has been publicly available all along. I just never read Terms & Conditions before using websites, apps or software updates. And I never will.

Click-by-agree contracts:

Out of curiosity, I looked up how many people actually read Terms & Conditions or terms of service agreements. I found a study conducted by the University of Connecticut. They created a fake social networking site called Name Drop, and wrote up a terms and services agreement for users to agree to before signing up. In the agreement, they included that users give up their first born child as payment, and that anything users shared would be passed along to the National Security Agency. A whopping 98% of participants agreed.

A Deloitte survey of 2,000 American consumers found that 91% of people consent to legal terms and services conditions without reading them. For younger people ages 18-34, the rate is 97%.

I suppose under specific circumstances, Roofstock might offer to reimburse a lot more than the capped amount stated in the Terms & Conditions. If they do that, whoever receives the reimbursements should be very grateful. They put the provisions in there doesn’t mean they strictly follow them.

More on me rating Roofstock 1 star for newbie buyers, 3 stars for experienced buyers, 5 stars for sellers:

I consulted a Jacksonville licensed broker on the permitting issue, without mentioning Roofstock. He brought up something that resonated with my personal experience. See the attached screenshot of the email. He wasn’t talking about Roofstock, but I think it applies to Roofstock and many of its sellers. This broker along with the realtors he’s hired have done thousands of RE transactions in Florida over the years.

I’m not discussing the terms in the PSAs I signed since I’m not supposed to. I’m talking about the blank one that anyone with a Roofstock account can see by clicking on a random property on their website. I can’t copy and paste specifics here because technically you need to have a Roofstock account to access documents in the diligence vaults.

For those of you who have a Roofstock account, refer to paragraph 18 on page 6 of the October 2017 version of the PSA.

So yeah, if you’re a seller, newbie or experienced, Roofstock has you back and you’re well shielded from liability.

I’d like to point out that, although I really don’t think Roofstock is suitable for newbie buyers, it is a fine website for seasoned buyers. After all, the wholesaler that bought my property was comfortable with buying “as-is” and doesn’t go after sellers later on after closing. Although, the wholesaler inspected the property in person twice, once before making the offer and once right before closing; whereas most Roofstock investors don’t get a chance to walk the properties before closing.

I'd also like to point out that Roofstock recently launched this patent-pending new platform called "Roofstock One" that allows investors to invest in SFR more passively outside of direct ownership. I think it makes more sense for newbie investors - less risk, less operation, more baskets for your eggs, low investment capital, etc. They've also added new programs such as bus tours and "bring your own property." Roofstock keeps refining their business model and it should become more and more sophisticated over time. I haven't tried any of the new stuff as I'm wary after what happened.

My rating is based on my limited personal experience with Roofstock. Although I consider the broker a trustworthy expert, what he wrote is just his personal opinion. Take it with a grain of salt and exercise your own judgment.

Roofstock closing coordinators:

I’d say if you’ve never bought a property in your life, the Roofstock closing coordinators may be helpful. They connect you to their affiliated providers - title companies, lenders, insurance agents, PMs - so you don’t need to search on your own.

I’d rather spend some time on finding my own providers. Just one example briefly, when I closed on my second Roofstock property, it took 2 months, multiple follow up emails and my complaint being escalated to the Roofstock director to receive the title insurance. To be fair, closing on the first Roofstock property went smoothly.

Although my closing coordinator was always responsive and was willing to address my questions and concerns whenever I reached out to her, she didn’t proactively make sure I got everything in the first place. I had to discover the issue and tell her what was missing. If that was my first closing and I didn’t know what to expect, I’d be screwed.

The title insurance example is just one of the five things that this Roofstock affiliated title company messed up. Some of those Roofstock providers each deserves their own separate thread if I have to write in details - stories for another day again. This post is about Roofstock.

Roofstock advisors:

I feel that my Roofstock advisor’s expertise stops at the macro market level. When I inquired about a particular property, he would often send me links to articles that discuss for example the “Memphis market” or the “Pittsburgh market.” Sometimes, I had already read the articles from my own Google search.

What I really wanted to know were things like "where are the bad pockets with rampant illicit activities," "what regulations and laws the local governments might implement or enact that could affect future property value and cause demographic shifts," "what infrastructure construction is underway," "is the FEMA map accurate and do the local insurance companies agree with it," "if the property is near an airport, is it in noisy flight paths," etc. Sure I can find some of the info online through time-consuming and extensive research, but the sources of the info could be outdated and inaccurate.

At least to me, my Roofstock advisor never demonstrated knowledge at the micro level. He’s knowledgeable about Roofstock though, to be fair. I was also impressed by his work ethic. He would promptly respond to my emails late at night, including weekends.

To sum it up, he’s always willing to help, always there to help, but unable to help as much as I’d like him to. I suppose the mediocre local realtors don’t even know the answers to some of those questions, let alone Roofstock advisors.

Assuming the Roofstock advisors only work from their fancy Silicon Valley office and have never spent a considerable amount of time in or even never been to those out-of-state markets, how can their expertise compete with that of the local brokers’ who’ve built their lives there? My assumption could be wrong. Who knows, maybe there are adventurous folks who’ve lived, worked, or invested in all 19 states serving as their advisors.

When it comes time to sell those properties, the majority of prospective buyers will be locals (unless sell on platforms tailored to RE investors), likely represented by local realtors who scrutinize the properties in person and guard the buyers’ interests - the cards would probably be stacked against the sellers who’ve never seen the properties with their own eyes and lacked guidance from experts with equal amount of knowledge when they bought the properties. Some out-of-state investors have local connections, or they themselves possess knowledge of the local markets, then it’d be a completely different story of course. This is another reason why I think Roofstock works fine for seasoned buyers.

Interestingly, many local PM companies have investment advisors on the team. If you give them a ring, they may even take a look at your inspection reports and share their opinions on whether the properties you’re interested in make good investments. The tricky part is conflict of interest - by far, I haven’t encountered a PM investment advisor that advised me against buying a property of my interest. Not sure if it’s because I’m good at identifying opportunities or they just want me on board to profit out of me.

There’s a lot of stuff I still haven’t touched on. I try to avoid writing lengthy essays. 

THE END…..

Thanks for sharing your insight. It is very helpful. 

The wholesaler sold it to the end buyer for 117K. The end buyer paid all closing costs; they're located in Israel; they plan to do some light remodeling and then list it for sale on the MLS. Looks like the end buyer bought into the market value being over 150K (after remodeling).

The Roofstock certified property manager screwed me over and got fired. I can't share the details yet. Then I hired a local PM I found on my own, not affiliated with Roofstock - transparent fee structure, tech-savvy, run by responsible ppl on top of their games. 

The inherited tenant (from the seller&Roofstock) along with the illegal human and animal occupants got evicted, trashed the property, left a whole ecosystem of vermins behind. I then spent around 13K on rent ready repairs before listing the property for rent. 

The first tenant of my first rental got evicted. Fun huh? 

The property was in bad shape when the tenant left. The HVAC filter hadn't been changed for over two years. Food and trash were left rotting. The flooring detached from the bottom of the wall. Some doors were dangling. That's another reason why I suspect the quality of the rehab work the seller did was poor. 

When I bought the property from Roofstock, the "current rent" was $950, with a green arrow next to it pointing up, meaning the "market rent" was higher. The "market rent" indicated was $1025. Roofstock has updated and revised their website over time, so it doesn't display like that anymore. Now I understand it was just an estimate. 

Anyway, the property was listed for rent at $1095 at first, nobody interested; I reduced it to $1025, still nobody interested; I reduced it again to $965, applications finally began to slowly trickle in but kept getting declined. By the time the property went under contract, there was not even a single approved application. It was listed for rent till it went under contract - it sat on the market for 81 days. 

The property was vacant for so long that the vermins starved to death. Didn't even need a treatment. 

The bad tenants, the eviction, the fact that the prospects' applications kept getting declined (low-quality tenant pool), the property sat on the market for rent for months, the neglected HVAC, the actual low market rent all contributed to my decision to sell. The permitting issue was the main concern, the trigger, but not the only reason. 

@Jack Bobeck

Thanks for your input. That just made me feel even better about my decision of getting rid of this property for good. 

I hope the flipper who told me the city of Jacksonville doesn't do a good job at enforcing permits doesn't actually skip on them. 

I too think the double-digit appreciation is a bit exaggerated. My Merrill Lynch advisor said her model predicts the market should be good for another two years, but nobody has the crystal ball. 

@Tony Kim

Who's your TK provider? An LA TK provider that only serves locally? 

Roofstock is more like a "broker on steroid" rather than a true TK provider as another BP investor put it. I thought it's kinda fitting although not exactly. At the same time, I can't come up with a better description myself. 

I didn't have the balls (still don't) to invest in my local market - San Francisco Bay Area, which is one of the, if not THE most expensive market. I wasn't comfortable with putting too much at stake as a newbie, so I invested in cheap markets to just get my feet wet. Exactly like @Jay Hinrichs said, too inconsistent for someone like me. 

CrowdStreet is pretty good, too. I might invest in a self-storage facility deal next, which should serve me well during the impending recession -- the four Ds (divorce, dislocation, death, disaster).