All Forum Posts by: Patrick Ellis

I was hesitant to add my comments on this, as I don't like airing dirty laundry or hear-say in public. But as a Networth customer, I felt I had the right to do so. I purchased a property from Networth last year.  I will say that they handle the up-front things in an organized and professional manner. But I was very unhappy with the final closing arrangement. First, because they were vague about the buyer having to pay everyone's closing costs and because they allowed the previous owner to stay in the property for another 2 weeks and didn't do anything to assist when they stole a couple thousand dollars worth of appliances that were supposed to remain in the home. The answer I got was, "sorry, call your insurance company". Then silence was all I heard after that.

I think it's no secret that the comments we've all read about ARV and Rehab are absolutely true. The property I purchased was overstated on ARV and understated on rehab. It's very common to hear things like, "just reface the cabinets", or "that bathroom just needs some paint". Once the demo starts, all the fun stuff they don't discuss gets uncovered. To my surprise, the appraisal I got after rehab was about $10k lower than their projected ARV, and that's after doing way more to the property than anyone ever imagined. After seeing that, I decided to convert the garage into a separate living space. Had I not done that on my own, I'd have lost about $10k in equity.

One other things they don't tell you about is whether the ARV they suggest will actually sell in the neighborhood where the property sits. In my case, selling a $250k home in Oak Cliff will take months. That means more holding costs and possibly broker fees.

Fortunately for me, I was able to turn my semi-horror story into a great rental property. But that was not my intended exit strategy and it was without any help from Networth.

I wish I could tell you there are better wholesalers out there. But the truth is most follow the same 70-75% rule based on a elevated ARV. Even the newer websites that claim to review ARVs of its listing wholesalers don't actually perform as promised. I worked on a deal from a husband/wife team that posted and the property appraised $20k lower than their ARV. When I ran the comps myself, I saw similar results unless I stretched the search to over a mile away. So much for verifying posts.

• You need to verify comps inside a half mile or within the subdivision.
• Modify comps appropriately if they don't match exactly.
• Verify the rehab with your own contractor or get good at estimating yourself.
• Do the math, then do it again just to be sure. If it doesn't add up, look for the next opportunity.

If people stopped buying wholesale, some of these issues would self-correct. But as long as there is a steady stream of new investors willing to buy wholesale, this problem is not going to go away anytime soon.

Good luck to you.

Run fast and run far.  Everything you're hearing from Jose and Bart is true.

Ryan, give me a call when you have a minute.

Ryan,

A wholesale purchase usually starts off with you signing a purchase/sale agreement. Most of time it's the wholesalers own form (request a 1-4 agreement). Then you have to give up earnest money (usually $5000) that you will never see again if the deal goes south.  Closing is typically in 10-14 days depending the situation with the homeowner.  You need to get your own appraisal, survey, inspections, etc. You also pay both ends of closing. You normally will not receive a sellers disclosure (always ask for one anyway). Two weeks later there is a double closing and the property is yours.

That's an over-simplified explanation. But hopefully it helps.

Patrick

Mathew,

I think you hit the nail on the head in your opener.  In today's market, the larger wholesalers have a steady stream of new investors to pick from. So they don't really need a lot of repeat business. 

That means there are lots of new investors doing a lot of work for not a lot of return on their investment dollars. I have used at least one of the wholesalers you mentioned and it's been the most troublesome property I've owned to date. While the ARV they suggested was relatively accurate, they forgot to mention that a house priced that high would take many months to sell in the neighborhood it was located.

I'd agree with John Chapman.  It's going to take a lot of work to find a really great deal in this market.

Good luck.

Might be time for a real estate attorney. My understanding of auction homes selling for more than what was owed, is that the original owner is entitled to those funds after taxes and fees are paid.  The clerks office is supposed to apply the overage to those charges and then disperse funds to the original owner.

Chimi,

I am a Dallas Realtor, originally from Miami.  Drop me a notes if you want to talk more.

Patrick

Raymond, drop me a note so we can talk more.

Patrick

Justin,

You can call or text me.

Thanks,

Patrick

I may be able to refer you to a couple handymen. What kind of work do you need done?