How New Western Acquisitions Made Me Lose my Life Savings ($70k)
I bought a house from Tanner Hester (a New Western agent) in June 2019. There were lots of issues with the house as follows:
1) The house was built without a permit
2) The house was for the most part sitting on the floor. There was no foundation
3) There were encroachments into the neighbor’s land, as the driveway and carport were on the neighbor’s land. The boundary also cuts the edge of the house diagonally.
4) The structure was just a cabin, and not a house, yet I was sold this house at about $60k more than what it should have been sold for,
5) They underestimated the repair cost by over $20k.
We requested for a permit to continue the renovation of the property but was denied due to the encroachments on the neighbor’s land as well as the extensive repairs involved. We were told by the city that the only solution would be to demolish the house and build a new structure as there were too many issues with the house to allow a remodel. I bought the house for $140k ($125k hard money). I spent a total of $70k cash on the house (cash to close and renovations). Now nothing can be done to the house except to bring it down.
Most of these issues are things I should have identified before buying the house, had I done a thorough due diligence as most of my assumptions were wrong.
The purpose of this post is to educate new and aspiring real estate investors on steps to take when New Acquisitions is involved in the sale of a house. Always do your due diligence. Don't assume every word from their mouth is true, until proven by your due diligence. And it must be thorough if New Western is concerned.
You need to take following actions: This is for new investor’s like me.
1) Confirm New Western's ARV from a licensed real estate agent.
2) Confirm the repair cost by having a licensed general contractor walk through the property with you. Also have a foundation repair engineer confirm the status of the foundation.
3) Request for the most recent survey of the property. This would help you confirm where the boundary is, and what you own and do not own. The house in question had the driveway and the carport on the neighbor’s land. The boundary also cuts the edge of the house diagonally. The new western agent did not mention this when we walked the house. It was included in the package, but Tanner Hester never mentioned a word of this.
4) Confirm from the city if there was any unpermitted addition to the house. This house full completely unpermitted.
5) Go to the city to confirm that there is no issue with the house, and that if you were to request a permit, it would be approved. Had I gone to the city, I would have known that the house was built without a permit, and that to be able to renovate the house I would have to appear before the board of adjustment of the city.
6) Most importantly, the current New Western business model does not afford new investors time to do their due diligence on a house. They want you to make a decision within a short time, put $5000 down, and even after this, they don’t allow you to go into the house until after closing, no matter how long it takes. This was my experience. It’s best to get your deals as a new investor without any pressures, and I don’t think New Western's model affords you that opportunity.
This is my piece of advice to new investors dealing with New Western. I know a lot of people in here would say I should have done my due diligence. I agree, but as a new investor, there are things you may not foresee if you’ve not had first hand experience or if someone had not told you to beware.
That's the reason for this post. Have a lovely 2020.
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I have heard this story about that company in Dallas specifically I know they are in multiple markets.
Your lender should have helped you with some of this.
and for sure you cant take anyones word for it.. you must check the due diligences box's yourself.. that goes for any wholesaler or like new western a wholesaling brokerage.. I suspect there might be some E and O you could go after since they are licensed..
@Femi Ibrahim
From what I’ve seen New Western is targeting new and inexperienced investors and then sending them deals where they have to close quickly. It is very unfortunate that this is your lesson in doing due diligence. I’ve learned never to skimp on due diligence. I also don’t do business with new western. I’ve been targeted by their agents in two markets that I invest in. I was on their lists for a while getting “deals” but they were never any good and they always had quick turnaround pressure-cooker sales tactics and non refundable deposits.
Unfortunately this is a buyer beware situation and predatory business practices are legal.
I hope this doesn’t turn you off from RE completely and you’re able to recoup some of your losses and move on.
@Femi Ibrahim You should get a real estate attorney on the case NOW.
If there was misrepresentation and/or negligence, you might have a case to sue the company, the real estate agent or possibly some other parties.
Did the HML do an appraisal? Did you have a home inspection? I'm assuming both answers are no. Either would have picked up something as obvious as not having a foundation!
Realtors generally carry E&O insurance which would be the first thing I'd go after. The company may as well. Then there's general liability. Retain all copies of documents you got from them as evidence. Same for emails, voicemails and texts.
It doesn't sound like you were represented by a buyer's agent and this is a perfect example of why a good Realtor is worth his weight in gold.
And when it comes to a company pressuring you not to do your due diligence, that should be an enormous red flag. That alone would make me tell them to pound sand.
Originally posted by @Femi Ibrahim:I bought a house from Tanner Hester (a New Western agent) in June 2019. There were lots of issues with the house as follows:
1) The house was built without a permit
2) The house was for the most part sitting on the floor. There was no foundation
3) There were encroachments into the neighbor’s land, as the driveway and carport were on the neighbor’s land. The boundary also cuts the edge of the house diagonally.
4) The structure was just a cabin, and not a house, yet I was sold this house at about $60k more than what it should have been sold for,
5) They underestimated the repair cost by over $20k.
We requested for a permit to continue the renovation of the property but was denied due to the encroachments on the neighbor’s land as well as the extensive repairs involved. We were told by the city that the only solution would be to demolish the house and build a new structure as there were too many issues with the house to allow a remodel. I bought the house for $140k ($125k hard money). I spent a total of $70k cash on the house (cash to close and renovations). Now nothing can be done to the house except to bring it down.
Most of these issues are things I should have identified before buying the house, had I done a thorough due diligence as most of my assumptions were wrong.
The purpose of this post is to educate new and aspiring real estate investors on steps to take when New Acquisitions is involved in the sale of a house. Always do your due diligence. Don't assume every word from their mouth is true, until proven by your due diligence. And it must be thorough if New Western is concerned.
You need to take following actions: This is for new investor’s like me.
1) Confirm New Western's ARV from a licensed real estate agent.
2) Confirm the repair cost by having a licensed general contractor walk through the property with you. Also have a foundation repair engineer confirm the status of the foundation.
3) Request for the most recent survey of the property. This would help you confirm where the boundary is, and what you own and do not own. The house in question had the driveway and the carport on the neighbor’s land. The boundary also cuts the edge of the house diagonally. The new western agent did not mention this when we walked the house. It was included in the package, but Tanner Hester never mentioned a word of this.
4) Confirm from the city if there was any unpermitted addition to the house. This house full completely unpermitted.
5) Go to the city to confirm that there is no issue with the house, and that if you were to request a permit, it would be approved. Had I gone to the city, I would have known that the house was built without a permit, and that to be able to renovate the house I would have to appear before the board of adjustment of the city.
6) Most importantly, the current New Western business model does not afford new investors time to do their due diligence on a house. They want you to make a decision within a short time, put $5000 down, and even after this, they don’t allow you to go into the house until after closing, no matter how long it takes. This was my experience. It’s best to get your deals as a new investor without any pressures, and I don’t think New Western's model affords you that opportunity.
This is my piece of advice to new investors dealing with New Western. I know a lot of people in here would say I should have done my due diligence. I agree, but as a new investor, there are things you may not foresee if you’ve not had first hand experience or if someone had not told you to beware.
That's the reason for this post. Have a lovely 2020.
This is a case study in the importance of due diligence and how experience with construction can help save you from making a bad deal. Sorry this happened to you and thanks for sharing.
No offense but in the immortal words of P. T. Barnum "There is a sucker born every minute"
These people suckered you in. Stole your money.
But you have to know how to walk before you can run. I have made a lot of mistakes, paid more than I should have, failed to do all my due diligence, but all within limits.
Start with a simple investment, then repeat. Learn the market, learn what makes money. Slow and steady wins the race.
Same song, different dance. There are plenty of warnings about these big box "wholesalers" online. Unfortunately, you are learning from your mistakes rather than the mistakes of others, which is always less expensive. Hopefully your warning will not fall on deaf ears. However, the title of your post is misleading. No one MADE you lose your money. Like far too many newbies, you chose to jump in with both feet without the appropriate knowledge, skills, relationships, etc. You chose to lose your money, this company just gave you the avenue to do so. Trust none of what you hear and only half of what you see.
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@Femi Ibrahim New Western has a terrible reputation here in Dallas. I absolutely refuse to even speak with any of their guys when they approach me at REIAs and meetups etc. It sucks you had to learn this way, but making mistakes is the best way to learn. Thank you for sharing your story here to help prevent other new investors from falling into the same trap.
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Originally posted by @Charlie MacPherson:@Femi Ibrahim You should get a real estate attorney on the case NOW.
If there was misrepresentation and/or negligence, you might have a case to sue the company, the real estate agent or possibly some other parties.
Did the HML do an appraisal? Did you have a home inspection? I'm assuming both answers are no. Either would have picked up something as obvious as not having a foundation!
Realtors generally carry E&O insurance which would be the first thing I'd go after. The company may as well. Then there's general liability. Retain all copies of documents you got from them as evidence. Same for emails, voicemails and texts.
It doesn't sound like you were represented by a buyer's agent and this is a perfect example of why a good Realtor is worth his weight in gold.
And when it comes to a company pressuring you not to do your due diligence, that should be an enormous red flag. That alone would make me tell them to pound sand.
for this exact scenario is why folks really should do business with licensed agents as opposed to unlicensed wholesalers if this was an un licensed wholesaler scenario my response would be good luck you have little chance of getting any thing out of them.. But a licensed brokerage as you state will have E and O there is clearly Errors and omissions here that any agent who has half a brain would have seen by personal inspection or reviewing paper work and helped steer the client away form this mess. Not to mention sellers disclosures that are mandatory in all states.. the seller should have disclosed a ton of this.. PHEW.. bad out fit that NW RE for allowing a client to suffer like this.
@Femi Ibrahim unfortunately stories like yours will only get more common in the next couple years. As we reach deeper into the real estate recovery cycle, profitable deals are getting harder to find. Wholesalers are going to start putting lipstick on pigs to keep their deals turning.
A quick visit to their company website shows 34 locations across 8 states. Assuming these are legitimate offices, this seems like a good size organization. That leads me to believe they would want to protect their reputation. It also seems there could be money to pursue them legally. Of course that assumes they are legally responsible. That all depends on what promises or guarantees where made and what the contract says. Based on the $70K and the $125K loan, you are into this for $195K. It is well worth your money to hire an attorney. If nothing else, you have legal problems over the hard money loan. I am pretty sure the hard money lender will come after you for their money.
There is very little difference between New Western and ISIS in my opinion. Same kind of scum!!!
Sorry to hear about your experience. Good to see you taking ownership and learning from the lessons.
I would encourage you to seek counsel, New Western has a reputation for this type of behavior and a track record of pushing misrepresented deals to novice buyers.
To anyone at New Western reading this thread, you're the used car salesmen of real estate and your resume is tarnished by having spent time being trained by this company. It makes you less hirable and much less respected in this industry.
@Femi Ibrahim Femi, this is unfortunately sad.
However, this is the same exact reason I do not advise newbies to start their REI journey in flipping!
The risks are just too high in my opinion and you can pay a pretty steep price as you did in your case.
Listen, this is a lesson and a tough one and yes you could sue but I'm sure you are not the first person to try to sue these guys. Consequently, you might want to try to salvage this deal and move on, fast.
@Femi Ibrahim
Your post-mortem is spot on. This is a good punch-list that all investors should use, not just new or inexperienced.
New Western is a wholesale mill for sure, but they also use licensed agents to complete their transactions, who are governed by state license law. If they have done you wrong, it costs you nothing to open a complaint with the real estate commission. Their investigation group will do a good job in ferreting out any impropriety(ies) and New Western's E & O insurance will pay damages if their insured (NW) is in the wrong.
Notwithstanding, to do business with them as a buyer, you have to agree to and sign their disclosures. Based on this disclosure and the constraints they put up for showings, inspections and contracts, it is not possible to do proper due dil, which is why I chose to never work with them in the Denver Market.
In the immortal words of Ronald Reagan, "... trust but verify"!
Thank you for the humility in this post. This is a terrible feeling for me as a reader, and I'm sure much worse for you. As Dave Ramsey says, and I echo, "I've done stupid with zeros on the end!" I have learned many lessons the hard way and reading your post caused me to pucker up at times I've done a fast purchase with less-than-due diligence.
Makes me wonder if someone has a great pre-purchase checklist they use for their due-diligence, at least on SFH purchases? Would be great if you're willing to share.
@Femi Ibrahim... Dang! Praying for you!
Question: can the house be moved? If it's not on a foundation anyway, and over the property line, it sounds like it might be a good candidate to be relocated on the property. Put up a block foundation and have a house mover slide it into place. Or do a partial slab, leaving key trenches in place to run water and sewer, and slide into place.
Originally posted by @Nate Marshall:There is very little difference between New Western and ISIS in my opinion. Same kind of scum!!!
That is a strong claim. Can you elaborate on why you formed this opinion with specifics?
Originally posted by @JD Martin:Question: can the house be moved? If it's not on a foundation anyway, and over the property line, it sounds like it might be a good candidate to be relocated on the property. Put up a block foundation and have a house mover slide it into place. Or do a partial slab, leaving key trenches in place to run water and sewer, and slide into place.
that's a great question. There has a to be a way other than tearing it all down and rebuilding.
In all honesty... I feel a more accurate headline for this post is “How I Made Me Lose My Life Savings”
Damn.. that sucks! New Western has a bad reputation in Los Angeles as well. I heard that not just from other investors but from wholesalers who supply them with listings as well. NW typically does a high pressure fast escrow tactics... even have you bid against other investors... often double escrows... and sometimes even delayed possession.
That said, I have just closed a 4day escrow with New Western as well. But I am fairly seasoned investor/flipper so I knew what I was getting into... and was able to identify that it was still a fairly good deal ( that is $230K below market price)
Although, my experience went fairly smooth so far... I likely won't deal with them again. I did not like the delayed possession tactic because it delayed my timeline to get previous owners out. Plus I found out they made $75k margin, once I got the title recorded and saw the purchase price on record. This led me to think they have unethical practices and they essentially robbed the previous owners of their home. Shady Realtors... bad karma!!!
At any case, Im not entirely sure if you can blame New Western a 100% on your loss ( in my opinion). With every deal...especially wholesale deal, you must always do your due own diligence. Never trust seller's ARV or rehab estimate. Did you buy this property site unseen?
@Alvin Uy, I went to the site, and we walked through. The backyard of the house was fenced, and there was no flag as to boundary issues until someone walked up to me while I started renovating, and showed me the real bondary.
Wow, just another bad story about New W A, there are many posts about just how bad they are right here on BP, too bad you did not get a chance to read them BEFORE you made this purchase. Everyone has already pointed out your mistakes so I won't poor salt in your wound but will remind you of the other advice that in most cases, these jerks ARE licensed and you DO have recourse!
I dealt with them several times here in LA, never made a purchase as I was too savvy for the crooks and liars I was dealing with. This company needs to be put out of business.
@Femi Ibrahim so sorry about you losses. I dont buy from New Western now but when i tried they came out to expensive for me. A lot of people in Houston find them ok.
Whosellers are double edged swords. If ones KNOWS THE MARKET /REHAB , they will find you the best/cheapest deals with wholesellers. I am yet to see a realtor beat wholesllers price ( i love you all realtor out there ) . If once DOESNT KNOW THE MARKET / REHAB then realtors may provide another sets of eyes thus may be beneficial ..
Permit with house /floors /no floors are all easy and typical for major rehabs. (last reahb i used 17 piers on a 1,100 SQFT house.. figure that ). I dont touch a closing statement without a survey on hand. Survey along saved me tons .
I hope you dont stop here with RE, go get the second one and break even . You know the most about all those issues and leverage those.
@Femi Ibrahim
Man I'm sorry to hear that. I hope you're able to recoup some of your savings and turn this devastating loss into just a hard learned lesson.
Coincidentally I have a meeting with NWA to look at a house in Fort Worth tomorrow morning.
So far I haven't been impressed with their margins, their comps or their high pressure tactics so I'm unlikely to buy through them. as a newbie in this particular area of REI though, I'm using them as kind of a sparring partner to practice the steps of analyzing wholesale deals until I find a more reputable organization to deal with.
Originally posted by @Femi Ibrahim:@Alvin Uy, I went to the site, and we walked through. The backyard of the house was fenced, and there was no flag as to boundary issues until someone walked up to me while I started renovating, and showed me the real bondary.
Very sorry to hear your story Femi, but do not let it defeat you. It will no doubt make you more focused, more hungry and more methodical when dealing with real estate in the future.
So you didn't go inside the house before purchasing (you said they didn't let you)? Did you look at the site map?
Do you have the option of removing the concrete where the driveway and carport are and relaying it within your boundaries? Would your HOA allow it? You can get a lawyer to try and nit pick and salvage something from this, but that is more expense and time with the possibility you get burnt by their more expensive lawyers. I would keep offering solutions to the city and see if you can have an extended face to face with multiple options for you to move forward.
You cannot blame New Western for this -- it is akin to hiring illegal immigrant labor to do skilled work and being unsatisfied with the result. You have to be there with them all the time overseeing and doing some of it yourself. If I put in x amount of work when buying a property normally, I would put in 2x the work when buying it foreclosed , private party or from wholesaler.