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.