Hey guys! Just a quick post to draw attention to a situation I've been seeing more and more of lately.
I know we all love these emails that come straight to our inbox with "Rare deals" and "Great buys!". Most of them are legitimate deals, from great wholesalers (Thank you for your work wholesalers!!). I truly have seen/been a part of some great properties from these emails. However, I have been getting a lot of them recently that are clear misrepresentations of the potential in the deal.
An investor reached out to me about an email we both received, saying "we have to jump on this, it's too good of a deal!" The email was from a wholesaler out of the western part of NC, with a contract assignment here in Wilmington. They wanted $235k.I started digging into it and found a few key problems
- The ARV they had assigned to it was around $350k. This was way too high. As seen below, the highest comp sold for $270,000. Clearly it is a HOT neighborhood as most of these went over list price- but they're not selling for $350k.
- The comps they used were not the same ones that would most likely be used by an appraiser. They were in completely different neighborhoods. None of the comps on the above chart were used in their analysis. This chart is straight from the MLS.
- The square footage was listed as almost 250 sq. ft too high, as they were counting porches/unfinished additions. This neighborhood sells for an average of $163 sq/ft. 250 square foot off can be a $40,000 mistake.
All of this to say:
1. Check to make sure the Listing agent/ Wholesaler/ Seller understands the market. They don't have to be local, but their analysis may be off if they are not. Neighborhoods/price per square foot varies from block to block around here.
2. Verify!!! Do your own research and your own evaluation.
3. Reach out to a local Wholesaler/investor/Realtor if you have any questions. Even if we are not benefitting at all from the deal we are more than happy to help you look it over!
If you've made it this far, thanks for listening! We're all on this site for the same reason- to be successful. If this story can help even one person not burn any due diligence/earnest money, then it has served its purpose.
Also- I am aware that this is stating the obvious, but sometimes its easy to get blinded by the potential of a deal! This is a reminder to stay diligent. Don't get yourself into a deal that is only going to work through speculation. Get into one where the facts line up!
Hey @Jesse Canady thanks for putting this out here, I've absolutely learned more from others experiences good or bad is very helpful.
Jesse, think this is a great post and very helpful. Biggest takeaways for me are (1) the importance of always running your own numbers and knowing what those numbers mean. (2) Putting aside any pride and surrounding yourself with people who know more than you about specific parts of the process. Let the experts do their expert job.
Lol I see this but with the neighborhood listed. A post will say "Rare deal in A+ neighborhood" when in reality its across the main street which is actually a C neighborhood.
But how would an OOS or non-local investor know.
@Steven Wilson Exactly!
that is why it is so important to get connected with an experienced local! Doesn't have to be a realtor- it can be an investor, a wholesaler, or even just someone in the subject neighborhood who understands the market.