"Networth Realty" any thoughts?

[Carol Donaldson]

All,

I was looking at a potential property posted by Networth Realty in Tampa.   I was just curious if anyone has worked with them?  I found a few things, and my attorney did too, that seemed risky about the deal, and I was wondering if this is the norm

The deal seemed awesome with a fix and flip potential of over $60K net to be made.   However when I ran the contract past my attorney, he was concerned about the high $ for a non-refundable earnest and no allowable contingency for inspection.  Plus there was a $500 fee that had to be paid to them for their fee and I was to cover all closing costs (their's and mine).

Do you know if this is the norm for this company?  Is it still good to consider them?  It seems like a lot of risk and I was wondering what other's experience has been.

-Carol   

[Seth Teel]

@Carol Donaldson

The concerns you raised are par for the course when buying wholesale real estate. There are companies large and small with almost the exact same business model.  All will require a non-refundable deposit (usually $2000 - $5000), most have a "transaction fee" or "admin fee" (usually $295 - $600), and all with require you to pay for the double closings costs unless they can assign the contract to you.  I would definitely ask if they can assign the contract. It's a much easier transaction for you and them.  

If you plan to buy from wholesalers you will need to get used to the "as-is" purchase and on refundable down payment.  This is just part of the business.  This is why it's important for you to make sure you do your due diligence prior to contracting the property.  Often times with wholesale deals, speed is the name of the game, so taking time to conduct lengthy due diligence is not an option. This is where educating yourself  and building your team becomes so important.  If you work with a good wholesaler or good agent, they should be able to help you make quick decisions.  

A lot of newer investors get hung up on the items you mentioned. I don't find any of them to be a big deal. The most important thing you can do is check their numbers. Is the ARV accurate? Does the rehab budget include everything needed to meet that ARV plus a 10% contingency? Does the price, rehab, and ARV meet your percentage requirements after holding costs, closing costs, commissions, hard money fees, permits, & other soft costs?

If your answer is "yes" to those questions, then it's a deal and there shouldn't be a worry about a non-refundable down payment...after all it is applied to the purchase price of the property and it is refunded if they cannot provide clear title.  This shows your intent to purchase and protects the wholesaler should you get cold feet and they're stuck losing their front-side earnest money, or heaven forbid, actually close on the property.  

When I was a full-time wholesaler most of clients were able to pull the trigger within minutes of entering the home, some trusted me enough to buy sight unseen on my recommendation, and some always wanted to get a contractor in there or run the contract past their lawyer. Most that fell into the last group are no longer "real estate investors" or they chose to purchase at retail prices from the MLS. There is money to be made buying from wholesalers, there is money to be made buying at retail off the MLS. It all just depends on your level of comfort and strategy. For me, I much prefer to purchase from wholesalers or directly from the owner. I like the exclusivity of it and feel I get better deals than those offered by real estate agents.

Lastly, if you are truly worried about this specific company, I would first check the BBB, and second ask one of their agents if they have any references.  Feedback good and bad will definitely be prevalent within your local RE community.  

I hope this was helpful. 

[Nick C.]

I've read their sell addendum Carol. It's very, how should I say this... seller friendly. If I was an attorney I wouldn't want my client to sign it. 

But I'm not, I'm an investor, and if they ever get a deal that I could make money on I would buy it.

I'd be more concerned with buying something based on their net potential figures instead of your own.

[Mike Makkar]

@Carol Donaldson, They are one of the bigger wholesalers around. Like most wholesalers, they over-estimate their ARV and underestimate their rehab costs. I'm on their mailing lis and occasionally I see good deals from them. I've never purchased any properties from them to comment on their added fees. My advise is, as a good investor, network with several wholesalers around and keep a pulse on the overall market as a whole. Occasionally you'll come across a good deal that you can capitalize on

[Adrian Smude]

@Carol Donaldson I have not purchased from them, but know people that have.  As state above, the main concern is doing your own numbers.  Hope things workout :)

[Ned Carey]

@Carol Donaldson  Wow cover both their and your closing costs - never heard that one before. 

As a wholesaler I sell on what I would call auction terms. The buyer pays all closing costs. Deposit is non refundable (unless I as seller  cannot close) If you are really a "Cash buyer" that having the cash to put down for a decent size deposit shouldn't be a problem. If you are a real buyer and know the game,you don't need contingencies. Look at the property all you want before you buy, but once you are under contract it's yours- no backing out.

If you are experienced these types of contracts shouldn't scare you because you should know the kind of deal you are getting. When you are new you may not feel comfortable with this and that is OK. It's better to pass on a deal then get stuck with a loser.

 Now I would make sure that the title company holds the deposit not the seller, I as seller prefer to be paid the deposit but I am OK with a title company holding it.

My biggest concern would be that, as said above, the numbers they give you may not be real numbers, You need to be able to evaluate the property on your own and not trust the numbers they give you for repairs and resale value, rents, expenses etc.

[Brent Coombs]

@Ned Carey, given the wording of your second paragraph (second sentence), I take it that you were being sarcastic when you wrote: "Wow cover both their and your closing costs - never heard that one before"?

It's just that, if so, your sarcasm may have been lost on @Carol Donaldson; maybe enough for her to want to continue jumping up and down about that?...

[Adrien C.]

As far as closing costs- it's negotiable. I have my buyer pay closing costs the majority of the time. I do this because I paid the closing costs on my buy. If paying the closing costs ($1050-1400 for a cash purchase with title insurance) is a deal breaker, I'll pay half or whatever to get it done. Typically I have enough buyers lined up for the property that I don't have to nickel and dime with an investor over stuff. 

[Ned Carey]

Originally posted by @Brent Coombs:

@Ned Carey, given the wording of your second paragraph (second sentence), I take it that you were being sarcastic when you wrote: "Wow cover both their and your closing costs - never heard that one before"?

It's just that, if so, your sarcasm may have been lost on @Carol Donaldson; maybe enough for her to want to continue jumping up and down about that?...

Brent thank you for pointing out something I should have made more clear.

 Actually no I was not being sarcastic. I have never heard of that before. That would be a non-negotiable item for me as a buyer. If you don't have title you can't sell it to me. Assign me the contract if you want but I am not paying to put you in title.

When I sell and say "buyers pays all closing costs", I mean they pay all cost for the transfer from me to them. I have never charged the end buyer for me to get into title first. If it is an assignment, the buyer pays whatever was negotiated in the original contract.

Reasoning from the wholesalers point of view. 

I want to know the deal is sold. I price things at a fair price that I know, if you  don't buy someone else will. 

So I don't want to mess around with buyers that are going to tie up the property and then not settle.  I honestly don't care if someone re-wholesales one of my deals. As long as it settles on time and I get what I bargained for. But I have more than once kept deposits from wholesalers that simply tried to tie my property up and then couldn't move it.

You are welcome to do any due diligence before you put the property under contract. I expect my buyers to be professionals and know what they are doing and get the deal done.

Do I make exceptions to that, Absolutely. I have helped many first time buyers, several of them BP members. I am wiling to help someone new navigate the complexities of a real estate transaction.  However I have little tolerance for knuckleheads that plow ahead not having a clue what they are doing.

Buyers point of view. 

As a buyer I negotiate the best deal I can. If it is not good enough, that's OK I just walk. There is always another deal down the road. If I have negotiated a good deal then I don't care how much the wholesaler makes. 

If I am buying directly from a property owner, I sometimes not only pay all closing cost but also back taxes, water bills etc. That way the owner knows how much they are getting and there are no surprises at the settlement table.

[Brent Coombs]

@Ned Carey, er, I don't get it. You wrote: "As a wholesaler I sell on what I would call auction terms. The buyer pays all closing costs" - but you were surprised to read that @Carol Donaldson, as a Buyer, "was to cover all closing costs (their's and mine)"? 

What am I missing? In Carol's scenario, I am assuming that Networth Reality are just being Wholesalers themselves, and have only got the property under Contract from the original Seller. How is that different from you being the Wholesaler? Cheers...

[Ned Carey]

@Brent Coombs  you probably were writing you last post as I was writing my last post.

The only part that surprises me, is the wholesaler expects the end buyer to pay for all 4 sides of a double close. At least that is how I understand it.

I consider it the norm in an investor to investor deal, that the buyers pays all the costs of one closing. That is how auctions work and that is what I expect to pay when I buy.

[Dev Horn]

Networth Realty is completely legit, started here in Dallas, run by Mark Bloom who had big time success here and has grown that business now to multiple markets.  If you're not going to drop thousands a month into your own marketing to home sellers, they offer a good alternative strategy.  Of course, you have to evaluate every deal on it's own merits, run your own numbers, etc.

[Mark Bloom]

Thank you Dev. I am glad you have had a great experience. We truly strive for that in every case. If I can ever be of any assistance please don't hesitate to reach out  

[Hugh Ayles]

@Carol Donaldson

We have done one transaction to date with Networth.   We are looking for our next deal and I am still using them.  In other words, we had a good experience with them.

As others have said, do your own due diligence (rehab budget, CMAs).  That is just a good practice as ultimately it is your cash on the line.

[Manesh Hardeo]

I've been with Networth Realty since before we were Networth dating back 12 years ago.  I have a few thoughts to share...

Wholesalers get a bad wrap and I do understand why.  Numbers are generally put together by an acquisition associate and can vary, but we try as best we can to provide as accurate numbers as possible.  As you can understand, we can never keep everyone happy.  It is our best interest to help support the investor to be successful -- we are not here to sell 1 deal and be done, actually in many instances we've helped newbie investors become full-timers.  

Look, this is a tough business and getting deals is NOT easy as I'm sure you know.  If at the end of the day we can provide a deal that you've assessed and you're happy with it, then that is great.  Terms are there so we can protect our fees in the middle.  At the end of the day we choose to be transparent with our costs and they are costs of doing business to provide opportunities (that are again very hard to come by). 

In my market, those know that if I believe in a deal and investors pass on it, then there are times we will do them ourselves. (See 832 White St that is completed and 1912 Vesta that I will be posting in the deal diaries section soon).  We believe in what we do 100%.  I'm not saying we're perfect...no one is.

I would like to extend a word to all the wholesalers that take it on the chin, well because there are so many newbies trying to learn the ropes.  Instead of bashing them...help them.  Educate on why or why not a deal is a deal.  It's hard enough for all of us to get these things as it is.  I think it helps us all if we can get more deals flowing -- there are plenty homes out there!  

I wish you guys all the best of luck and look forward to meeting some of you!

[Mark Bloom]

Originally posted by @Mark Bloom:

Thank you Dev. I am glad you have had a great experience. We truly strive for that in every case. 

We are also one of the only wholesalers, if not the only one, that will go back annually and compare our predicted ARV to the price an investors actually receives on the mls after concessions. For the past 4 years our investor/buyers receive over 100% of the predicted ARV. We are not appraisers, and we cannot always be correct on ARV, but we only put our best estimate forward, and we do double check the quality of that estimate to make sure it was solidly accurate. If I can ever be of assistance to anyone in this chain please don't hesitate to reach out to me.

[Carol Donaldson]

Hello All,

Very interesting conversation on this topic.  In working with many investors/wholesalers, I have never seen such a large non-refundable deposit on a property being wholesaled -   $1-2K is understandable with no inspection contingency.   My assumption is that the asking price already contains a $5-10K "finders fee".   Maybe that wasn't the case here.

The contract was not an assignment that was presented but a traditional contract, most likely they were doing a double close.  At that point I would have had to pay the entire closing costs on the purchase and resell the rehab.   Ouch.   

I did speak directly to several long term investors and they thought it was extreme too.  But each of us have our own opinions from experience.   I don't think any are really wrong, it's just how we want to do business.      I'm glad to hear that people have had a good experience with NetWorth.  

[Ramon Cervantes]

My two cents.. I spoke with one representative of this company as we walked through one of their deals and he informed me of the 5k deposit. This is reasonable only if you really, really, REALLY want the property! Some of the rehab costs were too low (central ac 4k but did not account for duct work), needed a new roof (not included in their rehab estimates), etc. This didn't bother me much; I had a feeling their estimates favor them a little more and that's cool IF you already know a little about rehab costs, ARV, and the current market in that area. To their credit, the representative took note of the things we pointed out and agreed there could be room to negotiate.

The one thing that really bothered me is that if you deal with any other wholesale company they will shut the door and never deal with you ever again. 

[Peter Schuyler]

If the ARV's are off, rehab estimates too low, high down payment terms, and double up on closing, I'm new to this, so this might be a dump question, but what value are they bringing, the search aspect of a deal that is not under MLS (retail)??

[Chris Pflum]

Carol, I am also located in Tampa. I've been working with them, and I have a couple things to note:

1. Even though they are a registered broker, as shared above, they clearly operate as a wholesaler. As we all know, wholesalers can be good for finding you deals, but you have to take their numbers with a grain of salt. It is no different with Networth.  

2. Do your own estimates and ARV calculation. The few deals I've analyzed from this firm are not surprisingly artificially low on the rehab, and artificially high on the ARV.

3. You will usually have a chance to look at the property before putting down a deposit, but don't count on scheduling your own inspection. Get good at knowing what to look for so that you can make quick decisions without having to wait for an inspector. If you aren't comfortable with that approach, I recommend partnering with an experienced rehabber.

4. Caveat emptor. The staff I've worked with there are professional, but once you go into contract on the property, all risk shifts to you. If they've fudged the numbers, you have no recourse but to either walk away from your deposit, or make the best of what you have. Do not, under any circumstance, count on appreciation to make up for smaller than expected potential profit.

If you don't have time to bird-dog your own deals, these guys can be a great asset. Just make sure you do your due-dilligence so you don't get burned.

[Trevor Christopher]

As a cash buyer, I've been trying to work with Networth in my local market. It's been a nightmare so far, and why I keep beating my head up against the wall with them is beyond me. First, they required me to use their hard money lender and to get pre-approved with them before they would send me their properties. lol. I guess they don't know what cash means nowadays. I told them thats not gonna happen, and may be in the gray area of mortgage steering. They back peddled on that of course, and then said that I could use my own money. Soooo, now, after asking them to send me what they've got as far as current inventory, I happened to mention to them that my closing attorney is holding earnest monies to be labeled and guided as I see fit. Well, much to my surprise, they then told me that, ohhh, I have to use their closing attorney too. Apparently people at Networth think investors were born last night. Obviously this company is up to a lot of shenanigans as I can see in these threads - and - legal or not, I wouldn't deal with them at all. Seems like you can find much less risky circumstances through other wholesalers & flippers. I have to look in to RESPA Laws, just for my own curiosity on this one too.

[Account Closed]

every deal they capture, the managers buy if its an actual deal.

They have been in business FAR too long to still be using "agents" who aren't even agents and turning them over constantly. It must be tiresome to have people call your bluff on your bs numbers day in and day out.

Also, they use bandit signs and CONSTANTLY are reaching out to investors (unsolicited) online to get newbies.

Why? If they had actual deals, and sell to investors then they shouldn't need to still spend half their time or more marketing to new investors. They are at "investor clubs" and all that crap all the time. Why? If you have as many deals as they claim they do then they would NEVER need to market to investors, ever.

[Ken Calvin]

I've been talking with my NetWorth of Tampa contact since July and just got my first property purchased. So far, I can confirm a lot of the things people said here: Their rehab estimation is too low, contracts/addenda favor the seller 100%, ARV appraisal is slightly lower than NPO (aka their ARV estimation), they got you one way or another once you're in contract. I am very pleased with my NW contact though; She answers her phone every time or calls me back right away, helped me find contractors and get bids, helped me find property managers, help me understand their '212 Loans' program, so I feel like my hand is being held through the whole cycle. Also, I'm investing from out of state, sight unseen, so I understand that this is extremely high-risk. My NW contact is no way obligated to help me and I contractually have zero recourse if she decided to disappear on me. But if this ends up working out, it would be awesome and I'll be asking NW for more.

[Xiao Huang]

Quote from @Ken Calvin:

I've been talking with my NetWorth of Tampa contact since July and just got my first property purchased. So far, I can confirm a lot of the things people said here: Their rehab estimation is too low, contracts/addenda favor the seller 100%, ARV appraisal is slightly lower than NPO (aka their ARV estimation), they got you one way or another once you're in contract. I am very pleased with my NW contact though; She answers her phone every time or calls me back right away, helped me find contractors and get bids, helped me find property managers, help me understand their '212 Loans' program, so I feel like my hand is being held through the whole cycle. Also, I'm investing from out of state, sight unseen, so I understand that this is extremely high-risk. My NW contact is no way obligated to help me and I contractually have zero recourse if she decided to disappear on me. But if this ends up working out, it would be awesome and I'll be asking NW for more.

It's been a few years, how has your experience been with them since? Did you take on more deals with them?