Need advice on Terms of a Deal

[Joel S.]

After searching for a real estate agent in Houston on Biggerpockets I keep getting responses from people from New Western Acquisitions. They are a wholesaling company and my understanding is that they work in Houston and Dallas. They also sent me a prenegotiated contract that says they do not work with conventional bank financing, no/option/inspection periods or financing contingencies are allowed (they also check a box in the contract they are not required to furnish the notice of properties condition under Texas code and there are no inspections for lead based paint), and title company is at sellers choice (buyer pays).

They also require $5000 down payment is the form of certified funds to be delivered at the time of contracting.

I don't know anything about this company, so I am doing my due diligence. I welcome any comments about what someone thinks of these terms.

[Kurt Carlton]

We are the main lender for New Western and have been connected to them since 2009. Their comps are usually pretty accurate. When a borrower sends me a contract on a property they want me to lend on I'm always relieved when I see its from our guys at New Western because I know we'll be close on value. I find that deals coming in from random wholesalers and Realtors tend to be way off much more often. I got one today that the guys Realtor had worth 300k and I comp'ed it at 160ish. When I asked for the CMA there were comps from more than a mile away and they were from 2011 and 2011, yikes! New Western typically always provides comps that meet appraisal guidelines, and they usually share access to comps with you so that you can see everything in the area for yourself.

I understand the initial reaction from the more traditional real estate agents in previous posts. Because they only cator to investors the New Western model is truly backwards by comparison to traditional real estate. It sounds crazy to not get a sellers disclosure to a realtor but you have to realize that 90% of New Western's deals are wholesale deals and they have never lived in the house, maybe owned it for one day, it's not possible to provide a sellers disclosure because they have no longterm knowledge of the condition of the property. This is also why banks are exempt from providing a sellers disclosure when they sell a house they foreclose on according to Texas Property Code.

As for the $5000 down and not offering an inspection period the reason is not actually New Western's fault and it would be horrible for the investors buying their properties if they didn't have this rule. They have to make sure they sell a good product, and the only way to do that is to make sure they sell the deal at a price where it has equity in it for the investor. If they allowed an option period and a refundable small earnest money payment then all of their properties would get snatched up in minutes by petty wholesalers trying to flip them and the end buyer would end up with a truly terrible deal!

There is a never ending supply of people looking to talk poorly about new western's deals. 90% of them appear to be independent wholesalers that get frustrated competing with them and lash out. I gotta believe it's hard to stay off of a couple people's sh*t list when you sell almost 1000 distressed houses per year. The reality is almost all of New Western's clients do well, much better than average. I know this because they track the market activity on MLS after they sell the deal to see what the investor resold it for. Call JD Castillo [REMOVED] in New Western Bedford, he has a binder full of investor case studies where his clients made 30-40-50k per deal, he gets all of his business from referrals! I feel like most of the negativity comes from people who have never done a deal with New Western and do not have a fair understanding of the model, or else they are a direct competitor to them and want to take some shots, or they simply were a client that managed their rehab or resale poorly and refuse to take personal accountability. All the broker can do is sell you the house, they can''t control what you do with it after that. Don't get me wrong, it's too big of a company to avoid mistakes entirely, but I've seen first hand how fair the managers treat clients when the company has genuinely make an error, and how much effort goes into ensuring that the clients are successful. All in all I think their properties are about as good as they get in the market place, especially because they have the set pricing that prevents inexperienced investors from bidding against each other until the equity's all but gone.