True story of a Realtor saving clients $121,000
I'm not a fan of wholesalers - especially those that are unlicensed and make their living by stealing equity from sellers who are uninformed or so desperate that they have to take a bad deal to get out of a jam.
Well, here's a real life story of one of those situations. I'm the Realtor and let's call my clients Jack and Jill (not their real names). They're a nice young couple, just starting out in life with a premature newborn and 2 1/2 year old toddler.
I met Jack and Jill a few months ago. They came to me as buyers who were looking for their next home. In the course of conversation, I asked them whether they were renting or had a home to sell. Jack responded that they had an offer on their current home that they were about to accept. It was from someone who had contacted them directly, interested in buying their home (a wholesaler).
I probed a little further. They had a 3 bed, 2 bath ranch in West Plymouth, MA (where I also live). It has 1,471 sq ft, an attached 1 car garage, 0.47 acre and is in a nice quiet neighborhood on a side street. It had granite in the kitchen, hardwoods throughout and was overall in decent shape. Plus, West Plymouth is one of the nicest parts of town. The actual home is pictured below.
It did need some work - there was a dilapidated in-ground pool that needed to be demolished, filled in, graded and seeded (we got a quote for $3,500 and credited the eventual buyers $3,000 at closing). The back screened in porch needed paint and the door removed or repaired. The backsplash in the kitchen was missing. It needed a replacement or at least paint to cover the old glue. The carpet in the partially finished basement smelled of cats.
All in all, no more than $5,000 in repairs. Sadly, the sellers were not able to do the work.
I know the market here like the back of my hand. This is an entry-level home and those are in a white-hot market segment. In spiffed-up condition, it should sell for $360,000 - $370,000. In this condition, $340,000 - $350,000.
The wholesaler came to their home and bamboozled them to the point that they believed that their home was a dump (it's not) and that he would make them the best offer that they would ever get.
$223,000.
Fast forward - I ran comps for them, and the numbers revealed exactly what I thought they would. We should list at $350,000 and expect to close between $335,000 and $350,000. Sure enough, we closed last week at $347,000 with a $3,000 concession at closing for the pool. That was a net of $344,000 in as-is condition.
I got true market value for my sellers which was $121,000 more than that lying thief of a wholesaler almost convinced them to take.
That kind of a loss would follow them for the rest of their lives. They would not only lose the equity on this sale, but every subsequent home purchase would be that much less in value. And as prices rise over time, that's $121,000 that's not growing in value.
It's true that they were not well educated on market values, but they made one mistake. They believed the wholesaler's lies.
This is why Massachusetts and many (if not most) other states have licensing laws in to protect the public. Licensed real estate agents cannot legally screw a seller and then instantly resell for a profit, because that's virtually indistinguishable from a net listing. Plus, we are required to deal fairly with the public.
But wholesalers flaunt these laws everyday. There's virtually no enforcement here in MA, though te Board of Registration has agreed to review a test case.
I'm glad that I was able to stop this particular fraud - and yes, to make a commission too - but I wonder how many others are getting screwed right now as you're reading this.
