Good deal or Bad deal? Okay so this is the first contract Ive got. This house is going into foreclosure in 20days. I have it on contract for 112,000 it has been appraised @ 139,000-149,000 my real estate agent says one could get 160,000 with some cosmetic repairs. The owner owes 69,000 plus 7000dollars in foreclosure fee’s total of 76,000dollars give a take a few grand for other expenses. So basically that’s 36,000dollars that is going to the seller. I assign it for $5000 making the property 117,000. Is this a good deal for an investor? I would think so but I have doubts now. I have one investor that is looking at the property but does not seem very motivated into getting it. Good deal or bad deal? am I going to get burned and possibly sued by the seller? any suggestions on what I should do?
I would talk with the investor on what are their concerns are. I would do a FMV (Fair Market Value) on the property and compare with the houses that are sold on the block with a realtor. You always want to do what is best for the seller. It doesn’t sound like you are greedy. $5000 on the first deal is great. It gets your feet wet. When you get more comfortable you will be making much more. It seems like there are concerns with the investor find out what they are. If the trouble is money or can’t qualify through a lender or bank refer them to private party lender or Hard Lenders. I hope this helps. God Bless you Tom
So you say its present FMV is 139-149K and its ARV (after repair value) is 160K. Fair market value means nothing as your offer is never based on FMV. But ARV does mean something to a flipper. First things first you need to know who you’re selling this property to. Is this property a rental or a flip. Landlords value property based on rent. Flippers base it on ARV and what kind of spread they have. At that price for the house, rents would have to be really high in your area for that house to work as a rental property. So I assume you would determine value using the MAO formula.
You did NOT mention how much it will cost in repairs to get it fixed and ready to sell at 160K. You HAVE to know that. Your ARV also HAS to be accurate and based on factual info. NOT A GUESS from a realtor. BUT ACTUAL FACTUAL info on comparable houses near by and what they sold for. You are clearly doing this entire deal in the dark and I suggest you read this so you understand real estate valuation. Once you do, you will know exactly what that house is worth. If you provide the needed info, an accurate ARV and repair costs, than we can help. If a landlord is buying we need to know rent amount and repair costs.