Hello group I have a question I have a realtor that has an Reo bank property. She wants $7500 for the property. What would be the next step in the process and any tips or suggestions when dealin with this type of deal.
This is a very broad question. Before submitting an offer, you need to know the answers to the following questions:
- Why is the property so cheap?
- What is the condition of the property, including mechanical, electrical, foundation and roof?
- What is the After Repair Value (AVR) or the value of the property after you fix it up?
- What will it cost you to repair the property? (You need accurate numbers here.)
- Is there money to be made here? Just because it is cheap does not mean that it is a good deal?
Okay, let’s say it really is a good deal and not a money pit. The next step would be to figure out how to pay for it. If you do not have cash, realize that the amount is too small to get a mortgage. A personal loan or taking equity from another property is an option.
If you got the free cash, then you will need to submit an offer to purchase. Your real estate agent can draw it up. I would make it contingent on property inspection.
Hey thanks a lot for the info and advice … Another question say the realtor is sending me deals where should I look for as far as any bad debt that wouldn’t make it a good deal if the home is in foreclosure . Like if it has unpaid water ,light ,gas ect …@campbellsimon
Part of your due diligence should include an initial title check which you can complete yourself. Go down to the county (or access their records online) and check to see what outstanding liens are recorded against the property (including construction liens).
You should also verify with the taxing authorities to make sure that the property taxes are up-to-date or what is owed plus interest and penalties.
A quick check with the local utility companies can reveal if there is unpaid utility bills - but at times they will go after the person on the account rather than transferring the expense with the property.
I have come across multiple properties that even if I got them for free I cudnt make a profit., The houses are in such bad shape that a total rehab is needed, which woud actually cost more than the houses are worth.
However, these can be great prospects for wholesaling. Some of these rehabbers have left over material from other jobs and they use really cheap labor and they can make it work, also if they are going to rent them out they can choose to use cheaper materials and cut corners.
However, realtors dont understand wholesaling and assignment of contracts, You may have to educate them, but I have found that to be a futile effort. Also the property being a REO, Good luck.
First find out why the property is so cheap. It could be because it is on the verge of being a tear down. You should go out and evaluate the property yourself so you can see firsthand what condition the property is in, or you can have someone you trust go for you.
If you are unsure how to evaluate a property. Get in contact with a contractor and have them give you an honest opinion on whether the property is salvageable or not.
I have bought properties in some of the worst conditions and still was able to wholesale the property for a profit to my end buyer.
It all comes down to your end buyer and if he feels there is enough room in the deal for him to be profitable.
Hope this helps :smile