Hello everyone, I have a deal I’m trying to work. A foreclosure that"s been on the market for 5 mos. and the default amount is 377k. The bank has reduced down to 323k. The house needs approx 25k in repairs & improvements. The comps range between 320 - 370k. I am putting in an offer of 275k, which will probably be refused. By the way the house is 2 years old, previously flooded basement, mold remediation has been performed, mood covered floors w/ mildew smell. After repairs and commissions there is very little room for error. What do you think about this? should I offer less or what? How can I do this w/ NMD (no money down)? Be patient with me this is my first foreclosure deal.
At your offer price, it is not a good deal. Even if you use the higher comps of 370k, you should have a max offer of 234k.
(ARV (370) x .7 minus repairs (25) )
For your first deal, you don’t want something with little margin for errors, because you will have some.
And that is a fairly large gap on comps - a 50K difference. Can you narrow down better comps?
pass…plus next time mention where the property is located,that is a MAJOR factor in wheeling and dealing…i think some investors are forgetting that very important point…especially in these times…its not just about the numbers,the address is very important…there are some towns that will be tanked for a number of years before they come back,also have your buyer lined up in these times!!!
my 2 cents
Robert A. Doncaster, Jr.
Import/Export Entrepreneur & Investor
*** DO YOUR HOMEWORK ***
Chicago Illinois USA
& sometimes Salzburg, Austria
Thanks guys, the house is in lexington park, Md. I think if I put less money into it I maybe able to make some money on the deal. The problem is that you can purchase a newly built home with stone front for less approx 2 - 3 miles up the road. This house has siding. I think that I may pass on this deal or go back to the table with the bank. I am trying to learn a method or formula to use to figure out my bottom line when looking at these homes. Can anyone help me with that?
Whatever you do, don’t be a motivated buyer. If the numbers don’t work, there will always be deals.
If I read your post correctly, there is still mold in the property? If so, you can use this to your advantage on a deal like this. You might be underestimating the potential cost of repairs. All that matters is what you can get the BPO to come in at and what you can re-sell it for. Despite the fact that this market may be tanking, there are always buyers at the right price. The question is whether the house is ugly enough for the BPO to come in low enough for the bank to justify selling it cheap. I recently did a short sale flip on a property in a really run-down urban area that needed so much in repairs that the bank went with a land value appraisal. So I actually paid more than the bank would have accepted, and I was able to find quite a few eager buyers at the price I was able to sell it for. However, it was a long negotiation, and the homeowner filed a bankruptcy, which provided us more time to negotiate with the lender. Sometimes the best short sales are in the worst areas of town because the lender figures they are going to have a really hard time selling it. Just document everything to the lender (crime statistics, police reports, locations of nearby sex offenders, etc.)
THis sounds more like an REO?
Anthohy is this an REO?
Yes this is an REO. I turned down the deal because they returned with a high counter offer.
Sounds like a good move! They’ll be other deals.