I have been researching properties that are going to be put up for public Auction for tax arrears and have found one that is also for sale on line. I am thinking that this is a good opportunity to buy for a reduced price as the owners are facing having their property sold by the government in three weeks.
What does having this informatin mean for me as a prospective buyer? The asking price is 330,000 and there is another property on the same street a few houses down that is listed at the same price. What kind of offer should I give?
A lot of folks pay their taxes off before the sale with loans from relatives, tax refunds, etc. Do not count them down and out just yet. Knowing they are in trouble gives you an opportunity to help them and still make some money for yourself. I like to find out what the debt is that they owe and work backwards. If they owe $330,000 you may want to make an offer to lease/option and hold for appreciation and have the back taxes be your deposit. Personally I would not do this type deal because of the cash flow but in high appreciating areas it may be worthwhile.
If they owe $200,000 I would offer to pay their loan off and give them $5000 to move to another house. You could possibly do a sub2 also.
It is better to know more about their financial situation as this will give you more insight into making an offer. I just like to talk thru the possibilities with them and come up with something we can both work with.
If the place needs work and you are getting a hard money loan you should offer no more than 70% of the retail value once repaired less the fix up costs.
The tax sale is not necessarily an indication that they will loose their property, it is all-dependent on the type of tax sale, rights of redemption’s and so on.
Looks like we have two homes with an asking price of 330k, but this does not determine the market value of the subject property. You will need to seek out three or four recently sold comparables in as close proximity and likeness of the subject property to determine it’s approximate market value.
I also suggest you do some title research to determine if the encumbrances outweigh any potential equity.
You will need to determine what necessary repairs will be needed to make this property saleable in the retail market.
You need comparables
The three key areas’ need to be completed before you can even consider an offer price.
Your last key will be your customers need’s and motivation.