I was thinking about buying a house owned by the bank. The house was first for sale for $245 and they came down to $230, i offered them $207k and they took it. Now the problem starts…when i did the inspection report, the guy found some problems with the house. Flooded basement, termites, some wood in the basement is destroyed, floors need to be sanded and need major TLC. House of that size go for about 250-300 in that neighboorhood. This house was built in 1954 and it has some improvements (nice windows, roof is in good condition, great neighboorhood, and central AC.
I spoke with the bank and they knocked off 2k so the new price is $205. Is this a good deal??
The RE lady called a few contractors and the price to fix the flooded basement is about $2,500 (or so he said) and the termites about $800.
I am super confused because she called this people herself.
This will be an all cash deal if I go with it…
I need your best possible advice since I am a first timer :help
Did the inspector gave you estimates about cost of repairs. When I did my inspection on my personal home I purchased few years ago, I was there with the inspector through the whole inspection and I asked a lot of questions - from how serious he felt the problem was to how much to fix it. I learned a lot about the problems in my home. If you were not there or did not ask for those estimates, you may still have a chance to call the guy and ask if he remembers the inspection and if he would be willing to give you some estimates.
Another option is to find a general contractor and ask him to take a look at the house with you and give you an estimate for repairs. Ask him to be as detailed as possible. You can ask for referrals from friends or worst case open your yellow book.
I believe you will need to do it quick depending on how much time you have left in your inspection period. If your inspection period is close to expire, you can always submit a list of repairs to the bank asking them to make the repairs - they will more than likely come back with no. But you would gain some time to complete your due diligence. I hope this helps. Good luck!
Get your self a contractor that you can trust to go over the property. Take his estimate and double or triple it. Then go back to the bank with a letter of explanation that there all these unanticipated problems and that even so you will still consider a purchase, however, at a greatly reduced price.
Don’t get attached to the property. The bank needs you much more than you need them. I always remember a saying my grandfather told me when I was pining about a lost love. He said “There is always another street car and there is always another woman.” This also goes for deals.
If you are going to do a deal, make it a good one. Especially these days as there are plenty of other deals out there.
thanks for the good advices guys!
I emailed the RE lady (who probably wont be happy considering she keeps pushing me to sign the contract :deal ) But I am going to listen to you guys instead because I know all she wants is to make money! Dont we all? So I said to her that I didnt feel like i was getting a great deal with this property considering 1) I am paying cash 2) needs LOTS of work 3) for the size of the house, its about the average price of a ‘normal’ home. I also said that if they werent willing to come down another 3k (at least) we could keep looking because I wanted a GREAT deal.
Lets see what the bank has to say to this! The listed price was $230k so they might not even consider lowering it even more but they can keep their house, and i’ll keep my money and keep looking for deals!! :beer
So the agent isnt happy because i asked for another 2k off. She is talking about they might not take it, they are going to sell to someone else and yada yada yada…
I said to her, well then im sure i can find another one :rolleyes
She is going to ‘try’ but doesnt think i can get any further discounts because i dont have any written quotes! :banghead She is really getting on my nerves :argue
First, List price is irrelevant. Go to your counties public records and find out what the bank got the property for at auction. Next, determine what the comps are for your house (comparable sales and comparable listings, within the last 6 months and within about 0.5 mile radius from the property). Any realtor can help you with this, or you can use Zillow to get a ballpark (note that there is a lot of discussion about the accuracy of the figures on Zillow’s website). This is a good estimate of the Fair Market Value (FMV).
Next, get a good estimate from a contractor on the repairs. Add at least a 20% contingency to that figure.
Never pay list. I use FMV x 0.7 - repairs to give me my max. allowable offer. I also factor in my cost of money, and, if I’m going to hold and rent the house, I factor in my cash flow requriements to determine the price I’ll pay.
In my opinion, you should be in the $160K to 180K range on this property, assuming $245K is the fair market value.