I am doing my first deal and it’s an REO listed at 94k with a realtor. The property value is around $125k. The property needs about $25k in rehabbing. Should I shoot a lowball offer in the 60k range to the realtor? I know that I would have to give them a POF letter to make an offer. I am looking at hard money lenders right now. Will they give me the POF letter if I have a buyer already set up? Any suggestions? Sucks to be new but I want to dive into this one.
How long has it been on the market? What type of neighborhood is it? What are the REO’s selling for in that area?
It never hurts to shoot an offer over. You may want to wait till the end of the month if you don’t think that the home will sell. Asset managers get a little antsy at the end of the month to clear out inventory. I have picked up some of my best deals that way;
If you already have an end buyer, some private funding (cheap) will let you write your own pof letter no problems
The property has only been on the market for 2 weeks so I do not have a ton of leverage there. I am thinking I should wait more towards the end of February to put in an offer. I imagine a low ball offer would get rejected immediately right now. How long do you usually wait to put in an offer on an REO? Maybe 3, 6 or 9 months?
In these current times? I would lowball everytime. Nobody knows what kind of day the realtor or AMs are having. The agents are obligated to present every offer by law so if you have to make ten offers so be it. I know of investors who are getting deals at 30 cents on the dollar!
You said the property is worth $125k. Is that at present or after rehab. If its after rehab then you definitely have to make a low enough offer to make money. If its worth that at present what would it be worth after rehab? Be sure the comps you’re using to compare are similar or that you adjust them accurately to get a real value.
Be careful on your rehab estimate. $25k is a lot for a house worth that low of a value. If it needs that much work you may be missing some other items. If you’re looking at new roofs be sure you get a good estimate from a certified roof before you estimate it your self. The same goes for termite work and other large ticket items.
Writing your own POF probably won’t fly. Most banks want it on a lenders letter head.
Are you working with your own agent or going through the listing agent? It’s best to have your own especially if you are going to do more of this type of investing. Interview several of them and get one that will work with you instead of telling the offer won’t be accepted or something else in a negative vein. A good agent can be of great help to you.
donrock