I’m working on what might turn out to be my first deal. Bare with me, I have a ton of questions.
The house I am looking at is a SFH in a fairly good neighborhood. I know the area well as I lived there previously for 15 years. The house is in foreclosure and was on the sheriff’s sale block however did not sell. As far as I can tell it’s now back in the hands of the bank, Wells Fargo.
The house was apprasied at 120k by the county court (outside inspection only). My feeling is that with the right work the ARV would be somewhere around 150 - 160k. Here goes my questions:
Who do I work with / talk to in order to make an offer? Do I just call up Wells Fargo and say I want to buy this house?
How do I come up with a reasonable offer? Of course I don’t want to pay 120k. I’m guessing there will be about 15k in work to put in to get up to the ARV of 150k.
Is there any way to get in the house to see what the inside looks like before making an offer?
What’s the best way to finance a property like this? Ideallly I would like to finance the cash needed to rehab.
My end strategy is to rehab and sell, but if that doesn’t work my backup plan would be to rent it for awhile. I need to see if the numbers work both ways. I estimate the rent to be about 1000/per based on others. I should mention that I have around a 625 FICO, great income, but currently two mortgages (one is my primary residence, the other is a rental where there isn’t much positive cash flow yet but I break even on the mortgage, don’t ask lol). I have a few thousand in cash, but looking to minimize my out of pocket costs.
I’ve been lurking around here for awhile and really appreciate all of the good advice. If you have any clarifying questions please let me know.
If the property went to the bank - they are likely now to list with a realtor. You need to search a little and find which realtor ends up with the foreclosures in your area. Most times they are handled by one or 2 offices in an given location. Wells Fargo is unlikely to deal with you directly, but they may tell you who they will be listing with.
2. How do I come up with a reasonable offer? Of course I don't want to pay 120k. I'm guessing there will be about 15k in work to put in to get up to the ARV of 150k.
What's your exit strategy? Are you going to fix and sell, or fix and rent? You can't guess at the repair amount and make a good offer, you have to know. First, get comps in the area of what has sold in the last 3 months that are similar to this house. Many people use a formula of ARV minus repair and holding costs x .70 to get the maximum offer. So if your house is worth 150 ARV and needs 15K of work, your *max* offer should be 94.5K. Go for less in this market. You want to under price the market a bit to sell quickly.
3. Is there any way to get in the house to see what the inside looks like before making an offer?
Once the house is listed with a realtor, you can schedule and appointment to view the inside. That way you will be able to make an accurate assessment of repairs.
4. What's the best way to finance a property like this? Ideallly I would like to finance the cash needed to rehab.
Again, this depends on your exit strategy. You could do hard money, but not if you are going to keep this as a rental. You can do conventional financing if the property is in livable condition, but you will need to come up with repair money on your own. You could also do a rehab loan through a bank.
I would speak with a mortgage broker to see what's available.