Am interested in Purchasing a REO property that is located in my area. The house was on market for 5 months and taken off now its back on the market again by the bank. The price is now 229K and it needs work online comps from BOA, Quicken, Ditech place value from 249k - 324K. The question I have is how should I go about pricing and making my offer ? Should I estimate amount of work needed + add my holding costs in and amount of any oustanding taxes/liens. Then I subtract that amount from price I think its worth (or feel comfortable offering) is there anything I am missing here ?
How does the inspecition process work am contacting banks to get information regarding financing now ?
Is there anyone that may have any suggestions and/or advice to move this along and direct me on anything I may have missed. Thanks in advance.
You should first define what you would like to do with this property. Do you want to buy, fix and sell? Or do you want to buy, fix and hold by either renting it or living in it? Determining your intent for the property will help you decide what you need from it or more importantly what the deal will allow you to pay for it and still be able to make money.
The next step would be to get some GOOD, LOCAL market value opinions (appraisal from local appraiser or CMA from broker) automated info obtained online is a good starting point but unreliable. The appraisal is going to be better info but more expensive. If you get a CMA from broker use recent prices from actual closed sales. Active listings and under agreements are good additional info but until a property closes w/ a factual sale price it means nothing to market value. I would consider getting both and ask them to provide opinions “as-is” as well as after you’ve done the work you say it needs - you’ll have to define this for them.
Once you’ve done this you have your starting point. Now back out your costs (aquisition, holding, renovation etc.) from your end selling price. This is your projected profit, make sure the number is large enough to justify all of the work. The financing you obtain can help make a little more on the deal but you make your money when you buy it so before you make an offer determine the absolute highest you’ll pay that will allow you to still make enough money and don’t spend a penny more.
You will have to determine the banks policies on how to submit the offer but if a broker is involved they will likely tell you what you need to do. Make your offer based on what you need, not what the bank tells you you need to do. In your offer provide for mortgage & inspection contingencies but be prepared for them to tell you they will not accept an offer with any contingency.
If you are able to get an inspection, hire a licensed inspector or bring your contractor with you to inspect the property.
I use zillow.com quite a lot to get a real rough and dirty idea of what a house is worth, to see if it is even in my ballpark. If its close enough to bear further scrutiny I look on the MLS for comps as close to the target as possible in location and size, I try to shoot for 2 months back only and go back farther only in areas where there aren’t many recent sales (small towns). With the falling market the farther I go back the lower I adjust my estimate down, I try to make sure there is an adequate buffer to keep my guesstimate as close to REAL numbers as possible. I’m no pro but I try to be as accurate as possible and when I have to estimate I estimate DOWN not up, when you guess low you may just make more money than expected by when you guess high you have the chance to lose money.
Go look at the property with a realtor since the seller paid commission is already calculated into their listing price. When you check it out you can get a good feel for work needed and make your decision based on that. Buying from a bank is the same as buying from an individual. You can structure your offer as you wish and offer as you wish. Inspect and don’t offer too much…
Of course you can, you can offer one dollar too but it doesn’t mean the seller is going to look at it. Most banks have specific contracts and don’t allow addendums or changes to be made by the buyer.