Putting a bid on a REO home, financing question

Financing, Hard Money Lenders, Private Money
1

This will be my first deal if it is accepted. I am wanting to put a bid on a REO home that I have found. Bank has it listed for 191,900 and it needs about 25,000 (I rounded it to 30000 just in case) in repairs (ARV 200000 - 205000). I plan on offering 95,000 but I don’t have the money for the proof of funds. I have descent credit but I am over leveraged because we bought into a business.

I have looked into the hard money lenders but I don’t want to pay the monthly payment for interest. I would rather have no payments and then pay off the loan when I sell it. Since this is my first deal I wouldn’t mind having a partner and spliting the equity.

Or, would it make sense to use hard money (95000) to buy the property then immediately wholesale it to someone else before the first interest payment is due?

2

Just get it into contract and find a buyer for a fee :slight_smile:

Hell, once you get it in contract call me. I know someone who’d buy it and I’ll wholesale it to them.

3

From a financing standpoint, if you decide to use hard money, there are programs that allow for a 6 month deferred payment so that you can minimize out of pocket expenses during the rehab period.

If you credit scores are => 640, there is a conventional rehab loan program that allows for 80% ARV, a high debt to income allowance (as high as 50), no min./max. loan size and can be used on SFR, duplexes, triplexes and fourplexes.

Hope this helps.

Regards,

Scott Miller

4

If your numbers are correct, you plan on offering 49.7% of what the bank wants…good luck with that! I’m thinking that the possibility of the bank acceopting such a low offer is remote…

My opinion…

Keith

5

I used to think like that until…

True Story;
In early June '05 I started looking into REO’s.
A broker from Colorado Springs sent me an email about a 4 B/R
2 Ba modular with two cbs out-buildings, a garage with a 1 B/R apt above and a barn all on 40 acres, the bank listed it for $119k,
appraised for $127K

I ran the numbers and made a cash offer of $73K :slight_smile:
after about 9 weeks (mid Aug) the broker sent another email…
“We’re sorry, but your offer was less than the owner had expected so they cannot accept it, however they have reduced the price to $114.9K Perhaps you would like to reconsider and submit another offer”

So, the very next morning I submitted another offer… $73K :slight_smile:

This time it was late October and I’m getting hammered by hurricanes
in S. FL. when the next email arrives…
“We’re sorry, blah, blah, blah, However, blah, blah $109K,
Perhaps, blah blah, blah”

Now I’m thinking, I gotta be the only guy looking at this property, so I carefully reconsidered my options and submitted an offer…
$73K ;D

a couple of weeks later, I close on another property up in Arvada and went to work on rehabbing it and actually forgot the ‘Springs’ property.

In May '06 almost 1 full year after the original contact, I signed up with Williams & Williams online auctions and was looking throuh some recently ‘SOLD’ properties and what do you think I found…

You got it… The 40 acre ‘Springs’ property! :-\

Now, guess what it sold for… come on, take a guess!!!

Give up?? a whopping $41.5K :o

There are two lessons here;

  1. Never think or say “I doubt…” “They won’t…” or anything even similar
  2. Once you make an offer STAY ON TOP OF IT never take your sights off of it until you see the ‘SOLD’ sign and even then, question it! :cry:

Keep Hunting
Investor Guy

6

I don’t think I said “I doubt…They won’t…” …I believe I said, “I’m thinking that the possibility of the bank acceopting such a low offer is remote…” – in fact, I know that’s what I said.

  1. That was then, this is now.

  2. It’s possible that they might but I think the chances are remote…it’s possible that I’ll sprout wings and not have to buy any more airline tickets but the chances are remote…

  3. They didn’t sell it as an REO for 50%, it went to auction and netted $41.5K…they turned down your offer for 61.3%…“I think it’s a wonderful story (and you tell it so well…)”, but it’s apples and oranges!

Keith

7

Okay,

If You’ve taken this as an insult in some way, It really wasn’t meant that way.

You’re are 100% correct, it did not sell at the 61.3% I offered… so it went to auction… so clearly my offer could have at 50% or perhaps even lower. My guess is that it wasn’t really the price but the broker.

remember the old saying… “If you’re not embarrassed by your offer, it’s not low enough”

I never brag about all the great deals I’ve done, there’s enough high priced guru’s doing that already.

Then or now, apples or oranges, mistakes are still mistakes
anytime someone can help you avoid them… take the advice.

Keep Hunting