Bank Owned Property - Looks Like A Good Deal???

[Akinwale 0]

Hey Everyone,

 

Hope all is well.

 

Quick question. I located a bank owned property that they are asking $18,900 for a 2BD 2BA. Its quite old though 1888. WOW. Not sure of the extent of damage or work needed, if needed. But my guess is yes and I would safely estimate $15K of rehab work. The property is assessed at $51,100 (city assessed). I am not entirely sure about the comps in the area and would have to find that out..(DOES anyone have a direction they can point me in to find out the comparables in the area? I normally compare the properties I find to at least 5 comps. My goal was to get the property under contract and locate a rehabber/investor that would be willing to take the contract assigment. What should I offer on this propert, or what would any of you offer is all was good....? I was thinking like $10K or less. more like $6-$8K then figure in like $20K rehab costs MAX. So maybe I can assign the contract for lets say $2-4K. So the investors total costs would be around $25K-$32K..Is that enough of a spread for them?

 

Thanks,

 

Akin

[-Tony- 0]

Akinwale,

Call a realtor and get a cma, this is a REO so it would most likely be sold by an agent. the bank pays there commission anyway. Although most banks will not take an offer "and or assigns". what if you can't flip it do you have the ability to make good on your offer? It seems it is hard to get a loan for less than 50k on real estate now-a-days, that might be another deciding factor. Just some food for thought, look at all the angles.

[Akinwale 0]

Akinwale,

Call a realtor and get a cma, this is a REO so it would most likely be sold by an agent.  the bank pays there commission anyway.  Although most banks will not take an offer "and or assigns".  what if you can't flip it do you have the ability to make good on your offer?  It seems it is hard to get a loan for less than 50k on real estate now-a-days, that might be another deciding factor.  Just some food for thought, look at all the angles.

<{POST_SNAPBACK}>

 

Thanks Tony...

 

Very true. It is a REO sold by an agent. After driving past the property I dont know if its the best area to concentrate on. I will propbaly pass it up.

 

I DID however find another property that I think would be a much better profit. The asking price is $109K, city assessed at $141,900. I looked at some of the comparables in the area (found 3 homes on the same street that were sold at $120K-$130K in 2001 & 2003.) I assume that there will be at least $10K rehab work. I was thinking of offering $85K or so for the property. So with the purchase price and rehab costs my total expense would be $95K-$100K. I guesstimate that I could sell this property for at least $130K min....or lease option it out for 6-12mos.....OR should I just control the property with a purchase contract and then assign it over to a rehabber or investor for $5K or so?

 

What would you do Tony? I do have an agent now that I am using to find me my home. I have talked to her about working with me to obtain properties and possibly sell some of the properties. She is a good friend and wouldnt charge a high commission.

 

What is a CMA? Sorry for sounding a little ignorant on that....

 

Thanks again for the help...

 

Akin

[-Tony- 0]

I DID however find another property that I think would be a much better profit. The asking price is $109K, city assessed at $141,900.

Okay give them what they want for it maybe a little more (L/O). Get a t/b to give you 3k assign it to him (CA)

 

I looked at some of the comparables in the area (found 3 homes on the same street that were sold at $120K-$130K in 2001 & 2003.)

Like I said before HOW DO YOU WANT TO INVEST i.e l/o, sub 2, buy and hold or rehab.

 

I assume that there will be at least $10K rehab work. I was thinking of offering $85K or so for the property. So with the purchase price and rehab costs my total expense would be $95K-$100K.

You know what happens when you assume.....I just sold a rehab I bought for 46k sold for 97k total cost of rehab and closing cost was 5k. Are you planning on doing the work or contracting it out? 10k is a hole lot of work can you make the payments if it takes long or doesn't sell...don't forget closing cost and opps factors.

 

I guesstimate that I could sell this property for at least $130K min

you what.....you should never guess anything

CMA= Comparative Market Analyses

 

 

....or lease option it out for 6-12mos.....

this goes for the hole post don't jump in a pool if you don't know for sure it has water in it...

 

OR should I just control the property with a purchase contract and then assign it over to a rehabber or investor for $5K or so?

Hey or better yet.......USE A LEASE OPTION that way you are not obligated to buy

 

What would you do Tony? I do have an agent now that I am using to find me my home. I have talked to her about working with me to obtain properties and possibly sell some of the properties. She is a good friend and wouldnt charge a high commission.

You probably don't want to hear this again but....EDUCATE yourself in crei

sorry I hade to say it again

 

what would I do? hmmm, first I would come up witha FMV (faire market value). Now you have more options available (get it options). find thier motivation level, if strong go for the sandwich and negotiate as low of a price as you can, if not to much go for a CA (cooperative assignment) or straight option.

 

alot depends on your market hot cold appreciation per year average price house (if this is a high end home, first you must live in the stick but if it is then allow more marketing time)

 

What is a CMA?

see above

[Akinwale 0]

I DID however find another property that I think would be a much better profit. The asking price is $109K, city assessed at $141,900.

Okay give them what they want for it maybe a little more (L/O). Get a t/b to give you 3k assign it to him (CA)

 

I looked at some of the comparables in the area (found 3 homes on the same street that were sold at $120K-$130K in 2001 & 2003.)

Like I said before HOW DO YOU WANT TO INVEST i.e l/o, sub 2, buy and hold or rehab.

 

I assume that there will be at least $10K rehab work. I was thinking of offering $85K or so for the property. So with the purchase price and rehab costs my total expense would be $95K-$100K.

You know what happens when you assume.....I just sold a rehab I bought for 46k sold for 97k total cost of rehab and closing cost was 5k. Are you planning on doing the work or contracting it out? 10k is a hole lot of work can you make the payments if it takes long or doesn't sell...don't forget closing cost and opps factors.

 

I guesstimate that I could sell this property for at least $130K min

you what.....you should never guess anything

CMA= Comparative Market Analyses

 

 

....or lease option it out for 6-12mos.....

this goes for the hole post don't jump in a pool if you don't know for sure it has water in it...

 

OR should I just control the property with a purchase contract and then assign it over to a rehabber or investor for $5K or so?

Hey or better yet.......USE A LEASE OPTION that way you are not obligated to buy

 

What would you do Tony? I do have an agent now that I am using to find me my home. I have talked to her about working with me to obtain properties and possibly sell some of the properties. She is a good friend and wouldnt charge a high commission.

You probably don't want to hear this again but....EDUCATE yourself in crei

sorry I hade to say it again

 

what would I do? hmmm, first I would come up witha FMV (faire market value). Now you have more options available (get it options). find thier motivation level, if strong go for the sandwich and negotiate as low of a price as you can, if not to much go for a CA (cooperative assignment) or straight option.

 

alot depends on your market hot cold appreciation per year average price house (if this is a high end home, first you must live in the stick but if it is then allow more marketing time)

 

What is a CMA?

see above

<{POST_SNAPBACK}>

 

ALWAYS AM EDUCATING MYSELF> That's why I am here....

[Akinwale 0]

I DID however find another property that I think would be a much better profit. The asking price is $109K, city assessed at $141,900.

Okay give them what they want for it maybe a little more (L/O). Get a t/b to give you 3k assign it to him (CA)

 

I looked at some of the comparables in the area (found 3 homes on the same street that were sold at $120K-$130K in 2001 & 2003.)

Like I said before HOW DO YOU WANT TO INVEST i.e l/o, sub 2, buy and hold or rehab.

 

I assume that there will be at least $10K rehab work. I was thinking of offering $85K or so for the property. So with the purchase price and rehab costs my total expense would be $95K-$100K.

You know what happens when you assume.....I just sold a rehab I bought for 46k sold for 97k total cost of rehab and closing cost was 5k. Are you planning on doing the work or contracting it out? 10k is a hole lot of work can you make the payments if it takes long or doesn't sell...don't forget closing cost and opps factors.

 

I guesstimate that I could sell this property for at least $130K min

you what.....you should never guess anything

CMA= Comparative Market Analyses

 

 

....or lease option it out for 6-12mos.....

this goes for the hole post don't jump in a pool if you don't know for sure it has water in it...

 

OR should I just control the property with a purchase contract and then assign it over to a rehabber or investor for $5K or so?

Hey or better yet.......USE A LEASE OPTION that way you are not obligated to buy

 

What would you do Tony? I do have an agent now that I am using to find me my home. I have talked to her about working with me to obtain properties and possibly sell some of the properties. She is a good friend and wouldnt charge a high commission.

You probably don't want to hear this again but....EDUCATE yourself in crei

sorry I hade to say it again

 

what would I do? hmmm, first I would come up witha FMV (faire market value). Now you have more options available (get it options). find thier motivation level, if strong go for the sandwich and negotiate as low of a price as you can, if not to much go for a CA (cooperative assignment) or straight option.

 

alot depends on your market hot cold appreciation per year average price house (if this is a high end home, first you must live in the stick but if it is then allow more marketing time)

 

What is a CMA?

see above

<{POST_SNAPBACK}>

<{POST_SNAPBACK}>

 

Can you negotiate a sandwich lease, CA or option with a REO?

[MichaelC 160]

Can you negotiate a sandwich lease, CA or option with a REO?

Probably not. Banks are not in the habit of playing landlord. They want cash, all of it, and now. A bad loan that results in their needing to take back a property is one they would rather forget and need to get off their books.

[-Tony- 0]

Well with all that investigating of mtg elimination, I figured out why the banks want foreclosures off there books.

 

when the bank has a performing asset (MTG note) they can loan out 9 times the value of your note (you and 8 others), but if it becomes a non-performing asset they must keep 8 times the value of the house in cash reserve. I guess it makes sence without the assett they have to cove the loans they made off your note with liquid assetts and the house covers the note that is why only 8 times.

 

I new they had to keep the reserve but never understood why. Everyone I asked either knew nothing about it or didn't know why. it all seems so clear now....

[Akinwale 0]

Can you negotiate a sandwich lease, CA or option with a REO?

Probably not. Banks are not in the habit of playing landlord. They want cash, all of it, and now. A bad loan that results in their needing to take back a property is one they would rather forget and need to get off their books.

<{POST_SNAPBACK}>

 

I didnt think so. My original plan for this deal was to wholesale it to another investor/rehabber. I saw it about 8 months ago but didnt have the cash to finance the holding costs. I could get a loan, just couldnt make the payments....

 

But since I have studied up on wholesaling...more than I have lease options and CA's, I do have a good understanding of how to wholesale a property.

 

I have also read that some banks require to prove a loss each month on their books. So I guess this is something that happens frequently...good for us

 

Well I did a CMA on the property...I found 5 comps in the area..

1) $136,000

2) $133,500

3) $125,000

4) $120,000

5) $96,900

 

I dropped the lowest and highest, divided the 3 and came up with $126,166 (FMV) and change.

 

I would like to profit $5-$10K on this deal is possible. They are asking $109K for the property now and it has been sitting on the market for at least one year or more according to a neighbor and myself knowing that I saw it there at least 8 months ago. My goal for this deal was solely to wholesale it to an investor. Get it under contract and then assign it to a rehabber/investor. I do have a good understanding of what to do but just want to make sure it makes sense.

 

I am not sure what type of down payment the bank would require or if they would need all cash up front or if financing would be allowed. I wasnt planning on keeping it for more than 60 days. Not sure if that would be acceptable to them or not. Theyre losing money anyways. I also dont know if I would be willing to put a large earnest money deposit down on this either. I would have to see whats acceptable to them..

 

To get to the chase...I was planning on lowballing an offer to see if they bite. I can only imagine how much they are losing. I came up using a formula to offer around $60,000 or so for the property. I was thinking more like $50K. If accepted. I would find a motivated buyer i.e. rehabber, handy person, etc. to move-in and fix it up. I am pretty sure I am estimating high on the rehab costs ($20K) but I need to make sure. I did a walk-by, looked inside the home, it looks very clean from what I can see. Exterior would need painting, roof looks ok but may need to be replaced, etc.

 

Assign it then to the investor for $65K if bought for $50K or $70K if bought for $60K. The investor would have the house for $85K-$90K including rehab work. Based on my FMA analysis the home could be sold for at least $120K.. Do you think thats enough profit for an investor?

 

In regards to lease purchase deals...what is a good % to use to determine what the option deposit should be for the tenant/buyer? Do you even have a % you normally use. i.e. 3% of the purchase price?

 

This sounds so easy but I know it a lot harder than it sounds.

 

Oh and so you know MC and everyone else...... I will be purchasing "the manual" right now. I will just have to deal with being in the hole even more. I should have a gig soon though. I hate being unemployed or even worse self-employed during a period where businesses dont want to spend any cash.

 

 

Please any thoughts are welcome on my long post....

 

Thanks,

 

Akin

[MichaelC 160]

Akin, the fly in the ointment in this potential deal is the bank. Again, they are not a mom and pop homeowner needing to offer great terms........at least not usually.

What you'll find is they want a cash buyer who can close in ten days for any type of discount. Or, a credit worthy borrower with a substantial down at or near FMV.

Wheeling and dealing with banks has never been something I enjoyed or was good at. Your experience may be different. To know, though, you'll have to make an offer.

[Akinwale 0]

Akin, the fly in the ointment in this potential deal is the bank.  Again, they are not a mom and pop homeowner needing to offer great terms........at least not usually.

What you'll find is they want a cash buyer who can close in ten days for any type of discount.  Or, a credit worthy borrower with a substantial down at or near FMV.

Wheeling and dealing with banks has never been something I enjoyed or was good at.  Your experience may be different.  To know, though, you'll have to make an offer.

<{POST_SNAPBACK}>

 

 

Very true MC> I was just thinking of lowballing an offer in there with a small earnest money deposit. What can they say. NO. They havent had anything on this house..its been sitting for over a year now. As far as I can see it doesnt need much work, but I am going to set an appt to go and check it out. If its worth it, I might just offer and see what happens. Plan to close in 60 days so that I have enough time to find a TB> I assume that they will be more open to negotiating because the property is just dead in the water for them.. Not sure though..I can only try. The FMV shows a great potential for a nice profit. Obtain the house for $60K, $10K rehab work into it, find a rehabber in the area that will be willing to take over the contract..Contract assign it to him/her for lets just say $10K and go from there. The rehabber could easliy sell the home fixed up for $115K. I dont have the cash flow now to sustain a rehab project. Even though I would love to make that kind of money now. Ill be there sooner or later....

 

Worth a try????

 

I do have contacts with some creative lenders as well that could work with me and the rehabber to finance the purchase. As far as I understand, most banks are not to keen on contract assigning and some banks dont allow it. Simutaenous closings etc.

[Kimberly 0]

Akin,

 

I was just thinking of lowballing an offer in there with a small earnest money deposit. What can they say. NO. They havent had anything on this house..its been sitting for over a year now.

If it's been sitting there for a year either they don't for whatever reason have all the paperwork done to allow them to sell, OR they're holding out for full price, OR it needs major work and they still want too much. In a year's time, I'd tend to think the majority of investors who do rehabs would have contacted them.

 

There's a credit union here who rehabs their own reo properties. Then they ask for full market value and wait, sometimes a year, for someone to come along and pay it.

 

However, no harm in asking, they could be ready to be reasonable.

 

As far as I understand, most banks are not to keen on contract assigning and some banks dont allow it. Simutaenous closings etc.

They don't allow it. You can make the offer in a LLC yet to be named. If the bank accepts your deal, you set up the LLC. You would then sell the LLC to your rehabber (your fee). Most rehabbers are going to use a hard money lender not regular financing.

 

Your contacts are good for you to be able to put the deal together for someone looking to get into rehabs.

[Akinwale 0]

Akin,

 

I was just thinking of lowballing an offer in there with a small earnest money deposit. What can they say. NO. They havent had anything on this house..its been sitting for over a year now.

If it's been sitting there for a year either they don't for whatever reason have all the paperwork done to allow them to sell, OR they're holding out for full price, OR it needs major work and they still want too much. In a year's time, I'd tend to think the majority of investors who do rehabs would have contacted them.

 

There's a credit union here who rehabs their own reo properties. Then they ask for full market value and wait, sometimes a year, for someone to come along and pay it.

 

However, no harm in asking, they could be ready to be reasonable.

 

As far as I understand, most banks are not to keen on contract assigning and some banks dont allow it. Simutaenous closings etc.

They don't allow it. You can make the offer in a LLC yet to be named. If the bank accepts your deal, you set up the LLC. You would then sell the LLC to your rehabber (your fee). Most rehabbers are going to use a hard money lender not regular financing.

 

Your contacts are good for you to be able to put the deal together for someone looking to get into rehabs.

<{POST_SNAPBACK}>

 

I figure that there is something majorlywrong with it. I will be going to look at it today.

 

Thats what I thought too..thanks..submit the offer as 1234 Main Street, LLC., if offer is accepted, finalize the LLC paperwork. and then assign membership rights over to the rehabber/investor...CORRECT???

 

I think I can do this stuff. I am soaking up all of this knowledge..LOL>. I keep everyone posted.

 

Akin

[Kimberly 0]

submit the offer as 1234 Main Street, LLC., if offer is accepted, finalize the LLC paperwork. and then assign membership rights over to the rehabber/investor...CORRECT???

1234 Main Street, LLC, yet to be formed

 

If the offer is accepted, set up the LLC. Then SELL the LLC to your rehab guy.