A Few Simple Questions :)
Here is my scenario:
A house owner listed during forclosure for $115,000. It is loaded with trash inside and out. It needs 10-15K rehab. Market Value rehabbed 110-120K. Now owned by bank reduced thru realtor to 82K. A letter from the bank left behind suggests he stopped paying his mortgage 14 months ago. Back then he owed a balance of 77K.
These are my questions:
1). What kind of offer should I give to be reasonable?
2). Can I do conventional financing and still get my best offer approved or does cash rule, getting me a MUCH better price? It would take longer to get the cash together before i could make the offer. I am afraid I might lose the deal if I dont move.
Thanks in advance.
Dealing with REO's cash will always be king. Non-conforming loans and preapproved financing at the least. The faster the closing and the less contingencies clauses the better.
You base you offer on your figures, not their asking price. The old loan amount is completely useless now.
For example, if you plan to only buy at 70% of FMV minus repair costs, you're maximum offer would be about $65-70K by your figures.
Roger
Sometimes going for the old loan amount works -- I've been able to push deals more easily through if the bank doesn't think they are losing as much money on it. However, I'm not sure if this is as profitable as you need. Whatever your offer, the agent might help push it through if he or she is getting your side of the commission too. Since the agent is now working on your side, ask they're opinion on what might be the lowest acceptable offer. For all you know,the agent might know that they will accept 60%FMV.
You can do conventional financing depending on the condition of the property -- if it has a bad roof or foundation that might not work. I bet if there are no other offers, and you get an APPROVAL letter, not a pre-qual or a pre-approval from your mortgage broker that should suffice. You might want to get the letter from a mortgage broker that the realtor has worked with before and feels confident that your loan will close. To show your serious to the agent, it's sometimes better to come in with an approval letter even if it's from a lending institution you don't use in the end.
Also, if you tell the agent your intentions on flipping the property (if that's what you want to do) and perhaps offer the agent the listing for that, I bet he or she'll help push your lower offer through if they know they will make more money in the long run with the property. Sign a listing agreement with the agent now if that will help. If you start setting up arrangements like this, the agent will probably start bringing you more leads on other REOS. Once people in the RE know that you're a closer, you'll be getting many more offers coming your way.
Call a mortgage broker, get your approval letter (you can sometimes get this in an less than an hour and if not move onto another broker) then call your agent and make the offer today.
Best of luck!
<IMG SRC="images/forum/smilies/icon_biggrin.gif"> [ Edited by HouseHuntersUSA on Date 03/06/2004 ]
thanks guys good advice.