Foreclosures And Listing Agents
I've found a house in my neighborhood (which has been vacant and foreclosed for about 2 weeks now) and noticed the company is selling the foreclosed property through a real estate agent.
The FMV of the house is 135k, they are selling it for 116k, and the estimated "as is" value is around 114k. I'm estimating that the house requires about 10-15k in rehab to be in top notch condition.
As I see it, to make a descent profit on the house I need to acquire it for about 90k-95k, however, the agent is determined to get 116k for it (which is odd considering their appraisal of the house in its current condition is below that). What is my best course to convince the agent/mortgage company that they should sell me the house at a discounted price? Any suggestions?
-Chris
[addsig]
OK,
Unless the agent owns the property who cares what they think?
An agent is legally bound to present "all offers" (written). So write up your offer to the REO company including the comp's pictures etc. Make a nice packet for them. and have the agent submit it. IF the REO officer is local make your presence during presentation a condition of the offer.
Good Luck!
[addsig]
Thanks for the quick reply. Yeah, I was working on an offer to submit. Decided to take a few pictures with my digital camera and I'm including a rehab estimate as justification from my contractor. The problem I'm having is trying to slip the 15-25k I'd like to make into the deal without it being blatently obvious.
-Chris
YOu could also use another realtor? and I wouldn't worry about the 15k. if the numbers won't work it isn't a good deal. I would submit the offer and keep submitting every three weeks until it is either accepted or sold to someone else. I have talked to many people that have had the same exact offer accepted the second or third time submitted.
Recently I heard that each REO property a bank has keeps them from lending $7 for every dollar commited.
Luck!
In your estimate of repairs, do not hesitate to utilize up graded materials which are really not in keeping with the items you will really use. Utilization of ball valves on all new plumbing lines, reposition of vent stacks to increase swirl effect on toilets etc. Structual reinforcements that may not be necessary. In other words reach with your estimate of costs. These items bankers will evaluate and not see the profit to be obtained on subsequent sale. Be sure to include the payments due on mortgages during period of rehabilitation. Load it man. Don't you have Real Estate Broker in your extended family? Suggest offer thru him/her with subsequent adjustments on true fees after settlement/escrow. I would suggest my favorite correction of a foundation line as per building inspector, which is eliminated in the subsequent rehab. Sounds sneeky yes but it is the nature of such occasions. You should see the list of corrections incorporated in an estimate by a speculative buyer that are never done as the requirement for conformance changes upon close of escrow. The introduction of the second broker is rather prevelant. Makes me grind my teeth but it sure has adjusted my overbite. Cheers. Lucius
Hey,
Just my two cents, but I have read a dozen responses to different questions about RE Agents, that all basically say the same thing: forget what the agent thinks, they have to present the offer.
And that is true. But an agent does NOT have to endorse your offer. In other words the agent says "Here Mr Seller is an offer from one of those slimy creative RE clowns. In my opinion, this isn't worth the paper it is written on."
What are your chances of getting this house now???
In every situation, your job is to win the hearts and minds of everyone involved, not to back someone in to the corner.
Get the agent on your side. Get the seller on your side. Get everyone on your side.
Getting Agents on your side is EASY. They put bread on the table by buying and selling houses and you put bread on the table by buying and selling houses. Is this not a perfect marriage?
And yes, most of them do not understand anything about CREI; so what? Teach them or just buy cheap houses through them. Either way both of you win.
Think about this for a second. Most people who need to sell a house, go to an agent first. That is the only way they know how to get their home sold. And many of these people need to get their home sold in a hurry (foreclosure, whatever). If you have ten agents who know you can close on the house in 7-10 days and they can still get a commission check, do you not think your phone wil be ringing?
Boy was I glad to see Bruce's response to this dilemma. I am a long time Agent in Columbus, GA and also an investor who often "needs" to get the best price possible on a deal. About 50% of my business is with foreclosure companys and banks who need to liquidate property.
Problem number 1 is that the beginning list price is almost never what it should be but the agent is bound by contract to try to procure the highest price in the shortest time possible for his/her client.
The second "major" problem is the "screw the agent and what he thinks" philosophy or the "use another agent" philosophy that most investors employ. There are lots of wannabe, late night TV investors out there and simply stated....The agent must believe that you can buy the property before he or she is going to "endorse" your offer. You get lots further with sugar than salt in this business.
Now I have to admit, some of us Realtor types can come off a little haughty at times, but the ones who do are trying to project confidence that they dont really have. You can get around this by ignoring the attempts to appear intimidating or overly impressive. Believe me...I have had agents say "I'm not even going to present that offer!!!". This is in fact illegal and we all know it, so just gently remind them and they will present it. The approach I suggest is to simply explain that the deal has to make sense for all involved and maybe back this up with some amount of knowledge of your repair costs. NEVER mention your profit.
Thirdly, you must understand that the longer the bank holds this property the more willing they will become to deal with you. Most of these properties get a price adjustment of some kind every 30 days. This adjustment could be between $2,000 and $7,000. Typically 2k. It may take you 4-6 months to get "your" price but it will often be possible to accomplish.
I hope this helps and I would really encourage you all to take Bruce's advice and try to get the Realtor on your side. It works best if you use the same one in every transaction so that you don't have to earn credibility all over again with the next property. A good foreclosure Realtor will supply you the credibility with the others that would take you years to earn.
thanks,
Chris
Is there anything else involved in a "packet" to the bank besides a breakdown of rehab costs and some polaroids? Is there a written offer template or does the RE agent have those already?
I'm just getting started so any advice anyone can give is greatly appreciated.
Thanks,
Nick
Well put Bruce and Chris