Bank Owned Suggestions?

Question

Hey there I have to option to pick up a bank owned property for what I feel is a good price.  Here are the specs..

3 bed, 1.1 Bath two story townhouse with a full basement.  I figure the property needs about $10-15k worth of upgrades.  The bank is asking $55k for the property.  The property sold in 2006 for $128k and currently there are three comps on the market all for around $120k.

My questions are:

1) For those with experience, is it unheard of to give the bank a low ball offer of say $40k?  The property has been on the market for 90 or so days, so I figure they're wanting to move it out of their inventory.

2) Would it be better to turn around and try to sell for $120k or better off finding a renter and holding onto the property.

Any other suggestions or pointers that would help me in this process would be GREATLY appreciated!

Thanks!

TIM N · Answer

Hey everyone thanks for all the advise!  I met with my mortgage broker today to discuss some possible and move along in the process.  I think I'll try to go in with a $30-35k offer like you've suggested, and see what they say?

The comps I've listed are ones currently on the market.. The most recent true "Comp" sold December of '07 for just under $130k.  I also think I'll take Mike's advise and look to try to sell for right around $100k.. to try to move it quicker!

Thanks again for all the advise! :D

Minna Reid · Answer

Offer whatever you want - they can say no, but so what. However I would highly question that the property is worth 120k if it sold for 128k in 06. Likely much less than that. Make sure you get some good comps.

Michael Ueltschey · Answer

I agree with Stephani $40k is not a low ball offer. What price did the bank start at? It is probably due a price reduction if its been on the market for 90 days.
            
            I would flip it if you can move it fast. BTW you don't have to sell it for 80%  for FHA. Mike what are you trying to say? FHA does a have seasoning on flips however so you may have to hold the property for 90 days before it is eligible for FHA. Conventional loans are fine.

Stephani Davis · Answer

I don't consider 40k a low ball offer on a 55k property.  I'd offer 30k and see if you get them to bite.  You can always come up if they don't budge much on their first counter.

When you say there are 3 comps on the market for 120k, do you mean 3 that have recently sold for 120k, or 3 that are currently listed for 120k?  There's a big difference.

Steph

Mike Macey · Answer

Free Enterprise...ain't it great?

Many bankers have no Idea what an empty house is costing them.  If you provide a BPO, many just shake their heads and say I'll wait to get more.  Dah!  Make your offer.  All they can say is no.

Selling or holding is full dependent upon your exit strategy and your investing objectives.  I recommend you write out a plan and it will help you make those decisions.

If you choose to sell outright or as a lease-to-own, I'd sell it for 80% of value so the next buyer can get an FHA.  Financing is tough.  Having 20% down is hard to find with buyers who might buy a rehabbed REO.

If you bought for $50k, added rehab of $15k, and sold for $96,000, you'd make a cool $31k.  Now, how did you structure your business?  Are you an LLC or a Sub "S?"  Recommend you get a goodXXXXXX strike that...Great CPA.