Offer price and Exit Strategy Question for Shortsale / Flip in MD
Hello BP
I’m evaluating a short-sale opportunity in an upscale neighborhood of Montgomery County, Maryland and I wanted to seek your advice given the following facts:
- 1) 5500 sqft 5 bed 6.5 bath SFH, taxed assessed at $2M, with current market value of $1.5M
- 2) This property and 7 of its neighbors are the most expensive properties within a 1 mile radius. The rest of the SFHs in this area range between $900K to $1.2M
- 3) SFH was built 30 years ago and is still in original but decent condition.
- 4) The property is definitely underwater (trying to find out by how much and who the lender is).
Q1) Assuming I’m the only offer and this is an all cash purchase, what is the minimum you’d expect the lender would accept? If this property hits auction, it would sell at around 70% of market price or $1M, and of course lender would incur legal fees, etc associated with the foreclosure process. Is 80%-85% off market price a reasonable range to shoot for?
Q2) In many other high-end neighborhoods of Maryland, homes are selling very fast at about 15% above their tax-assessed values. If that was the case here, it would have been a no-brainier for me to perform a high-end rehab and resell the property. However, in this particular area, homes are either depreciating in value or just never fully recovered from the Crisis. There are only a few comps available for this area but it appears that they have sold at about 15 to 20% under their most recent tax-assessed value. The highest recent sales amount in the area was $1.6M for a very similar property. This concerns me and I feel like performing a full rehab could be a bit risky if there is a price ceiling. What other exit options do I have? Should I do a very light cosmetic touch up and put back on the market without incurring significant rehab cost?
Would appreciate your feedback