Cordova, TN · Member since 2014 · 54 posts · 12 votes
Today's the day...
While the deal may be small, this is a big day for me. I have been reading REI for years and studying the local market. After getting in a more stable financial position (and with bank pre-approval in hand), I am ready to make an offer on a zero-lot line attached.
Ask: 59,900
Assessed Value: 49,500
I am planning on offering 25,000 and see where it goes.
Lender · Granite Bay, CA · Member since 2014 · 456 posts · 454 votes
11y
@Matt Ransom Never be embarrassed to offer low, and never care about hurting someone's feelings or offending someone. I have been in the RE and mortgage industry for many years and have closed thousands of transactions. I have seen sellers take ridiculously low offers, even saw a home sold in a garage sale one time!
Here is how I do it. I don't just offer low. I arrive at a price based on a specific profit I want to make, usually 20% on my total money invested, which includes cost of the home + rehab. I also add in the cost to carry my money at a decent rate of return for the time I anticipate it will take to complete and sell. My offer might appear low, but I sound like an expert when they ask me to justify my low offer. I walk them through what I believe the property will be worth, I explain that I am an investor and need a 20% return to offset risk etc... I talk about cost to rehab etc... They may not want to take the offer, but I come off as a highly educated and experienced rehabber, and a lot of times they call me back when the home does not sell.
Real Estate Investor · Elkhart, IN · Member since 2014 · 119 posts · 50 votes
11y
What is your intention with the property, buy and hold or flip? Have you check out the comps is the area? Or the rents in the area if your planning on renting it out? Is it a FSBO deal or a MLS listing, short sale, etc. Does the place need rehab? If so how much rehab? What is your exit strategy?
You may have already answered all these already, just throwing them out there.
What is your intention with the property, buy and hold or flip? Have you check out the comps is the area? Or the rents in the area if your planning on renting it out? Is it a FSBO deal or a MLS listing, short sale, etc. Does the place need rehab? If so how much rehab? What is your exit strategy?
You may have already answered all these already, just throwing them out there.
You are the guy I want our my corner to hold me accountable to see this through. This will be a buy and hold. It is in decent shape from the outside and pics. I will be meeting with the RE agent tomorrow. My main focus when I see the property will be roof, HVAC, windows, and plumbing. 2 options for an exit strategy are 1) simply sell in the distant future or 2) sell to another investor once I have a stable renter if I can get the right price. I don't know if this will qualify as doing "comps", but I have looked at recent sales for similar properties on that block using the local tax assessor website. I have not checked the rents other than the suggested rents found on Zillow for those other properties. Where could I find that? Once again, huge thanks!
Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
11y
I would like to encourage you, but what makes you think the seller will take 40 cents on the dollar. Is it an individual who owns the house? If so, your offer will probably be a waste of time. If a REO and on the market for along time, then they may deal. But who knows.
Real Estate Investor · Elkhart, IN · Member since 2014 · 119 posts · 50 votes
11y
@Matt Ransom Also make sure to check out the foundation. Just remember to work the numbers, and stick to your numbers that will work for your proposed deal, unlike what @Arlan Potter mentioned, if 40 cents on the dollar is all that will work, then that is what you offer, just don't chase a deal if they turn you down and your numbers say that what you offer is all you can do. In other words, don't let your emotions, enthusiasm, and excitement force you to try and force a deal if it isn't one.
I would like to encourage you, but what makes you think the seller will take 40 cents on the dollar. Is it an individual who owns the house? If so, your offer will probably be a waste of time. If a REO and on the market for along time, then they may deal. But who knows.
I really don't know what to expect. I know that I am embarrassed to offer this and that seems like a good starting point. This property has been on the market for a long time. I am sure that I am just another RE investor out of hundreds who have probably come along and made an offer. But maybe the timing is better. I will find out at 4:30 today. Thank you for your thoughts. It is appreciated.
@Matt Ransom Also make sure to check out the foundation. Just remember to work the numbers, and stick to your numbers that will work for your proposed deal, unlike what @Arlan Potter mentioned, if 40 cents on the dollar is all that will work, then that is what you offer, just don't chase a deal if they turn you down and your numbers say that what you offer is all you can do. In other words, don't let your emotions, enthusiasm, and excitement force you to try and force a deal if it isn't one.
Yeah, the numbers may not work for the deal. They work for me and work towards what I am willing to ultimately offer for this property based on all the research I have done on the local market.
I have noticed ridiculous transactions in the area from out-of-state investors who pay way more than I ever would for properties. Any clue on why they would do that?
Real Estate Investor · Elkhart, IN · Member since 2014 · 119 posts · 50 votes
11y
Why they would do that all depends on what their strategy is, maybe buy and hold, maybe they are praying for the property to appreciate, who knows, doesn't really matter. All that matters is your numbers, remember that.
It looks like there are a bunch of houses for sale in Cordova. Looking at realtor.com it looks like the cheapest is around $54K.
How is the rental market? Did you ever figure out who owns the property you want to purchase for $25K?
Cordova has always had a ton of activity with no end in sight. I believe the rental market to be very good. But I am about to find out, for sure, once I get things going. The property in question is owned by an individual, not REO. As far as the 25K- as amazing as it would be if that sticks- I am going to offer it and hope they don't show me the door and we can negotiate.
Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
11y
My original question still stands. Why would they take it? If there are a bunch of negatives about the house, lots of rehab work, no other offers. Then the realtor should not have listed it for $59. I know sometimes MLS houses do get listed too high, but usually come down to reality over time.
And like you said, they may have had a boatload of lowball offers. My experience with individuals selling on MLS is that they will move down some but not 60%.
They may have originally listed the house at 80K and have been moving down to $59 which is closer to what its worth. Also when you look at MLS the cheapest house in Cordova on MLS is $54K.
Why do you think the house is worth only $25K. What is your reason for the offer.
My original question still stands. Why would they take it? If there are a bunch of negatives about the house, lots of rehab work, no other offers. Then the realtor should not have listed it for $59. I know sometimes MLS houses do get listed too high, but usually come down to reality over time.
And like you said, they may have had a boatload of lowball offers. My experience with individuals selling on MLS is that they will move down some but not 60%.
They may have originally listed the house at 80K and have been moving down to $59 which is closer to what its worth. Also when you look at MLS the cheapest house in Cordova on MLS is $54K.
Why do you think the house is worth only $25K. What is your reason for the offer.
After visiting the property (which they dropped their ask price by 5K- $54,900), I learned that the property is in a flood plain and that has been a big obstacle considering insurance rates. But that is not my reason for the 25K offer.
My reason for the 25K offer is that after doing research on the local market in Shelby County as a whole, I know what local investors are paying, on average, for properties in relation to the tax assessor's value. If I am to stick to that percentage (or close to it), 25K gives me the wiggle room to negotiate up to that. But being a newbie- I probably don't need that much wiggle room. --OR-- should I just make my offer and stick to it and forget negotiation altogether?
Cordova, TN · Member since 2014 · 54 posts · 12 votes
11y
So I pulled up to the house and there was another investor (local investor who owns 75 properties in Shelby County). I was surprised to see him but he was a very nice guy and I decided to follow him around and see what he was going be looking for in the house (as well as sticking to my game plan).
He checked the outside unit and glanced at the roof.
But he seemed mainly interested in closets. He looked inside every closet and the outside storage room. He turned all the way around on the inside of the closets and looked them all over. Why?
My guess is that if there are foundation issues and cracks in the walls. Closet walls will be lowest priority to be addressed because they are not visible. That's all I have on that.
I am still waiting on the insurance company to quote me on the flood insurance.
Also it's been 3 days, did you make the offer, and did they accept/reject it?
Thank you for holding me accountable. I did not make an offer. I heard from the insurance company yesterday but they did not include a rate for flood insurance. Without complete numbers, I did not feel comfortable making an offer. I just found out, literally, 5 minutes ago that the other investor bought it. I am looking forward to seeing for how much.
Good News: I am seeing another property around the corner. I will be in it today at 4:00. Trying to make moves....
Also it's been 3 days, did you make the offer, and did they accept/reject it?
I just found out, literally, 5 minutes ago that the other investor bought it. I am looking forward to seeing for how much.
Good News: I am seeing another property around the corner. I will be in it today at 4:00. Trying to make moves....
Any idea how much the offer price was from the other investor? Not saying there price will even work for them, but knowing it could be helpful in evaluating the market.
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
11y
If you are going to be making such discounted offers you can't do one at a time, you have to be getting more offers out there. Because realistically very few people are going to take a 40% haircut, and probably even fewer who've gone through the trouble of listing with an agent. You should be making 10 offers a day.
Cordova, TN · Member since 2014 · 54 posts · 12 votes
11y
I am getting closer to making an offer. I went to the other property and found that it is an estate sale. It was smoky. I could easily replace the carpets, padding and paint. But the flood plain issue is preventing me. If it weren't for this, I would have made an offer. waiting to hear from the agent about elevation levels and, ultimately, what the resident was paying for flood insurance (FEMA maps show it in the flood zone).
There is another property that is near me that I have had my eye on for a while. It went to auction and did not sell. I talked to the firm handling the property and they said it went back to HUD but "they had not yet recorded their deed". Would be a waste of time to visit the local HUD office to check on it?
If you are going to be making such discounted offers you can't do one at a time, you have to be getting more offers out there. Because realistically very few people are going to take a 40% haircut, and probably even fewer who've gone through the trouble of listing with an agent. You should be making 10 offers a day.
I was thinking the same thing. I just want to get the rush of making one offer and go from there.
Lender · Granite Bay, CA · Member since 2014 · 456 posts · 454 votes
11y
@Matt Ransom Never be embarrassed to offer low, and never care about hurting someone's feelings or offending someone. I have been in the RE and mortgage industry for many years and have closed thousands of transactions. I have seen sellers take ridiculously low offers, even saw a home sold in a garage sale one time!
Here is how I do it. I don't just offer low. I arrive at a price based on a specific profit I want to make, usually 20% on my total money invested, which includes cost of the home + rehab. I also add in the cost to carry my money at a decent rate of return for the time I anticipate it will take to complete and sell. My offer might appear low, but I sound like an expert when they ask me to justify my low offer. I walk them through what I believe the property will be worth, I explain that I am an investor and need a 20% return to offset risk etc... I talk about cost to rehab etc... They may not want to take the offer, but I come off as a highly educated and experienced rehabber, and a lot of times they call me back when the home does not sell.
@Matt Ransom Never be embarrassed to offer low, and never care about hurting someone's feelings or offending someone. I have been in the RE and mortgage industry for many years and have closed thousands of transactions. I have seen sellers take ridiculously low offers, even saw a home sold in a garage sale one time!
Here is how I do it. I don't just offer low. I arrive at a price based on a specific profit I want to make, usually 20% on my total money invested, which includes cost of the home + rehab. I also add in the cost to carry my money at a decent rate of return for the time I anticipate it will take to complete and sell. My offer might appear low, but I sound like an expert when they ask me to justify my low offer. I walk them through what I believe the property will be worth, I explain that I am an investor and need a 20% return to offset risk etc... I talk about cost to rehab etc... They may not want to take the offer, but I come off as a highly educated and experienced rehabber, and a lot of times they call me back when the home does not sell.
I like the way you worked that. I have not tried that approach. I started with what my wife and I have budgeted that we can lose and be okay with. But I will certainly work the numbers using your approach and see if there is any overlap.