REO Price

18 Replies

I am in the DFW market -currently, it's a sellers market. Good deals are going within 1 day and even regular homes that are upgraded decently are on the market for less than 2 weeks. We're currently looking for a deal for our permanent residence. We found a Foreclosure that we do like - however it is over our budget. We'd like to spend 120-125, and the house is currently sitting at 170k.

Normally, I wouldn't even bother with something that over our budget, however I noticed It was orginally listed for 199k, but has dropped 7-8% every month since. It has now been on the market for over 100 days. The last price drop was 15k on June 11th. Zillow 'estimates' the property was foreclosed for 155k.

Is it reasonable for us to go look at this property? It doesn't appear to need much work, if any and is move in ready. I don't forsee the bank selling for what they less than foreclosed on it, especially when the market is the way it is here in DFW. Even if the foreclosure amount is a little off from Zillow, it's still over what we'd like to pay.

Holly,

You're absolutely right about the market.  No inventory will do that to a place. 

As far as the REO, you just never know. Part of it will depend on who the lender is. Most of the bigger banks just want to be done with it and sell. The smaller, portfolio lenders are more concerned with their total loan loss and less concerned with ongoing holding cost loss. It's just a different philosophy. Also, some of the banks are using brokers to help with their REO liquidations. As a result, you will run into some situations where they will hold, rehab and then sell at ARV.

In this case, place an offer on the house you're comfortable with.  Set a max amount and don't exceed it, under any condition.  You're dealing with a lender, so there is no emotional factor of a seller being offended by the offer.  The worse thing that will happen is that the lender will reject your offer without a counter.  The best thing that happens is they accept your offer.  You're not going to know what they will do, unless you place an offer.

Get comps for the house. Do a thorough walk-thru and account for any repairs, upgrades and/or updates you feel the house needs to be valued at the comp level. (Make sure you never bid above ARV - rehab costs.) When you submit your offer, make sure you stress ALL the things that need to be done. Even if you don't feel they are mandatory, make your wish list, because your goal is to make the lender understand why your offer is low.

Good luck!

Hattie

@Hattie D. 

Thanks for the reply! Isn't it crazy how fast some of the homes are going around here? I see you live in Grapevine. That's is our goal long-term living location in the next few years. Love it there. Unfortunately, we're way under budget to afford anything there unless it's an ancient one bathroom! Haven't even seen one on the market in a while.

I am getting the realtor to look at the listing to see if there is any reason why is hasn't sold. It's a great house in a nice neighborhood, but schools are lacking. That might be a reason. Other than that I have no idea. It appears as if the bank put $$ in it..new carpet and paint, but it's still below a lot of homes in the area. Not many homes in the neighborhood have been for sale or sold recently. The closest I found Sold in Nov. 2013. It's 500sqft larger, had 4bedrooms, has higher ceilings, had all matching appliances (included the fridge and microwave), and a MUCH more updated kitchen for 180k.

Looking at the pictures, I'm already nit-picking things.

For the record, it is a Fannie Mae home. Not a homepath, though. I've been reading on here and I'm worried there may be some issues with it because it isn't a homepath property. I don't know if should wait until a price drop to put in a offer or if we should just put one in?

If you don't mind me asking, what area are you targeting right now?

@Hattie D. Sure thing. We're looking in Hurst, Bedford, Euless area. Preferably north of 121/183. However, we're definetly not opposed to the homes in Hurst Proper. We're also looking in North Arlington (North of 30) or directly East of Lake Arlington.

We'd definetly like to avoid anything in North Richland Hills. Hate going that way on 820. The traffic is terrible.

The house is in North Arlington, however :)

You should make an offer and leave out all the weasel clauses because most investors don't have included weasel clause, and that is the reason they are going really fast.


Joe Gore

Originally posted by @Joe Gore:

You should make an offer and leave out all the weasel clauses because most investors don't have included weasel clause, and that is the reason they are going really fast.


Joe Gore

Yep.  The worse they can do is say "no".

Holly,

I'm not sure if schools are a concern for you.  If they are, I'm not sure the areas of HEB that support your price range are going to be where you want to be.  However, you can definitely hit SW Arlington in that range.  You're likely looking at 3/2/2 in the 1,500 - 1,800 sqft range.  I used to live out by the lake there.  A couple of close friends still do.  It's a great area.  If elementary school quality is a consideration, focus on Ditto, with Little Road being a solid alternative.  In general, east of Green Oaks, north of Poly Webb and south of Arkansas will keep you in safe, well maintained areas within your target price range.  If you shop around, you can even go as far west as Perkins without necessarily pricing yourself out.  You'll just have to bargain hunt and the house will likely need updates.

Good luck!

Hattie

@Hattie D.,

You are correct they can say no. When you leave out the weasel clause's deals will be closed in a hurry.


Joe Gore

The only possible thing you could do that could "hurt" would be to bid more than you are comfortable paying. Anything else is great education. Look through it. Put in an offer. Do whatever you want, just dont become emotionally attached and overbid.

(479) 739-8438

Thanks for the advice. Luckily we're willing to go without many of those weasel clauses. We don't have a house to sell and we're willing to close ASAP. 

 Luckily schools are not a concern for us. Which is why we've even looked in meadowbrook EAST of 820. But we just aren't willing to risk it. There are some BEAUTIFUL homes out in that area, but I would just be worried about never feeling comfortable. Such a shame.

I'd like to think we're being very cautious about going over our budget. That's kind if why we've been hesitant to look at the house in the first place. I think we'll discuss today and maybe go look tomorrow. 

When you are on a limit budget, you might try Irving, Plano, or Lewisville. Are you paying cash with a fast closed?


Joe Gore

Unfortunately, we are limited to our current area. This HEB would put us in the middle of both of our jobs. We work on opposite ends of Tarrant County.

And we're financing. I know it's no the best option, but it's out only option.

Add:  emailed our agent on Friday about the house. Never got back to me. Would it be okay to just contact the seller's agents for information about the price, condition, etc.

Very frustrating. I was hoping for more info from our Agent by today.

Nothing wrong with contacting the seller's agent, but they might want to see your approval letter from the lender if you are financing.


Joe Gore

Bad news about the house. It has major foundation issues as well as plumbing issues. They're probably only getting worse with it being vacant and summer here. The house has been bank owned since January, so I'm sure that doesn't help.

I was looking at the records and the homeowners tried to sell the house for a while in mid-late 2013. It went through several price drops before it was just delisted and probably let go into foreclosure. I have a feeling the homeowner knew about the issue and couldn't afford to get it fixed and couldn't find a buyer.

We're not interested in fixing any foundations - especially major issues. So, on to the next! I appreciate the help, guys!! I love this forum!

Holly,

This post is not in relation to REOs but I see you are in the Fort Worth area, as are we.  We are newbies just starting out in flipping and I am having a hard time finding local investor clubs in our area.  Are you aware of any?  Thanks!

Pat

I notice a lot of investors hang out at Springcreek BBQ in Irving.

Joe Gore

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