My offer - clever or dumb? please tell me what you think

Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes

Totally dilapidated House ( nearly a tear down ) on 6 acres upstate New York

in hot area.

currently in foreclosure , couple living there , but need to sell before going to auction next week .
Asking $225 ,

multiple offer situation.

My offer : $75 k and allow them to stay there for one year at no cost.
are there any pitfalls that I am not seeing with my offer , other than I know I’ll need to evict them in a year?

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

You’re going to offer $150k less than asking in a multiple offer situation? Who’s going to pay the balance owed to the bank? Either they have equity at $225k and will walk away with cash in hand (I can’t see them paying $150k in “rent” for 1 year) or the bank will want the balance owed to them.

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
You’re going to offer $150k less than asking in a multiple offer situation? Who’s going to pay the balance owed to the bank? Either they have equity at $225k and will walk away with cash in hand (I can’t see them paying $150k in “rent” for 1 year) or the bank will want the balance owed to them.
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Marci Stein
OP
Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
4y
They owe $30 k in back taxes.
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Dwayne Poster
Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
4y
Quote from @Marci Stein:

Totally dilapidated House ( nearly a tear down ) on 6 acres upstate New York
in hot area.

currently in foreclosure , couple living there , but need to sell before going to auction next week .
Asking $225 ,
multiple offer situation.

My offer : $75 k and allow them to stay there for one year at no cost.
are there any pitfalls that I am not seeing with my offer , other than I know I’ll need to evict them in a year?

The only pitfall I see is that you are likely way under price. At minimum, they'll need enough to pay the mortgagee and charges. Beyond that they will need something as operating capitol. Lease back is a useful option to negotiate and I have used it on a couple of occasions to move a deal along. Is the property MLS listed? I would pull title to see if anything else is going to hamper your attempts. What price have you come up with that is market value?
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
4y
Surplus proceeds from a public auction may net them more than any lowball offers they are receiving. If the property is in a hot area and can be subdivided or put to better use than a SFH, the bidding should be be competitive.

Also... is getting a traditional closing completed before the sale even an option at this point? If not, there is considerable risk that additional liens would be inherited.
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Marci Stein
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Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
4y
Would not a title insurance policy protect me from additional liens?
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
4y
In general it is a bad idea to let the old owner stay as a tenant. I would be even more concerned in NY that things go sideways and they stay there for years. You would be better to increase your offer by $12,000 and hold that in escrow, charging them $1000 a month. Rent free deals may even make a lease hard to enforce or could run afoul of the IRS rules against leasing for under market rent. You always want some exchange of monetary interest in a lease contract.
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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
4y
What's the payoff and amount to bring them current?
Does $75k make that happen?
Make sure you are closing at a title company and lender gets paid off....you don't want to give the seller/owner/occupant the cash.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
4y
Quote from @Marci Stein:

Would not a title insurance policy protect me from additional liens?

Likely but you don’t have a contract so I assume you don’t have a title commitment… and time is running short.
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Jon KellyPro Member
Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
4y
@Marci Stein Why not pay their moving or additional living expenses for another apartment for a short period (3-6 months)?
I think you'd want to take possession of the property and get started with repairs ASAP. I wouldn't let them continue to live there and have the property deteriorate AND likely have a battle to evict them in 12 months.
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Marci Stein
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Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
4y
Thank you everyone for all of your wonderful advice —very helpful!
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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Year holdback, what happens when you need to evict and they don't leave? NY they can probably stay for another year for free..
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