Hi fellow BPers!
After months of looking in So Cal, networking and reading/learning and encouragement from BP I finally took action and made an offer! An investor-friendly agent found a repo posted to market at $90K, probably requires $20-35K in rehab depending on how far I want to go. Cheapest house in area is selling for $200K. This house ARV is probably conservative $220K. Spending a little more on windows to replicate charming cottage look will likely yield a little more on ARV.
Here's the details of the transaction so far:
1. day 1: property hits MLS at 1PM
2. day 1: drive by property at 2PM, schedule viewing at 3PM. 3PM-5PM review property, put in offer of $103K by 9PM. Cash offer, contingent on inspection. My first ever cash offer too!
3. day 2: agent cannot reach listing agent until 4PM. Listing agent says multiple offers in, several higher than mine. Also states that bank is not going to do final 'best and highest offer' round and will just stop taking offers 5PM day 2.
4. day 2: 4:55 PM, submit updated offer of $125K. Given that I want to buy and hold this property conservative rents, rehab etc, this is the max comfortable amount to bid. I am not really wanting to bid/value on possible appreciation in this case, so based the max offer on rents.
I will likely not get this property as there are probably some contractor types that have a) put in cash offers with no contingencies (not even inspection) b) are willing to pay more because they can flip and are willing to take less profit. If a contractor paid 140K, did the updates for 20K, they could still make 30-40K on the deal.
I also learned that I can do a cash out refi pretty easily for amount paid according to my direct lender.
So, my questions for BP:
1. Based on the above was I too conservative?
2. For so cal offers should I always just start with best offer?
3. Does the idea of just having my contractor view property with me or working some deal with a home inspector make sense so that I can offer with no inspection contingency?
Thanks for any feedback!
My opinion is that you don't want to over pay for the property and lose money on your first deal. Since this is your first offer, it might be better that you didn't get it. You can figure out how much it went for and adjust you strategy. It seems that most investors put out a lot of offers and get only a few that stick.
I say keep looking, making offers and one will come through for you that you can make money on.
Good luck on you next offer.
I normally put in many, many offers to get one under contract,,so don't hold your breath, you will learn from every offer you put in,,I don't get emotionally involved with offers now,,,,but when I have a contract its a different story
Thanks for the feedback.
I am already looking at other properties and hope to put in another offer shortly. I don't think I am that emotionally involved in this property other than I finally managed to get moving and make offers, which feels like I've cleared a hurdle in the process - can't get a property if you don't ever offer.
I'll see where the property ends up and use that info for bidding on the next one.
@Jeff Zamora - Most of my buys have been MLS listed REOs. And I often make offers with no contingencies. I've bought houses before when others made higher offers, but mine was a cash offer with no contingencies and a large earnest money deposit. You may not get this one, and that's okay. Keep on making strong offers, and see if you can get some experience and education on what to look for so that you can make offers with no contingencies too.
By the way, on REOs you can often make the offer with no contingencies, and they will sometimes still give you an inspection period in their standard contract addenda.
@Bryan L. - Thanks for the info. What % would you say is a large earnest deposit? My agent / brief research on BP said 3% was normal. Do you typically go higher?
Interesting tip on the inspection period even though no contingencies. I will check into that one.
@Jeff Zamora - Your first bid was at 103, but you were willing to go to 125. So that first bid should have been with no contingencies for sure. Because you essentially had a $22,000 cushion built in. You can do a heck of a lot of repairs for $22,000.
Earnest money: The houses that I bid on are typically in the range of $30,000 - $80,000 list price. And I will usually offer 5 or 10K as earnest money. You should probably be offering at least 5%, maybe 10% if you really want to get the deal. I sometimes go over 10%.
The thing about the addenda doesn't happen every time and I wouldn't count on it.
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