I just closed on a condo in Frederick MD. However I do not have the unit filled. Another unit has come on the market in Laurel, MD in a condo complex I have been trying to buy in for about a year. I would be making an all cash offer on this new unit, but I am a bit hesitant to make an offer while I have a vacancy on the unit I just closed on. Part of this hesitation is I just left my fulltime job to pursue investing (and being an agent) full time. So I am a bit nervous of being on the hook for the expenses of two units and having them both vacant. My wife however feels this other unit is such a deal that we should go ahead and make the offer. She feels it is worth the risk. It should also be mentioned that it is a short sale, so any contract on it is likely to take quite awhile to close.
So what say you fellow BP addicts. Should I take the risk and make an offer while having a vacancy, or play it more conservatively and pass on it till I get my other unit filled?
You said condo. Have you CHECKED the condo association docs to make sure renting is allowed there?? If so is it year round or only at certain times?? If it is allowed all or some of the time is there a certain percentage that can only be rented versus owned and what is the current level in the building??
You need to know these things and more before you buy properties and have a "oh crap" moment where you can't use the property as you intended and now your returns are affected.
Since it's a short sale on this second property your wife thinking it's a deal it might not be true. On a short sale the seller can list for whatever they want but it's the lender on the senior loan and any juniors that must agree to that price. You can think you have a great deal only to find out after months and months the bank comes back with a crappy price they will accept. It's a tactic in a rising market sometimes for banks to stall short sale approval so the property becomes worth more and they can demand a higher payoff on their loans. Lenders sells tens of thousands of properties a year and also negotiate a lot on their loans so unless you are dealing with a newbie asset manager they are generally experienced.
If you do offer on the short sale make sure you do not have a lot of EM tied up into the deal. Make sure you reserve the right in the contract to put in an offer with other properties. Also have a clause that EM will not go hard until WRITTEN approval and acceptance by the seller and all lienholders. If it's a bank verbal the bank can still accept other offers etc.
Basically if you have to wait forever do not have your EM tied up in some escrow account and do not say you are only buying this property. When the short sale approval finally comes you may have found a better property to buy, still want to buy this one, or not buy it at the price the final approval came in at.
No legal advice.
Thanks @Joel Owens.
I am familiar with all those issues. Yes renting is allowed in this complex. Actually the majority of it is renters, thus no FHA loans are available. And while it is a short sale, it is listed at the market rate for these condos. They tried to short sale this same unit about 9 months ago and it was not approved then, but now the owner has moved out and has stopped paying the mortgage. So the bank is in a situation where they can allow the short sale, or simply let it go to foreclosure. When it does foreclose and is relisted, it will only sell for about what they have it listed for now. I am sure that the bank would order a BPO, and the BPO price will come in within a few thousand of their listed price.
So I know there is little guarantee of getting it even if the seller accepts an offer, as I have never actually closed on a short sale Ive made offers on. My strategy with this place would to be offer all cash with no inspection contingencies. I would offer about 10% below asking price, and allow the bank to negotiate me up to roughly the asking price. If they came in and asked for significantly more, they just simply wouldnt get it from me or anyone else, as its currently market value is only about 1/3rd what it was sold for at the height of the market.
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