Short sale negotiations

5 Replies

I saw a short sale "2 legal family" property in an up and coming neighborhood. The price is set for 220K. The property itself needs at least 60-80K to fix up. The comps in the area are low 300's though.

Here is what I was taking and had questions on:

1) Can I offer less than the asking amount to the bank, say 170K? I'm not sure if they negotiate at all? It would be an all cash offer.

2) There are tenants in the house. Whose responsibility is to ask them to move out?

3) Would it be worth flipping this property or use as rental? The neighborhood is OK but I expect it would be somewhat tough to get good and long term tenants.

Appreciate everyones advice.

Thanks!

The listing price is set by the seller and the listing agent, not the bank.   Unfortunately the listing price usually has no relation to what the bank may accept.  If the agent has it at market value, he shouldn't let the seller accept your offer, as the bank won't approve your contract price.

@Ma Diga

1) Can I offer less than the asking amount to the bank, say 170K? I'm not sure if they negotiate at all? It would be an all cash offer.

You can always offer whatever price you want. Whether the bank accepts is always the unknown. You will only know by trying.

2) There are tenants in the house. Whose responsibility is to ask them to move out?

I don't know about your state, but in my state, when you buy a property with tenants in place and those tenants are on a lease that has not been breached, the tenants get to stay and you can't terminate their leases without cause.

3) Would it be worth flipping this property or use as rental? The neighborhood is OK but I expect it would be somewhat tough to get good and long term tenants.

You would need a local expert to advise on market conditions, but using the numbers you're giving here, it's too thin for a flip.

Guy Gimenez, Buying Texas Today | [email protected] | (512) 270‑7279 | http://www.BuyingTexasToday.com

2) There are tenants in the house. Whose responsibility is to ask them to move out?

We had a short sale where there were Tenants living in the home.  We thought on our end that the tenants would be out be the time of closing, we did our finial walk through and the tenants were still in the house.  We called our realtor and said that we would not take the house with tenants in it and walked away from the deal.  Two months later we got a letter from a lawyer stating that we breached the contract and was being taken to court for the moving cost of the tenants, holding cost, and some kind of pain and suffering.  When I got the letter I was taken back by it.  Then we read our purchase agreement, which stated that the seller would provid the property to us free of (I forget the wordage something like encumberments). A lawyer read our PA and sent a letter to the seller stating that we were not obligated becasue of the wordage.  It is always good to have a strong PA that takes everything into consideration. 

Thanks for the input everyone.

I'm in NY state. My biggest fear is dealing with tenants if they don't want to leave.

Perhaps I can put a contingency on seller otherwise I'd walk away from the deal.

I think if I can get 170-180K for the house. Spent about 60K to fix everything up...that'll be 240K + 20K more for closing cost, utilities, and other unknowns. Total would be $260.

I guess I'm looking for 40-50K return assuming no issues with tenants or other lingering problems.

1. You can offer whatever you want. Whether he seller will agree to it is unknown. Also if he seller does accept it, it will have to go to the short sale bank for approval. Whether they will accept it or not is also unknown.

2. If there is a current lease in place and you purchase the property, you will need to honor the lease terms. If both parties agree to cancel in writing then the lease can be terminated prior to the lease expiring.

3. In regards to whether it is better to flip this property or keep it as a buying hold rental, you should analyze the deal both as a flip and as a buy and hold including ROI on both as well as the cap rate should you choose to keep it as a rental. there is no way for us to determine the cap rate or which investment strategy is better based on the information given. We will need to know the total expenses, rental rates, and final purchase price including closing costs to determine the cap rate. You will also need to account for vacancies and repairs. Many investors use different formulas for these figures so the cap rate may vary depending on how you calculate for these.

Please let me know if I can be of any assistance.

Medium rgc adams team logoRobert Adams, The Adams Team at Rothwell Gornt Co. | [email protected] | 702‑349‑9175 | http://www.LVrealestateHELP.com

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