Fannie Mae asking 185 for the property. Big old farm house built in 1857. I looked at it, and although it looked structurally sound for now, it has some major issues.
Not hooked up to municipal water and sewer is the first big one (shallow hand dug well, and cesspool ), Probably 25 G right there.
Knob and Tube wiring hacked up by at least half a century of home remodelers.
Hole in roof, not big but you can see rafters from outside
Holes in plaster, ugly bathrooms, broken kitchen cabinets, overgrown landscaping, lead paint,,,,bla bla bla lots of interior cosmetic stuff.
After repairs this place would be worth about 250. But I'll bet it needs about 80 in work to get it there. Lots of stuff not disclosed in the condition report. I kind of feel that whoever set the 185 number really doesn't know how bad the place is.
So anyway, I told my Realtor that I wanted to make an offer of 90 on the place. She seemed reluctant. She said that she figured 150 would buy it since Fannie Mae is asking 185.
I really don't see anybody getting a mortgage to buy this place, it's pretty much limited to cash buyers. I have to make some kind of offer on the place, I really see it having potential. But damn if I'm going to start high like that. Much easier to go up from 90 then try to go down. I really think I'd go as high as 120.
So anyway, here is my question. Do you think the Realtor has a point that 90 isn't a serious offer? She didn't think my estimate of 80 to fix the place was way off base.
@Joe Cummings Stick to your numbers and make your offer. You never know with them. Sometimes the dont even respond other times they accept without even countering . I would do your inspection and buy it as-is where-is with no inspections. Just my thoughts no legal or accounting advice. It also helps I am a GC so I inspect it while I am there.
How long has the property been on the market? The longer it has been on the market, the more flexible Fannie Mae becomes. If it has just came on the market, Fannie Mae generally has the property overpriced. I would find out if there is other bidders on the property, if there is any, and their offers. For now I would stick with your price. Raise your price maybe a few thousands at a time. Good luck on your bid.
Agree. You don't HAVE to buy this house. You're buying it as an investment...not to live in, and not to "keep it in the family". Who CARES if Fannie Mae is insulted? They won't be. They have no emotional ties to the place either. They'll either take the offer, decline it....or negotiate.
Stick to your guns.
The best time to make low-ball offers is when it is bank owned. Don't feel guilty, and don't let your agent make you feel bad. Your agent is required, by law, to present the offer you want to make. She can give guidance if she has a buyers agency agreement with you, but if you stick to your guns, she has to make the offer. (At least she does in CO, check with your own state.)
Like @Joe Moore said, if it has been on the market for a while, they will be more agreeable to lower offers.
My own house was a Fannie Mae Homepath property. I made a relatively low-ball offer because it was ugly and had been sitting on the market during a super rush time.
They did accept my crap offer over another offer because I was going to be owner-occupied.
I've got to tell you after looking at the place, and thinking about it for a bit I kinda deviated from the original plan of fixing it and selling it. I was thinking about moving into it, and selling my current home (200 ish current market value and paid for)
It would free up a lot of capital for me quickly. Lets face it, you can never go into these projects too well capitalized. And I really don't mind living in a dump if it puts money in my pocket. My girlfriend and I kind of got a good laugh because the first thing we saw was the junk car sitting on the lawn with trash bags taped over the busted windows. It took us right back to our Appalachian roots. There was a barbecue pit in the back yard with the remains of a trash fire in it, milk crates for lawn furniture, piles of beer bottles, and the remains of a camper that someone was living in. All in all it was like a little slice of heaven in the middle of an upscale suburban neighborhood.
But I'm rambling, so really what I'm gathering from everyone's responses is that it's not unusual for Fannie May to be way off about their asking price.
From what I understand about Home path REO's, there are certain criteria for how they sell. They list it at a price, they will accept or counter up to 85%-%100 of the list price. After it sits on the market with no offers/bad offers for a set amount of time (30, 60 days) they will make price cuts to create interest in the property. The price cuts can be big. They try to create multiple offer situations so they can get a highest and best letter out there, to create competition and get the most money for the property from investors. If it is an Owner Occupied offer, everything listed above goes out the window and it moves to the highest priorirty offer. There is a program in place to get the propertys to Owner occupy because the theory is that the house will be fixed up more and have a stable tenant to better the community. A lot of this is dependent on the asset manager that is responsible for the property.
@Mindy Jensen , @Joe Cummings , @Jeremy Tillotson : How well have you done on lowball offers with Fannie Mae? I just started looking at Fannie Mae foreclosures but don't yet have a sense of how cheaply I can acquire them. It seems like their list price is just a sliver under FMV, suggesting not great flips but maybe good rentals.
@Asim Alam , it depends on your market. My market is so hot that lowballs aren't even being looked at - asking price or higher for every property on the MLS. They don't even get out of the owner-occupant phase in my area.
Yeah, my realtor said the same thing about the Atlanta area. They'll get out of the Owner-Occupant phase but won't go more than $15,000 under asking price. Oh well!
I am notoriously against "low ball offers" unless it falls in any one of the following criteria:
1) Bank owned
2) Government owned
3) "Days On Market" is greater than 45
With the first two the offer generally takes about 60 seconds and isn't "binding" until they come back and ask for all the forms. Many times a computer accepts or rejects (at least in my area) so honestly who are you insulting or ruining your rep with? No one. So in your case, I would say fire away.
Just my 2 cents and good luck!
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