Making an offer on a foreclosed property

7 Replies

Hello BP family I am in the process of making an offer on a Chicago SF home 3 beds 3 bath. It is listed at 140k and in need of approximately 15K work. The properties in the area are within the 190 to 240k range. 

My question to those who may know. What is considered a low ball offer and what would be considered a good offer. My take is I use the valuation of 220k after repair value and offer .50 cents on the dollar which will equate to 110k. Is that off base. 

Make your offer according to the numbers you have worked out that work for you. I mean do what you can handle in whatever situation. If you can handle things no matter what happens then you are ok. You may end up with a buy and hold when you want to do a flip simply because the market in Chicago is unpredictable. When you do comps you may find there is little if any new or recent sales in the area. I have seen comps that are years old and that indicates there is no reliable live market in the area. You just can't count on selling a place depending of course but that is one thing to watch out for. 

At 7 houses, 6 rentals I would like to consider myself very succesful. That being said we have never met any of the rules on here and still been very successful!!

The key for us was to work without our margins and rules. Our houses are less than 1% but have still done amazing over the years. I even worked up one of our houses in a case study to show that. The key is to figure our what your strategy and style is and just to go!

Good luck!!

If that works for you, sure. I think you'll have better luck calculating all of your costs, hard and soft, and make an offer with the margin you need to take it on. I'm not sure I'd use a one size fits all approach like 50% ARV. Just work your numbers, come up with your maximum allowable offer and give yourself some negotiating room with your first offer.

Make an offer based off what your numbers are telling you.  The first step in that process will be to make sure you are figuring out the numbers the properly.

In general in the area I am based in CT we do not see many foreclosures bought at 30k below asking.

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570
Originally posted by @Challenor Jack :

Hello BP family I am in the process of making an offer on a Chicago SF home 3 beds 3 bath. It is listed at 140k and in need of approximately 15K work. The properties in the area are within the 190 to 240k range. 

My question to those who may know. What is considered a low ball offer and what would be considered a good offer. My take is I use the valuation of 220k after repair value and offer .50 cents on the dollar which will equate to 110k. Is that off base. 

Answer to this question depends on your business strategy, market conditions for the location you're purchasing the property, terms of your offer...  

If your business strategy is to hold the buy & hold, what's the right price, considering rents for the area, for you to make your ROI target. Consider whether your paying cash or leveraging when evaluating your ROI target.

If your business strategy is to purchase, renovate & sell the property; What's your target return either in $ or ROI. Work your offer back from the ARV w/ your minimum profit number in mind. Then consider all the costs, closing costs, holding costs, realtor costs....

Regarding market condition & terms- Is it an area w/ long or short Days on Market.  If it's an area w/ short days on market (less than 30 days) then you're going to have to be close to or over list price.  An area that's not as attractive you may be able to get away w/ going below list price.

Sometimes the terms of your offer are more important than price- Can you close fast, with little to no contingencies? Do you have a solid Proof of Funds (POF)

Thanks for all the responses. I do agree its not a one size fit all. I will let you all know of the outcome.  

My offer was reject but I am not disappointed because I felt I made a good offer. This one was not for me and there will be many more :)

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