I've got an issue that might turn out to be good for someone willing to help out a newbie. Here's the situation:
Perousing the internet and MLS I found a very distressed property that had only been online for about 6 hrs and I put in an offer; The issue is, I don't know what the heck I'm doing. I got motivated to take action and bit off more than I can chew.
I live in Portland Oregon, and the property was listed for 209k. 3/1 1550 sqft. I sent a message to a realtor offering 120k. They got back to me and asked a bunch of questions and I spoke to them as if I knew what I was doing and told them I would be paying cash. Comps in the area are conservatively 225k. ((*side note* the MLS page had verbiage"All properties are subject to a 5% buyer's premium pursuant to the Event Agreement and Terms & Conditions (minimums will apply)."))
My initial thought and strategy was that I could find an investor to purchase and do a double close type transaction where I would use transactional funding to purchase under an LLC, and then sell the LLC to the investor for my "assignment fee." My hang up is
1) I've never done a deal before and I don't feel confident going through this transaction solo at this time.
2) I'm not sure what I want to do is legal, or if I need to disclose all of this information to the agent, the other investor or if I should try to find someone to JV with me on the deal. ( If I do JV, how do I ensure I get compensated?) [I mostly want the experience and I would be willing to take a smaller cut on the pie]
3) Oddly enough the agent just text me and tells me that this is owned by the bank and there will be an auction for the property this Wednesday 11/22/17. He says he'll call me and bid as I tell him to.
4) Are there other elements to this that I am completely oblivious to?
In a round-about way, I'm asking for help and looking to see if I should completely back out of this or if there is someone in the Portland area willing to help out a newbie and gain a property along the way while also increasing your network. Any help with this would be greatly appreciated, thanks in advance.
I got nothing to offer because I don’t even know where to begin with this one...
“Listed” at $209k, agent actually replied to lowball of $120k, yet house is actually for auction...what could possibly go wrong?
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@Thomas Burnett , not trying to burst Aaron's entertainment balloon, but as far as I can tell, you're not in anything yet, so do not need to get out of it, right?
Before today is out, just let that Agent know that you will not be proceeding with your previously expressed interest. [If helpful, admit to them that you were lying! Chances are, they won't care, because in all likelihood $120k won't cut it anyway].
And here's the kicker: If the Bank and their Agent can't find anyone to pay more than $120k, what is it about this deal that they know, but you don't?
Next: Never make any bid unless you can and will go through with it! Good luck...
this is an auction .com property subject to overbid.. the chances of you getting this for that price are slim
not only that you will need non refundable EM of at least 3% and you have to close in the name that the contract is in.. no assignments this keeps the wholesalers at bay..
properties just don't sell that deep of discount in the uber hot Portland market.. at least not on MLS heck lots sell for 100 to 150 k with nothing on them :)
Auction.com is just trying to get a commission from the seller (bank). They will actually call you if you are not even in the ballpark of the reserve. I bid on a couple of properties on the website for what I thought the property was worth and someone kept bidding it up. I find out later it is auction.com that bids it up in hopes that you meet the banks reserve price. I got a phone call from them once telling me I was the only one bidding and the reserve was 3-4x my bid. I told them I couldn’t even sell the property fixed up for the amount of the banks reserve.
Later after 6-12 attempts of them trying to auction it off, my realtor let me know the property was assigned to him with the same ridiculous reserve. Eventually he convinced the bank to reduce by 50% and I still low balled them. They countered and I accepted. The point is that you might have to wait a while before you get the property at the price you want to pay.
When you see the words "buyers premium" you are dealing with an auction.
You sent an email, you didn't make an offer... offers in the pre-auction scenario are in writing, accompanied by fully executed terms of sale, a large deposit, and an executed contract.
Thanks for all the info everyone. I know that I'm not really on the hook for anything right now, and that I should have a better plan going into it including the means to carry out this type of deal. When I heard the auction update everything became more clear that this deal wasn't what I thought it was and I was much less likely to get very deep into the process.
Btw, maybe give the name of the agent out because that's the person you want to be avoiding...
@Thomas Burnett what made you think they would even entertain the offer of $120K on a $209K ask, 6 hours after it was listed? What made you even think to offer that? If this is how you plan to purchase properties, I would rethink your strategy... Sounds like you are in a hot selling market and these types of offers will never fly. If you plan to actually try and buy something, I would get networking on how yo get the money first.
I would also caution against the strategy of purchasing property in an LLC, and then selling the LLC to an investor. We've bought property that way, but it wasn't clean and there was a risk that there were debts or other judgements attached to the LLC that we didn't know about.
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