Hi-- I'm very new to real estate investing. We just purchased our first home last fall and are now looking to make our first offer on an investment property. The property is in a very small city in South Carolina. It is an REO listed for $39k. It has an ARV of $145,000 and it needs approx. $80k of work (according the the general contractor we had give us a quote).
Our plans for the property are to rehab and sell quickly. The house has extensive damage and basically, according to the contractor, the only thing they will not be replacing is the framework, the foundation and the brick exterior. Everything else has to go. From what I can see based on completed sales, they are way over asking. So, I want to make an offer closer to $10k. I heard that when making lower offers on REOs, it was best to offer directly to the listing agent.
We have the cash to buy the house, so I called the listing agent, left a message and said we wanted to make an offer. In response, I got a call from the buyers agent (whose name is on the sign at the property). I do not want to work with this buyers agent. Since his name and number are on the sign at the property, I feel like he may be representing other buyers on the same property. I've called two agents and both suggested that with this property, I call the listing agent. So I'm back to square 1.
Not sure the best way to proceed. I don't have any other agent contacts to call, so at this point I feel like I'll either have to use the buyers agent, or call an agent at random to make an offer. Also, this particular buyers agent is a very new agent so I'm not sure how beneficial that would be to me.
Sorry for such a long question, thanks in advance for any advice you have!
many Reo agents don't deal with buyers myself included. They simply don't have time. That's sounds like an incredibly scary deal to me. With that much work the budget could increase significantly and it could take a very long time. After costs you might profit $35,000? Most likely much less.
@Mark Ferguson thank you for your response. Since its my first, I'm curious, what is a good profit margin? To me $35k sounds great but haven't done a deal yet. Should I be aiming higher?
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I had this problem only it went a bit further in that the listing agent wasnt dealing with my agent either. My first purchase in LA was finally achieved by me hunting the owner and getting him to get his listing agent to respond to my calls. That finally went through. Another seller I dealt with directly was Fannie Mae, again I made a complaint directly to them due to the non responsiveness of the listing agent and they too agreed to sell to me.
@Kim Book I just sent you an email.
I agree with @Mark Ferguson, as this flip barely pencils to me, and would have been very scary as my first. I believe it is human nature to underestimate costs (especially when it's not the contractors money being spent) and overestimate ARV (especially when looking for a quick sale) however if the numbers make sense to you, I hope you were way under on the ARV :)
As to the buyers agent, I was that young agent with the buyers sign on the REO before, and I can tell you nothing gets done by this agent without running it by the listing agent first. As Mark said, the listing agent is too busy dealing with the Banks constant requirements for updates, so they assign a junior agent to handle the buyers side. I would encourage you to work with the listed buyers agent, as ultimately he is a go between for you and the listing agent/bank. He may be talking with multiple buyers, but so could any other agent you speak with.
@Emily Snapp $35,000 is a great profit margin if the home needed $15,000 to $20,000 in repairs. I have done close to 100 flips and I have never spent more than $35,000 on a rehab. The higher the repair costs, the more risks. You have the cash to pay the contractor $80,000?
@Mike Sattem Looks like I may need to keep looking for another property. I really appreciate the insight.
@Mark Ferguson We would be purchasing the home with cash, but using hard money to pay the contractor. I'm feeling very thankful right now that I haven't put an offer in, thinking I am going to have to keep looking.
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Yes @Kim Book we tried to make an offer on a HUD home in Spartanburg last month, but it sold during the Owner Occupant phase. We also made an offer on one before Christmas, and the same thing happened. They couldn't consider our offer until after the Owner Occupants, and we missed out.
@Emily Snapp - Regardless of the issue about agents:
I'm an experienced rehabber, and I would shy away from this deal that might need so much in repairs.
Thanks @Bryan L. I see now that this is not the deal for us!
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