I'm about to make my first offer and I'm nervous

11 Replies

Ok. So I'm about to go see a foreclosure. They're asking for 70 and the comps are a 240 at the low end. There may be a contractor meet me there. I've applied the 70% rule which I changed to the 50% rule just to make sure and this place passes on that front. 

I'm still waiting on my estimating rehab costs book from BP. I'm going to look for foundation issues, mold, water damage, fire damage, roof, age of materials, etc etc. 

I have 45 saved and I'll need to finance the rest. Again the ARV is 240.

Assuming the house needs 50 in work, what's my next step? How do I get the renovation loan(?) that I'll need to fix the house? 

James Canoy

    We sometimes write the offer for more then the asking price and ask the seller to give it back as a concession to update the property. With the spread you have and cash in the bank you should be good on the project.

    Eric Burch, Contractor in AR (#0204630817)

      This post has been removed.

      Not saying it's impossible, but curious how this made it to MLS if there's so much profit to be made? Are you under estimating the repairs or over estimating the comps?

      Originally posted by @Matt K. :

      Not saying it's impossible, but curious how this made it to MLS if there's so much profit to be made? Are you under estimating the repairs or over estimating the comps?

      It's a foreclosure in NY I'm not sure how that plays into it. I haven't even estimated repairs I'm just going off the 70% rule or my own conservative 50% rule. THe ARV is actually on the pessimistic side.

      James Canoy

        Isn't repair costs a significant part of using the 70% rule ? I don't flip so forgive me if this is wrong.

        Originally posted by @Matt K. :

        Isn't repair costs a significant part of using the 70% rule ? I don't flip so forgive me if this is wrong.

         It is. That's part of why I was undercalculating the max I was willing to pay. But this place had so much wiggle room I didn't trust it. Someone was quicker than I anyway and I lost it.

        James Canoy

          You should keep an eye on it and maybe see it again if it goes for sale. But you'd need to at least have some kind of idea of what construction costs would be to make an offer. I have zero idea of the details of this house but what if something funky was up with it and it needed something like 

          70k list

          30k foundation repairs

          150k inteior (which could be low that's 100/sqft and 1500 sqft for easy math).

          Now you're already over or at your company depending on how you bid. You're also only going to have costs for the loan etc.

          I know you said 50k repair est but curious how you came up with that. 240k would likely either be a decently size house or likely some mid to higher end finishing both of wich going to increase costs. Again I know nothing of your market nor any details of the house just working with the limited info I have.

          For point of reference Nat average to rebuild is around 200-250 a sqft probably more now with all the construction going around around the country.

          Hey James. Looks like it could be a promising deal. Be sure your contractor understands the mitigation required for a fire-damaged home. It isn't as simple as tearing it out and replacing it. 

          Unless the fire stopped on its own, there was a heavy amount of water being sprayed into the home and that brings additional damages & hazards that you need to be aware of (wood rot, mold, etc.)

          are you sure this is a first and not a second

          John Thedford, Real Estate Agent in FL (#BK3098153)

          Originally posted by @John Thedford :

          are you sure this is a first and not a second

           Oh it's a first. I am curious about why you would think it was a second though. 

          James Canoy

            Originally posted by @James Canoy :
            Originally posted by @John Thedford:

            are you sure this is a first and not a second

             Oh it's a first. I am curious about why you would think it was a second though. 

             I didn't know what position and was curious. 

            John Thedford, Real Estate Agent in FL (#BK3098153)

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