Newbie Here - This a No Brainer Fix and Flip DEAL? Right?

Boston, MA · Member since 2015 · 46 posts · 5 votes

This is a no brainer FIX and FLIP. Am I right? Not a bad area. 80K owed to the bank per the county assessors website. Asking price of 129K. Comps between 210 and 370K.

Used the flip calculator with conservative numbers and this deal is screaming $$$$ at me. Am I missing something?

Help me out BP!

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Michael Miele

Investor · Marlborough, MA · Member since 2016 · 28 posts · 11 votes

@Michael Brown

Im a Realtor in Marlborough and I flip houses. I know the house your talking about. My target sale price would be $299K if I were doing the numbers. You may get $325K but $299K it would sell quick. I did a quick look on masslandrecords dot com and in 2004 they mortgaged $185K then in 2005 -$53K and in 2006 -$80K. The loans from 2005 and 2006 look to have been paid off this past year so you'd only be dealing with the first mortgage of $185K from 13 years ago. I have listed short sales in the past. In my experience the bank won't even entertain a short sale until there is an offer on the table. Thats why some agents price the house low so they can get the ball rolling with the bank. If you submit a full price offer the bank will then get BPO's done and thats what they will base their value at. So in the end the bank may want $160K for the house and if no one offers that then they will foreclose and sell it on their own.

Also on the listing it says the buyer has to pay $5,000 towards negotiating fees and that money can't be financed. I hate when agents do this. Things may have changed but when I listed short sales I had the bank pay the sellers attorney fees who was doing the negotiating.

I would do your numbers and submit an offer at what works for you.

Hope this helps.

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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
@Brandon Turner
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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
9y
Michael,
Are there other liens attached to the property. 129 + 80 = 209. Comps are 210-370. That's a big spread. How much is the rehab, cost of money to use to hold or rehab. Property taxes. Cost of broker fees, utilities, permits, etc. You need to narrow down the comp so you don't assume its a great deal. What is the average DOM (Days on Market). I know someone who bought in Ohio and the average DOM was 360 days. So much for a great deal.
Good Luck.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
@Kenneth Garrett The bank is asking for 129K, but according to the assessors site, they are only owed 80K, meaning they are asking for 40K over what they are owed. Not adding them together lol
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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
9y
Sorry I must be tired. Just check all of your numbers to make sure and narrow down the comps.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
Well even with a 210K comp (the lowest most conservative comp) that leaves me with an 80K buffer (assuming I was to pay the asking price) Marlborough, Massachusetts
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Lydia S.
Real Estate Agent · Albuquerque, NM · Member since 2015 · 542 posts · 193 votes
9y
Michael Brown Would this be a short sale, or an REO? Has the property been vacant a long time, which I ask as the potential for increased repair costs need to be considered with long-term vacancies, such as cracked plumbing from freezing, etc. Just some thoughts. And I agree that you need to get a tighter ARV to help with your calculations. Keep analyzing!! Maybe it's worth pursuing.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
Lydia S. It says that it's a short sale.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
"Short sale,home being sold as is. The home needs an interior rehab.Purchase with a 203k renovation loan. There will be no showings until the open house on Saturday, January 7, 2017. Offers should not be submitted until after the open house on Sunday, January 8, 2017. Please make offers valid until Tuesday, January 10, 2017."
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Rod HanksBusiness Member
Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
9y
Can't tell if this is a deal without your repair numbers and ARV. Generally, if you take the after repair value (ARV) times 70% and subtract your repair cost you will get your maximum allowable offer (MAO). If the asking price is at or below that number then it's a good deal. Find out what the true ARV is and the true repair costs are and you will have your answer.
Rod Hanks Insurance4.9153 Reviews
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Steve Milford
Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
9y
@Michael Brown
Go find a Broker that you trust. You have until January 8th to find one.
I recommend an in-depth title search - assessor web sites usually have the 1st mortgage on a property - not any subsequent refinancing.
Nail down those comps. Most of the time true comps are within $50k (around here anyways - and our market is swift).
"Short sale" = anything including fantasy land teaser price. "Short sale with bank-approved price" is something different. Is there a carve out fee? Look behind the curtain - this is where a broker is valuable! If the carve out is $40k - that kind of throws a wrench in your engine. Consider everything to be buyer-beware.
Can you accept the AS-IS condition? If not, then it is not even worth your time. This statement, "The home needs an interior rehab" sounds fishy to me. GO LOOK, YES LOOK AT THE PROPERTY, NOT JUST THE PICTURES, ESPECIALLY THE BATHROOMS AND THE KITCHEN. I can't emphasize this enough. Go smell the rooms, bounce on the floors to make sure that they are not soft, look up.... Get out from behind the computer!
Good luck.
Steve
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Ryan K.
Investor · Richmond, VA · Member since 2015 · 139 posts · 43 votes
9y
A few things to consider -
If the listings states "Short Sale" then the list price could be a teaser price, I've seen some MLS listings recently in my market that were no brainers, but sold within a day or two for well over asking price.
If they only owe $80k and asking $129k then thats not a short sale unless I'm missing something?
Short sales can be a hassle if the bank drags their feet, expect long delays and 6-12 month to close.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
I just went and drove by the property. It's on a street directly behind a main road with a bunch of businesses (helps explain the LOW price). Would end up offering way lower than the asking price for that reason alone. Not excited about this deal anymore.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
Bids will likely go higher than ask and the biggest issue is always the hidden structural damage.
Still money to be made for a experienced flipper with a crew in place ready to get in and out quickly.
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John CasmonPro Member
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
9y
What's the rehab and holding costs and how did you arrive at them? Hard for us to provide valuable feedback without understanding these figures.
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Deren Huang
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
9y
Michael Brown I haven't read all the responses but if it is a short sale, the bank may not even approve the price point. This may be a strategy to get a ton of bids on the price and for the broker to pick up some buyer leads Also, what does the inside look like and what repairs need to be done
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Linda S.
Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
9y
@Michael Brown,
What's the address? Maybe we can help more with pictures.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
...the link is above in the first post: "DEAL"!
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
0 Reply
Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
0 Reply
Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
@Linda S.
Ok. Here is a more informed post. I am currently looking at a potential house in Marlborough, MA for my first flip opportunity! It is a house built back in 1890!!!. My question is the following:
Can you guys check out a FLIP Calculator Analysis I put together (below) and let me know your thoughts? I have not been in the house yet (the open house is tomorrow 1/7/17 and 1/8/17, but I literally went through every cost in J Scotts book on Rehab Costs and assumed the worst. I was hoping to get insight/expertise from people who have flipped houses. Here are the comps I used to get an ARV (Comp 1, Comp 2, Comp 3) that I felt were most similar (using J Scotts comp. technique). I know I didn't use sales within the last 6 months for Comp 1 and 2, but Comp 1 is literally on the same exact street (which is key because the street is just off a busy street with a bunch of businesses). It sold for $270,000 a couple years ago, and is currently worth 340K. Anyways see the "Analysis" below, and let me know what you guys think!
Here is the Zillow link to the house: House
and here is the analysis link: Analysis
Thank you guys!
Michael A. Brown, CPA
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Michael Miele
Investor · Marlborough, MA · Member since 2016 · 28 posts · 11 votes
9y
@Michael Brown
Im a Realtor in Marlborough and I flip houses. I know the house your talking about. My target sale price would be $299K if I were doing the numbers. You may get $325K but $299K it would sell quick. I did a quick look on masslandrecords dot com and in 2004 they mortgaged $185K then in 2005 -$53K and in 2006 -$80K. The loans from 2005 and 2006 look to have been paid off this past year so you'd only be dealing with the first mortgage of $185K from 13 years ago. I have listed short sales in the past. In my experience the bank won't even entertain a short sale until there is an offer on the table. Thats why some agents price the house low so they can get the ball rolling with the bank. If you submit a full price offer the bank will then get BPO's done and thats what they will base their value at. So in the end the bank may want $160K for the house and if no one offers that then they will foreclose and sell it on their own.
Also on the listing it says the buyer has to pay $5,000 towards negotiating fees and that money can't be financed. I hate when agents do this. Things may have changed but when I listed short sales I had the bank pay the sellers attorney fees who was doing the negotiating.
I would do your numbers and submit an offer at what works for you.
Hope this helps.
1 Reply
Michael Miele
Investor · Marlborough, MA · Member since 2016 · 28 posts · 11 votes
9y
@Michael Brown
I would not use comps more than 6 months old. Maybe stretch it to 9 months but when the bank does an appraisal they're going to want no more than 6 months from the appraiser. Heres a perfect comp for you. This house is at the corner of a four way stop. really busy road. Someone flipped it and it had an offer accepted in 7 days. List price $299K and sold for $300K Comp
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Denise Evans
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
9y
Some banks pre-approve short sale without an offer. Usually, HUD-insured loans are eligible for pre-approval, which will come back at 95% of current appraisal for any offer received in the first 30 days, 90% of current appraisal for any offer received between 31 and 60 days, and 85% of current appraisal for any offer received after 61 days.
There are other times when pre-approval is available, depending on investor or insurer guidelines, and whether it is a portfolio loan (owned by servicing company) or not.
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Michael Brown
OP
Boston, MA · Member since 2015 · 46 posts · 5 votes
9y
@Michael Miele Thanks for your advice. I just looked at the mass land records. Trying to make sense of everything you said. If I am understanding you correctly, what you are saying is, is that the house is just sitting there "under water", and the realtor is listing the house at a super cheap price (less than what is owed - i.e short sale), and having an open house (teasing buyers) in hopes of lighting a fire under the bank to get the foreclosure process going?
Also when you say "in the listing it says the buyer has to pay $5,000 towards negotiating fees and that money can't be financed" - is this on the MLS? or where do I see that?
Do you think this is a good flip opportunity?
Here is deal with an updated 299K ARV Press This
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Steve Milford
Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
9y
Ok @Michael Brown let's go back to your numbers based on what we know right now...btw the neg fee info is usually in the private agent notes in the MLS (it is usually for us). That's why you need a local Realtor on "your team".
1) The list price is a fictional thing - it's a made up number from the Realtor. We don't know what the bank will agree too.
2) A $5,000 cash payment is needed at closing from the buyer. It's a trustee or negotiator payment - that is why it is not in the deal.
3) The mortgage most likely is right around $185k +/-. Let's say we go with $300k for resale.
So let's revisit realistically. $300k (sales price) -$5k (neg fee)-$81k (rehab) = - $8.8 (holding fees) - $5 (closing costs twice) - 18k (Realtor fees) = $182,200 - $20,000 profit = You will want to pay a max of $162k to make the profit you want. Now the big question of the day is, will the bank accept that? There is no way to know for sure until you submit an offer that sticks and work through the process. If you offer, it gets accepted, and you are wrong - the bank holds your EM until they tell you that they will not accept your price +/- 6+ months from now.
Is this a good deal?
Well, it would be to me if you can get the home for less than $162k. And that is still a big if.
Steve
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