What would you offer for this big REO?

Question

Big house in the country with very few comps because of its size and location. Bank asking $225k. It's been on the market for 5 months. Needs about $30k in cosmetic work. Built in 2003. Should rent for near $3k/mo. Retail value very tough to know because of lack of comps. Tax value is low $300K's. Replacement cost is around $450k.

What would you offer?

Just Don · Answer

Remember as a rental BIG houses equal BIG repair expenses and big utility costs,,,will the market bear those on top of that kind of rent?  How easy is that price rental to get good tenants?? Big houses equals big families,,,I dont like those.

Gerald Levin · Answer

Jon,

Totally agree with Rich and with your above offer at $150k. If they reject just move upward $10k at a time. See it all the time on Pawn stars. Low ball offers are taken all the time. No different with banks.  You may get lucky.

Tod R. · Answer

Jon, I just emailed you a response from someone I've worked with for a long time.  He is experienced in land, development and purchasing bank REO's.

Jon Klaus · Answer

Regional bank with 20-30 N TX locations.  $150k?

To be clear, Rich, the mortgage commitment is to me and not for this property, specifically.

Rich Weese · Answer

MAKE AN OFFER!!!!!! I see no downside on this deal as far as getting started with an offer. If you are comfortable with the amount of rent you think you're going to obtain, how can you lose? If the bank is offering financing on it, you know they are motivated to sell and there aren't going to be hundreds of buyers lined up around the block to make an offer. I really think you are in the driver seat on this. Not to belabor the point, but didn't you buy something like this already for your own residence? Maybe I'm confusing something as I sometimes do. I'd probably offer some were under 200,000 and if this is a local bank, I'd also tied the interest rate you want into your offer. You are aware that a local bank has the ability to pretty much do what they want and you might get a win-win situation on price and rate. Good luck Jon. Rich

Tod R. · Answer

Is it a small local bank?  If so, you may have more flexibility to go in low to see if they will consider.  If larger bank, then you probably don't get to negotiate too much.

Jon Klaus · Answer

I can do that Tod, but the house is still twice as big as most of the custome homes for miles. Now 30 minutes away in Dallas suburbs there are similar homes but completely different areas as far as comps are concerned.  Actually, I'm not so concerned with the comps as with how much the bank might take for it.

Tod R. · Answer

I know these are tough comps.  I've had the same problem of no good comps with a custom home on acreage. I had the appraiser break it into pieces, the homesite and then the land.  Can you find a comp of just the home without acreage, then value the land separately?

Jon Klaus · Answer

There is additional acreage around it available from a different seller. It should be divisible. I'll make an offer on that too, as I have a pretty good idea to its value. I'd rent out the house while I divide and sell lots.   And here's a twist. I have a mortgage commitment from the same bank that owns the REO.  Not for this property specifically, but any investment home I might buy.

Rich Weese · Answer

Morning Jon- Is this the one for owner occupancy? Acreage? Any ability to split?Is extra land valuable if any?  Financing or cash? If you can get a decent loan, it looks like great cash flow! Rich