All Forum Posts by: Vikram C.

Scott, I have actually analyzed the average SS discount and the average REO discount on properties here in Maricopa County for the East Valley. SS discounts are, on average, a little higher than the REO discounts. The reason that makes economic sense as well is because the bank is going to lose money the longer they let the process drag on, so it makes sense for them to accept a lower price earlier.

The exception to this, of course, is the REO that has deteriorated in condition and is no longer suitable for move-in. Those, as you have mentioned, sell for a lower price.

I agree with Bryan that China is not as stable an economy as one might think, but I also agree with Charles that they are, overall, headed in the right direction and have a good long-term future. An economy that was one of the two wealthiest countries in the world for about 85% of the last two millenia is not one to be ruled out.

One interesting aspect of the way government officials are selected in China is that it is a meritocracy, although it is not a market-determined meritocracy. They have an elaborate point system and people get promoted based on points. This is a bit like selecting our politicians based on SAT scores - very imperfect, but at least you get the smart ones in office instead of the weird politicians that most democracies seem to have.

But I do think they will face several shocks over the next few decades as they transition from a controlled economy to a free market. I also wonder how they will handle the increasing demands by a more affluent and educated public for more personal freedoms. Singapore and S Korea have managed their transitions well so I suspect China also has a chance to pull it off, although it will be harder for them than it was for the more easily manageable countries.

The reason a lower percentage of SS listings end up in escrow compared to REOs is because an REO does eventually have to go into escrow whereas a SS can end up in foreclosure.

Converting points to an effective interest rate would depend on your typical holding period. My holding period is around 3 months, so I multiply points by 4 and then add that to the interest rate to figure out my effective annualized interest rate.

So, in the example above of a 15% interest and 5% points, that is equivalent to a 35% interest rate with no points. (Because, over the course of a year, I would end up paying points four times during the year.)

In reality, of course, I have never paid points, but if I were to, that would be my calculation method.

Regarding a fair return to an investor, it really is whatever return will (a) attract that investor to do more deals with you in the future, (b) cause the investor to tell other investors about your great opportunity so that you get more and more investors contacting you and (c) leave you with enough margin that you are also happy to do more such deals in the future.

The ultimate goal is to figure out how you can maximize your career earnings.

Thanks for the feedback, guys. This is a 1938 house in a historic neighborhood in the east coast - very desirable area for a flip because properties sell quickly at good prices once renovated. All the nearby homes are from the same era or have undergone a complete renovation.

From the information you guys have given, it seems as if my decision would be based on whether the tank has leaked or not. Is it possible to identify a leak under the tank without first removing the tank, or would I need to spend the money to remove the tank first in order to figure out whether there is a leak under it?

We worked on this a while back and after looking at all of them, could not find a single one that was priced attractively enough. There were a few that looked promising on initial analysis, but on further investigation, they turned out to be not such great deals.

Thanks, Jake. Does the company you use provide service out of state? If it does, I would definitely appreciate the referral.

Thanks for the information, Dale. We will make sure we check those things during our inspection period. Looks like it has the potential to be quite expensive.

We just finished negotiating the price and the seller has revealed at the last moment that there is an underground storage tank in the property. Our offer price did not take into consideration the cost of dealing with that issue and we are debating whether to reduce the offer price, walk away from the deal or sign it as it is.

Has any of you dealt with a UST before? I am concerned about the following:

1. The cost of finding and fixing a leak if there is one that can be detected without removing the tank,

2. The cost of filling the tank with sand, cement, foam, etc.

3. Whether a buyer would be put off by the very existence of the tank even if there is no leak that we find and we fill the tank.

4. Whether banks are reluctant to lend on such properties (which would reduce our pool of buyers).

5. Worst case, how much would it cost to remove the whole thing? When we remove it, if we discover a leak at the bottom of the tank, could it result in much higher expenses than a surface leak because the oil could have seeped into the ground and be very expensive to fix?

6. Does it take a lot of time and money to deal with leaks - reporting to some government bureaucracy, etc?

I have never flipped an older property before so I have not encountered these types of issues until now. Any advice / guidance would be much appreciated. Thanks!

Deceit is never a good thing but I don't see how you lose much from it since you have figured it out. In any event, you should never go based on what the other party's agent says to you. Perhaps her deceit will work in your favor by putting more pressure on her to get a quick response to your offer.