Foreclosure in Detroit>Question Details

Chris, Home Buyer in Royal Oak, MI

How to determine price to offer on foreclosure in expensive area needing work e.g roof, windows, etc?

Asked by Chris, Royal Oak, MI Mon Oct 29, 2007

House has no appliances and needs basic, albeit expensive repairs including new roof, new windows, rotting wood, and replacement pipes. Seems like a good investment because its in a historic area, but not if the repair costs bring the price back up to the comps. The house is currently in my price range, but only because it's a foreclosure with the damage noted above. Should I attempt this? Please advise.

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Hi Chris,
How much time and money do you want to invest in a foreclosure to rent/flip? This is an equally important tangible as the home's value. The worst possible scenario is you getting burnt-out or over-spent on repairs that you simply foreclose. Make sure your family/friends are supportive as you will quite possibly their help at some point.

Certainly, if you are up for the work... have your agent recommend an inspector. Also have your agent compile a list of sold comparables in the last 6 months. This will provide the final and most clear answer if your rehab is worth doing.

Best Wishes
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0 votes Thank Flag Link Tue Oct 30, 2007
Chris, Nicole gave you the best answer to your question so far. I've shown many foreclosed homes and most do not meet Freddie Mac lending requirements. This would not come up until the lender appraises the home.

If the home is within the City of Detroit, you will be required to complete an Affidavit of Compliance and Responsibility (ACR). All repairs noted by the City will have to be completed within 6 months. I would not submit an offer without reviewing a copy of the City's inspection report. More information is available on the City website I believe this is the correct Department
0 votes Thank Flag Link Tue Oct 30, 2007
Hi Chris ~ Besides the price, there are some other things to consider. Are you planning on getting a mortgage to purchase the property? Check with your lender. Most mortgage companies will not lend on a property that is not "livable". Also, how will you be paying for the repairs/updates? Do you have the cash available? There are some mortgage programs out there that will allow you to rehab the house but make sure you can qualify for that before you make an offer. Do you have living arrangements while you are working on the house? If you still have to make a rent payment, keep in mind that you will have the mortgage payment too. Although a foreclosure property sounds like a great deal, right now the best deals I am seeing are private sellers. The house is usually in great condition and they NEED to sell. Good luck!
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0 votes Thank Flag Link Tue Oct 30, 2007
Take the prices off my website and add 20% if substantial water damage wood, etc.
I am doing a few rebuilds like this in varying neighbourhoods, but the basis is always the same.

Send me an email, and I can send you a spreadhsheet of a project I sent in for a property closed last week.
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0 votes Thank Flag Link Tue Oct 30, 2007
I would get estimates on the repairs before I considered making an offer. Know as much as possible about your overall cost.
0 votes Thank Flag Link Tue Oct 30, 2007
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