After having our buyers agent do a CMA, she would list the house for 190K. The house is structurally sound but the inside is in poor condition. It was built in the 70s and needs new plumbing, mix of hardwood floors, carpet, and tile, all the bathrooms updated (3), the drywall cleaned, scraped and painted, insulation added under the house, all new kitchen appliances (all were taken by the owner), new AC unit as one of the two were stolen (2-story house) , GFI's in all the rooms, ceiling fans, debating about new cabinets or just sanding and painting cabinets and putting new fixtures. We have a good friend who is a contractor and has friends who can do the work. They have already walked the house and We are getting an estimate on Monday but wanted to know others thoughts on how much this will all cost.
Do you think our highest offer (103K with bank paying closing cost) is strong enough to counter act a cash buyer. My question is how do we compete with a person who offers cash. I know it's all about ROI. I'm assuming they are an investor and will flip the house so what's our best strategy?
Charlotte foreclosure market is fairly strong right now. Waiting and making lots of counteroffers only increases the possibility that another buyer comes along with an offer of an unknown amount resulting in the seller notifying you that there are multiple offers and to submit your highest and best offer. We generally advise to submit your best offer sooner than later. If you appreciate an answer, please give "thumbs up". For the most helpful answer, please say thanks with a "best answer" click.
I agree with Lisa...you do not need to point out to the asset manager and listing agent what the house needs, they know. They check that out before putting the house on the market. That is why the home is priced where it is and not at $200K since that is what the comps show for the home.
The bank has certain numbers that they need to reach. The have a number of sales that they need to get to and also a percent of the sales price that they expect to get. If you best offer meets that numbers for them then they will accept it. If the number does not work for them then they will not accept the offer. The good part is with a bank those numbers change over time so if they do not work now you can always check bank with them in the future...if no one else decides to buy it.
There is nothing to point out with the bank. When it comes to REOs, you are usually dealing with corporations where one person is assigned that specific home, or asset. That one person may have 20-30 files or assets on their desk at any given time. Unfortunately, submitting a cover letter and 'pointing things out to the bank' will not be looked at by anyone but the seller's agent. They don't care, and its not personal to them...its personal to you and you alone.
When a bank prices their assets, they usually have the listing agent and another broker in the area submit opinions of value and what they suggest the home should be listed at. Sometimes, the bank will also send out an appraiser. If the home is highly damaged, an insurance adjuster may also send a report to the bank. In these opinions of value, there will be pictures, a list of repairs needed to bring the home up to a loanable condition, and comps in various conditions. Its up to the bank what price to ultimately start with. If they have no offers, a reduction will likely take place every 30-45 days until it sells. Remember: this is not an emotional or personal issue with the bank. Its nothing more than an asset. They do require your pre-approval or proof of funds, but a cover letter is a waste of time and energy. Banks can take 3-5 days to get back to you for an REO, but its not uncommon for a response the same day, depending on which bank owns the asset. Some banks do give preference to cash offers and are leary of rennovation or 203k loans...others it doesn't matter. If its in that poor of condition, are you sure it will be loanable with a conventional loan?
I do understand your frustration, though. The home is only worth what you are willing to pay for it. You might think it needs 60k of work, but someone else may think it only needs 30k of work. Some people do their own renovations and others hire out a contractor. Rennovations can add up, too! Granite counters are much more expensive than formica. And bathrooms can get expensive very quickly!!
I think a highest and best of 95 or 100k is reasonable, and would bring an accepted offer...but don't take too long to decide what to do. If another offer comes in, all bets could be off and they will ask for everyone's highest and best. Its easy to be beat by one dollar in those situations, and if the home is a good deal and just reduced, there will probably be more showings!
Investors calculate their offers on these properties by using a formula that goes like this "After fix up value, less cost of repairs, less XX% (financial incentive). As long as your offer includes an incentive that is less than what investors will expect the bank should be thanking you. They won't, but they should be!