Home Buying in Excelsior>Question Details

Tlstone722, Home Buyer in Eden Prairie, MN

I am considereing making an offer on a REO property that was once our family home.

Asked by Tlstone722, Eden Prairie, MN Tue Jun 14, 2011

Emotions aside, this home has been neglected for the last 30 years and is now in need of major repairs. I am in contact with the neighbors - some of which were neighbors when we lived there and family members who are still in the area. Everyone is telling me that the home also has a mold issues.

When submitting an offer, 1) is it best to provide "estimates" for the repairs to substantiate the "low offer" and 2) regarding the mold - do I bring that up in the offer or re-address after the inspection? If the mold turns out to be extensive, can the offer be withdrawn?

Not sure how to proceed. The home has not been listed on the MLS yet. So not sure what the asking price will be but do have a good idea on the market for that area.

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Answers

6
Many of these REO homes are moving quickly in Excelsior. You should be ready to move quickly. We can find out who holds the mortgage, when it may be listed and with whom. You want to be first in line with an offer.

The owner (could be several depending on how the mortgage was pieced out) will do an appraisal and / or a Brokers Professional Opinion (BPO) of the property so they are aware of the condition.

Usually we work these problems backwards starting with market value if the home were in great shape. Subtract the cost of renovation (you need to walk through with a reno contractor). Subtract another 10% (at least) for contingencies. Now you have an idea of what a reasonable offer might be.

If there are mold issues this home may not qualify for financing. Are you paying cash? Some of our lenders may offer a construciton loan to fund you though the reno period then change to traditional financing.
0 votes Thank Flag Link Wed Jun 15, 2011
Very likely, the price will reflect the condition of the home. Foreclosure pricing has become much more competitive. Excelsior is a popular area and if this home is well-located, it is quite probable that it will sell quickly. Last week a foreclosure home in the area had multiple offers in the first day and it was in horrible condition. Some banks are waiting for a week to accept offers. You want to be ready to act quickly. Cover all of your bases. Ask the neighbors to inform you of activity. Most often signs are NOT posted in the yard. However, usually notices are posted at the front door including presence of mold. Contact a realtor to help you through the process. Realtors have immediate notice of newly listed homes. Have a "Saved Search" on a real estate website so you are informed as soon as new homes are listed in the area. Have financing in place. If a cash offer, have a letter/statement from a financial institution indicating your ability to purchase. If at all possible, have a reliable contractor visit the home with you.
Good luck!
0 votes Thank Flag Link Wed Jun 15, 2011
It cannot hurt to provide estimates to back up your low offer. There is no guarantee that the bank will consider them, but it can not hurt. As long as any and all inspections are a contingency in the contract, you do not have to specifically address the possibility of a mold issue. If you know there is a mold problem, including it makes it perfectly clear that ot is a deal breaker for you. However, actually mentioning a mold issue or inspection may scare the bank and they may not accept your offer, thinking you are going to be asking them to pay for mold remediation, which can be quite expensive. If you have not mentioned the mold inspection specifically, but have made it clear that your offer is contingent on any inspection you choose to have done, then you are protected if the mold is an issue, and the chances of the bank accepting your offer may be better. If your offer is accepted, and the mold report is bad, you have a better chance of getting them to help pay to have it taken care of. The old "bird in the hand" analogy fits in this case. The bank would rather work with a buyer and offer they have accepted then start over. Good Luck
0 votes Thank Flag Link Tue Jun 14, 2011
The mold issue will already be taken into consideration or will be addressed eventually. It sounds like aren't working with a realtor. It's especially important to work with a realtor that has experience with bank owned homes since they can present many obstacles such as the financing one mentioned below.

The seller pays the sales commission so you shouldn't hesitate to find a realtor that can assist you with purchasing the home.

Also, banks don't want to negotiate anything other than the net sales price and closing date. These properties often move fast so be prepared to do so as well.

Good luck.
0 votes Thank Flag Link Tue Jun 14, 2011
You will have to wait for the property to go on the market to make an offer. As a fellow REO listing agent I would be happy to see what I can find out about the property and who will be listing it (shoot me an email at address below). Sometimes we can get you to the "head of the line" when it comes to an offer.

Yes, you should always be able to justify your offer. Understand that the lender knows the condition of the property as well and will likely have some estimates of their own. Today almost all REO properties allow for an inspection so that is not an issue. But if the mold is obvious I would address that with the initial offer.

These properties are very popular and it is not uncommon to see multiple offers even if in lesser condition. Just had one of my own that had a total of 6 offers in 5 days and eventually sold for $15,000 over asking price.

And it needed a fair amount of work.

If you make an offer based on condition and current market value you should be fine. That won't be low balling. If you make an offer and can't justify it to the bank they will likely turn you down. They are very good at waiting for the next offer.

Good luck and again, if I can be of assistance let me know.

Steele V. Propp
Foreclosure Specialist
REO Division
Home Avenue Real Estate
steelep@aol.com
612-325-6764
0 votes Thank Flag Link Tue Jun 14, 2011
I'm guessing from your email that you have not been in the home. Until you see the condition of the home, it's difficult to know where to put in an offer. I have worked with many buyers buying REO homes. Usually, if there is a mold issue, the Bank is well aware of the problem and it will be disclosed. The other thing to be concerned about if there is a mold issue, will be getting financing for the home. Unless you're planning to pay cash, many lenders will not loan money if there is a known mold issue.
Make sure you have a search going to notify you as soon as this home comes on the market. Then get in there and look at it, and you'll have a better idea about what needs to be done and how extensive the damage is.
0 votes Thank Flag Link Tue Jun 14, 2011
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