Home Buying in Sky Valley>Question Details

Diane, Other/Just Looking in La Quinta, CA

I'm bidding against three others in a short sale for rental home on 5 acres. What can I bid to win if asking price is too high?

Asked by Diane, La Quinta, CA Wed May 18, 2011

I was figuring I'd pay an additional $10k for land appreciation but this is an exception to cash flow formula. Still, asking price is $20k above recent sold homes. I love this street - my favorite in the whole era, so have to watch out for personal feelings interfering with investment criteria.

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Hi Diane,
I cannot comment on price without knowledge of the property. The other factors in getting your offer accepted are financing terms, length of escrow and contigencies. If the price is over comps there is a good chance the property won't appraise. If you are a cash buyer you will have a leg up. If not, the larger the down payment the better. I would propose the shortest ecrow period and minimize contingencies. The cleaner the offer the better. Hope that helps and good luck.
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0 votes Thank Flag Link Wed May 18, 2011
You may want to look at the property as something other than what it is now, the typical Donald Trump acquisition approach. Can you subdivide the 5 acres, improve the structure, or do anything else to instantly increase its value after you take possession?
I think you already know that if the property doesn't appraise for the asking price your lender, if you are using a mortgage (and I really hope you're not...) will ask you to come in with extra cash to cover the difference.
Unless you absolutely must have this property and have the money to over-pay based on current value, look ahead to predict (with some level of risk) if the property will be worth the current asking price in the future. If the property is truly in a great location, someone will take that approach and pay full price.
0 votes Thank Flag Link Wed May 18, 2011
If you are unwilling to win on price, which is what your question suggests, then you have to win on terms. Banks will love it if you get rid of all contingencies and pay cash. Otherwise you are going to have to pay more than you might feel it is worth.

Of course if there are three other people bidding on the property, maybe it is worth more than you might think.
0 votes Thank Flag Link Wed May 18, 2011
lower your expectation on ROI !
0 votes Thank Flag Link Wed May 18, 2011
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