You take the ARV and subtract the repair costs. That's the maximum you should pay for the house. Probably offer less. Your Realtor can advise you.
As the others note, your estimate of $50,000 in rehab costs may be too high. It probably is. True story: A while back, on a Sunday, I looked at an open house. The property needed work--probably about $20,000 worth. There was nothing terribly wrong with it, but it really didn't show well. Fixed up, it'd probably have been worth about $600,000. After looking at that house, I went to another open house in the community. About 5 minutes later, someone else visited the second open house. The agents started talking to the person who'd just come in, and the potential buyer mentioned she'd been looking at other nearby houses. She said she'd seen one a few blocks away, but really couldn't consider it since it needed at least $100,000 in repairs. As she described the house to the agents, I realized she was describing the home I'd just looked at. She was grossly overestimating the amount of repairs.
That sort of thing happens all the time.
So, you need solid numbers on the ARV and on the needed repairs. Then you make an offer. Don't worry what your offer would be. What would be "wrong" would be offering too much whether that amount, in your case, is $100,000 or $90,000 or $80,000 or $70,000.
Hope that helps.
Get a 203k contractor to do your home inspection so that you have a estimate of the needed repairs. Check with your lender to find who they already have vetted to do 203k repairs.
David Cooper Investing in Las Vegas since 1994
Nathan T. Kessler | Sr. Loan Officer
City First Mortgage Services
8871 W Flamingo Rd Suite 202
Las Vegas, NV 89147
(C) 702.683.3126 | (F) 702.974.0848 | (O) 702-522-6743
Company NMLS # 3117 | Branch NMLS # 819501
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a construction crew on payroll, and are doing multiple repairs on distressed homes.
Doesn't pass the smell test!
David Cooper 702-499-7037
There are so many underpriced houses that are less than 5 years old in perfect condition at the $100,000 price range, that would be a better choice.
DAVID COOPER Professional Investor with "Since 1917 Realty".Call +1-702-739-8820...35 Years Experience . For a Free List of Low Priced Bargain Homes in Good Areas. GO TO http://www.lasvegaswinner.org
please see my blog for more info on buying foreclsoures
TIPS AND SECRETS ON BUYING FORECLOURES
Do you feel the homes current list price shows no reflection of adjustment for fair market value on other homes sold in the neighborhood? Did you have an agent run comparable sales in the neighborhood to see what other homes have sold for and what their condition was in comparison to the subject property?
The Seller ultimately picks the price and some REO's are way out there on their pricing. Most listing agents are asked to give an opinion of pricing which is double checked against a Broker Price opinion of value from a completely different real estate brokerage. The banks have made it clear; they are looking for Fair Market Value on their homes.
There are renovation loans out there. The most common renovation loans out today are called the 203 or 203k Home Renovation loans. Don't quote me on this; I am not a licensed loan officer. I am told those loans are not allowed to exceed 25-30k.
In my opinion, 20k has been enough to get a home back into livable operating condition. It might not get you granite countertops with the repairs you are looking at with your subject property. But you can get new countertops.
I doubt the bank is offering the rehabilitation loan you were told about. The Loss Mitigation department is moving an asset and Loan Origination is probably on a completely different floor if not a different building. Chances are the loan is being offered to you by a loan officer who knows the listing agent.
The question becomes, does the home really need 50k in repairs? If some of those costs are looked at as esthetics, your offer could simply get ignored. Figure out what other sold for and figure out what Fair Market Value would be.
Let me know if you need a hand.
Marketing Director/ Realtor
Waugh and Associates
however the bank may not accept your offer or someone else
may submit a higher offer.
I suggest you find out what the comparables in decent shape
are selling for and get estimates from contractors for the cost
of the needed repairs. Deduct the cost of the repairs from the
comparables and submit this offer.
Then submit the amount of the offer plus the cost of the repairs
to your lender to get a rehab loan. The lender will disburse funds
for the contractors as the repairs are completed.
I hope this helps. Should you need any assistance please don't
hesitate to call or email me.
Richard Fears, Realtor
Premier Realty Group