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Pawli, Real Estate Pro in Houston, TX

Submitting an offer on a REO or getting estimates; What do I do??

Asked by Pawli, Houston, TX Sun Apr 6, 2008

Should I get an offer accepted by the bank on a REO, and then ask for repair allowances?

The property I'm looking at is in a great neighborhood, but is overpriced considering all the work that needs to be done. I don't want to do all the due diligence (getting an inspection, contractors' bids, etc.) before I submit an offer if it will be sold from under me, so to speak. But I also don't want to be locked in to a price that is too high by first submitting an offer, and then not be able to get the "repair allowances" needed. If I submit an offer now, what kind of offer letter or contract should I use? And what should it have in it, to make sure that if I -upon inspection- discover there is even more to the work than meets the eye and there won't be a profit for me?

This would be my first flip so needless to say: I'm scared.

I will use my realtor friend - who is brand new and learning some of these things as she goes along. Any advice would be appreciated! Thank you!

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If the house is a HUD foreclosure, there will be a cursory inspection report on line along with a allowance, if any, for doing some repairs. This amount is usually under $5000.

In either case, you should ask for an option period to do a thorough inspection and determine the cost of repairs. Banks usually will not negotiate, so I agree that having a contractor look at the property before your offer if you have serious questions about condition and repairs.

I would be cautious about taking on anything but fix up and cosmetic changes if it were my first flip. I've seen a few done recently by realtors giving flipping a try and have been astonished by the unrealistic expectations of return on what are low cost renovations. They're ending up eating a lot of carrying costs.
1 vote Thank Flag Link Mon Apr 7, 2008
Thank you for your answers! It confirms what I was thinking - despite getting advice from a real estate agent to submit a higher offer, since banks "don't like to be lowballed", and then ask for repair costs after doing a thorough inspection.
0 votes Thank Flag Link Tue Apr 8, 2008
pawli, no you should not. The bank will very rarely help you with repair costs after they have excepted your price. write in the contract what you want up front. Ask the listing agent if they have had any insections done if so get a copy of the reports. the problem will be if there are other offers and you ask for repair money etc, you may be bumped, remember banks are always looking for the "highest and best offer" Hope this helps.... and good luck
leanne smith
0 votes Thank Flag Link Tue Apr 8, 2008
Your realtor will use a standard TREC or TAR contract. Most bank sales are sold "as is", that means no repair allowances. You should seek out the best realtor for the job in your area or you may end up with cost overruns. Your realtor friend may want to co-brokers with an experienced agent.
0 votes Thank Flag Link Mon Apr 7, 2008
We specialize in Dallas home foreclosures, banks sell properties AS IS they are very well aware for the condition of the property based on the BPO.

You submit an offer based on the banks "stack list" there are many tips and tricks for REO, bank foreclosures in order to secure a winning bid.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Sun Apr 6, 2008
You might want to look at their addedums for the contract if they will give them to you up front. Normally they don't want to do repairs or they have the option not to do them if more than X amount, like $500. If you are in Texas you will likely either need to use the TREC contract or one written by an attorney.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Sun Apr 6, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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BEWARE. Most foreclosures are sold AS-IS, so your offer should be made as such. Most banks are coming now asking us to state that INSPECTIONS ARE FOR INFORMATIONAL PURPOSES ONLY. If you feel the home needs a certain amount of repairs, take a contractor to the home to estimate repairs PRIOR to bidding, NOT after. Most banks WILL NOT negoiate repairs AFTER they have accepted a contract. And they shouldn't unless it is something unseen like a slab issue or A/C-Heat that may effect a sale with another buyer. Most banks are giving 7-10 days for inspections in case you wish to back out of the contract. BUT AGAIN, I would take a contractor in there to give you a rough estimate and then work out your Offer Price after this.
0 votes Thank Flag Link Sun Apr 6, 2008
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