Lowball foreclosure offer

Asked by T, Greensboro, NC Mon Jan 19, 2009

I'm interested in a foreclosure property that does not have flooring, therefore, nearly impossible to get a mortgage. It's been on the market for 180 days with no offers. It's listed at $100K. Am I wasting my time by offering $35K cash?

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Larry Story, Agent, Greensboro, NC
Mon Jan 19, 2009
If it is one of the homes I have seen with some of my buyers then yes. I have seen a couple of homes that are presently listed with no flooring because it has been removed. The listing maybe for 100K but the tax value is much more then that. The asset manager for the bank that owns the property will only go so low. It maybe a buyers market but, the same rule applies in that if you insult or make a ridculous offer then you will not get a deal. Also it is not impossible to get a mortgage. It all depends on how the lender structures the loan. The CO (certificate of occupancy) can be issued in some cases when something is not finished or is to be done.

I have a buyer presently looking at a builder's foreclosure that the home is not finished either. You have to start off with a loan structured like a new construction loan. After the home is finished the loan is rolled over into a more conventional mortgage.

I suggest speaking with your buyers agent and a good lender to work out the best approach. The bank is not going to give away the home for nothing though.

Hope this helps,
Web Reference:  http://www.storybookhomes.ws
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Daniel Eberw…, Agent, Clayton, NC
Mon Jan 19, 2009
T - that really depends on what the house's fair market value (FMV) is assuming the flooring was there. If the house had a fair market value of $150,000 and flooring would cost $25,000 to install, then offering $35K probably isn't going to fly. If the FMV is $100,000 and needs $25,000 to install the floor, then $35,000 is still a low offer.

Banks know the fair market value, they know the condition and have estimates of repairs, and they recognize a buyer will want some level of ROI (return on investment) on what they put into the property.

You need to know the FMV of the house, and you need a realistic repair estimate. The asset managers see quotes for repairs all day long, so if you come in and say that the repair costs are $25,000 when truthfully you can get it done for $10,000 then the bank is likely to reject your offers. I've seen plenty of quotes recently for repairs on foreclosed properties that are ridiculously overpriced in an effort to get the bank to accept a low offer, which they reject. The bank has property preservation companies that have been to the property and documented the condition and provided repair estimates, they've had Realtors that have been to the property and done the same.

So to sum it up, if:

FMV - (Repairs x ROI) = $35,000

then make the offer, and be able to back up your numbers and include that in the offer. If the number is a lot higher then $35,000 then you're probably wasting everyones time in making an offer. That being said, if you have a Realtor, and want to make an offer, we have to present all offers.

Web Reference:  http://www.tri4sale.com
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Erica McClen…, , Raleigh, NC
Mon Jan 19, 2009
You can offer whatever you'd like...that being said, a totally unrealistic offer will get no response. The bank is willing to deal somewhat but only if you're being reasonable.

No flooring is not an abnormal problem. There are many ways it can be structured to work with a conventional or 203K FHA mortgage. Cash does have some weight these days but not the power you're talking about!

Good luck!
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Dallas Texas, Agent, Dallas, TN
Mon Jan 19, 2009
The bank is aware of property conditions and received a BPO provided by a realtor you can submit an offer never know however dont be disappointed if you receive no response.
Web Reference:  http://www.lynn911.com
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