Next Step =$10,000?

Sully,

Is this purchase price too close to FMV to assign it to an investor? Plus, the buyer's bank is going to determine what the down payment needs to be, not you, am I wrong?

Vincent

My ideal buyer here is a retail buyer. Someone to actually buy the house and move in. I would agree with you that the spread is too thin if I was to even try to sell it to another investor. At this point in time, I am trying the reatil buyer on this one, as my search for actual investors in the general (central vermont) area has been a challenge. I figure if I can squeeze out $10K I will try. As for the "buyer's bank determining what the down payment needs to be", I dont know as this will be my first deal. I put $6500 in the above equation as enough money to show interest to my seller and that my buyer was serious. Am I off base with some of my assumptions?
-Marc

Hey Marc,

Well, as long as I'm understanding everything correctly, your retail buyer will simply pay you $10K in cash, then deal with the financing and down payment of the $175K with his bank or whatever. Are you a member of the academy? This sounds like a great topic for their advice on as well.

Vincent

Vincent, yes I am a member of the academy and maybe I will run this run this by them on Monday to see if Im on the right track
Thanks
Marc

It doesn't hurt to try and thats the best way to learn of course. But you need to look at similar homes in that area that recently sold and for what price they sold at. That will give you a good idea if you can sell this property or not.

Another thing you have to remember is that all the bank owned properties (REO's) that are selling right now are the regular home owner thats looking to sell's competition. So you might want to see what similiar bank owned homes are selling for in that area as well. That will let you know if your selling price is even comparable.

I guess you'll never know unless you try.

All the best, Jason

Hi Jason:
The comps in the area that I have researched tell me that the $185K is a discounted price for the area and should make it attractive. The street that the home is on is a main artery to a Hospital and a number of commercial properties (Dental offices, Dr's.offices, Veterinary etc) Closer to the hospital you have the Dr's offices and dental offices which command higher prices and on the other end (where this house is) the prices are a bit lower. At about the half way mark on the street a home recently sold for $150K, but it wasnt an exact comp. Again, based on my research I believe the $185K is a discounted price.

I am not sure about your REO comment though. My understanding is that REO propeties are being sold at a discount to normal home sales, as they are normally in some type of distressed situation. (Foreclosure etc) So I guess my true question here is, why would one want to use those as a metric for comparison here? Wouldnt that be comparing apples and oranges? Let me know if Im off base here.
-Marc

REO properties might be distressed, but those lower prices must be figured into the comp equation. Unfortunately they will bring the value of your property down, so compare all the like houses(3bed/2bath etc.)to come up with a realistic comp.

Not all REO properties are distressed physically, and many in my area are really nice. It amazes me at how low some of these properties sell for. Many people looking to be home owners have been buying REO's in my area.

So Like user name gceriani says you might want to figure some of the REOs in that area into your comp. Thats all. If there are none in the area then don't worry.

If there are though you can use that in your negotiations with the seller to get a lower selling price and you could actually profit more. Many sellers still today don't belive there house has dropped in worth significantly. For example my personal residence is super nice! I'm talking top of the line everything. But you know what my house is $30k less than what is worth 3yrs ago. Thats a huge amount for my area. Unfortunately sometimes us investors have to be the bearer of bad news to people still caught up in the past.

So you could say to your seller "Hey people in this area have actually been buying similar bank owned properties that compare to yours for less". Tell them what they sold for. Therefore justifying a lower price. But do research first before you say that.

Either way get it on contract and see what you can do. If the deal doesn't interest any buyers. You can renegotiate for a lower price or just cancel the contract.

Keep us posted as to how it goes.

Jason

Even if its a block or 2 away use the 150K comp to compare it to the seller's property in order to get a better price.
It true, you have to educate sellers on today's prices ... our house dropped over $ 300K in the last 3 or 4 years. Don't over pay, you'd be better off to walk away & look for a better deal.

It is amazing the knowledge that most of you have. As I read all of your posts it keeps me striving for the first deal. Just one question sully no chance of a subject to with your seller? If it is a dumb question sorry still learning.

Thanks for the insight. I see it now. "A Sale is a Sale".. meaning that no matter how it sold, (REO, short sale, foreclosure)--it sold. I will be sure to reassess the area.

Jason:
Thanks for the insight. Appreciate it. Reevaluating the neighborhood now as we speak. Bringing all my contracts over to RE Attny this week to have him "one time" them and make any changes if needed. Keep you posted. Again, thanks for comments...

You also need to know the average time on market. You need a quick sell so what if you find out the average time on market is 90 days? Also, how many are currently listed in the area of the property of interest. What if there are 6 listed in the area? There is more to comps than price!

Good Luck!
Michael Mangham
MD Home Acquisitions LLC

Michael:
In reference to "average time on market", one of the reasons I approached this seller is that she has already had this property on the market for 120+ days. She has only had 5 interested people look at the house over that time period. I am in the process now of doing a bit more research and I will take that into consideration.
Thanks Again
-M

Time on market is very important. We just purchased a 2/1.5/1 2 weeks ago
that was on the market for 366 days...it was an estate, the 1 spouse was in a nursing home & the daughter lived in New England. She thought the property was worth 100K, then slowly dropped to the 90's, then 80's, then 70's, then 69K. We offered 41.5K & she accepted it with out even a counter.