Deal or no deal?

I like the sound of this deal. I like that you have a Real Estate Agent. I found that 95% of my clients have an agent on their first deal and it goes a lot smoother. Make sure the agent fully understands assignment of contract and ask how many he or she has done. Let us know what price you get the contract for so we can help from that point. Good Luck!

Thanks, Justin McQ

Sounds GOOD!
It depends on you estimated repairs.
And also do you have an end buyer.
Who did your repair estimate?

Good Luck with this it sounds good!

Jay C

Hope you won't mind if I repond to all of you at once. Glad you like that we have a realtor. Good idea asking how may assignments they've done. Hadn't thought of that. Repair estimate is just that, figured from just updating our home. Realtor tell us we need transactional funding since it's bank owned and it'll be a simultaneous close. Really appreciate your offer to help when we get contract locked down. Looking at end buyer now and think our local REI club will be a good place to start. Can't tell you how much 'first time fear' you've removed!

Hi - any update on this potential deal?

- Tom

Yes Tom. Got an estimate on foundation repairs yesterday of $7,000 making total repairs $40,000. Listing price dropped to $62,200. Husband ran comps, and we think $35,000 is a good offer on potential ARV of $106,000. What are do you think?!

Appreciate your interest in the process.

Gail

I would start lower on the offer price. Be sure on the ARV and the repairs. Generally you're always going to get less than expected for the selling price and repairs will be more than expected.

Going off the numbers as is:

106k ARV
x 70% = $74,200

less repairs ($40k)

Max offer price = $34,200.

Definitely start lower to give yourself negotiating room, plus transaction costs, plus your profit.

You mentioned you were going to use transactional funding, do you have potential buyers lined up?

Hope that helps and feel free to ask more questions.

- Tom

You mentioned

Thanks for your help, Tom!

Closing costs are roughly $5k, profit $3k, so max offer would appear to be $26,200, right?

Gail

Yes, max offer in that range. Maybe start a little lower, the worst they can say is no!

If it helps you understand the process, I recently bought a HUD home (owned by gov't) that was valued at $110k (real comps), they listed it for $80k, and needed $20k in repairs. I offered $40k and we settled at $48k with them paying the closing costs!

BTW with my offer I only had to send a photocopy of my earnest money deposit check of $1,000, although after we haggled and agreed on terms, they changed it to $3,000 cashiers check within 48 hours of signing the final purchase agreement. Also note I had to sign their contract, and it specifically said not assignable, and can't resell for more than 20% profit within 90 days. So check for that language, but if you're looking for $3k profit, that's within the range.

I rehabbed and kept this property, all in after rehab at $60k ($48k, less 20% down of 9K, plus $20k rehab). The appraisal did indeed come back at $110k after it was fixed up (ARV).

Good luck!!

Tom

Tom,
Thank you. We are getting the purchase agreement together now and reviewing the language. We will be working to keep the earnest money as low as possible. In your deal, could you have done a double close? I realize you would have been limited to a 20% profit in the 90 days. Thank you again for all your kind information. We will keep you informed about the response.
Rob & Gail

Yes, I could have double closed in my deal, there was no language against that, only that I could not assign it. I ended up just purchasing it myself, rehabbed it, and still own it today.

Please keep us informed how it's going.

Good luck!

Tom

Will do Tom! Thanks again for walking us through this one.
Continued success to you as well...

Gail

OK. Got proof of funds letter on this property for $20,000, tweaked contract with realtor, ready to send back to see what the bank says. Offer is based on ARV of $106,300, repairs $41k - $52k. Contract states option period of 14 days, closing 30 days.

With it being an REO do I need to increase closing to 60 days and add 'subject to' clauses?

Rob & Gail

Hi Rob & Gail,

In my opinion, the initial offer sounds good. The worst they can say is no, and hopefully you can get them to counter and start negotiating.

I don't recall what your exit plan is, but 14 days inspection and a 45 days close would be standard. I wouldn't add too many "subject to's" except for financing contingency, if you're planning to buy and hold the property. With those two contingencies you'll have time to work with, anything more and they may reject the offer.

Good luck and keep us in the loop!

- Tom

Thanks Tom! Our thinking exactly.

A regular and 'referral you can trust' from local REI club asked a bunch of questions. He said he has funded several others in the subdivision and one was $35K and the other $50K but the $50K was not as much work was needed. Says if we get the deal he'll buy it!

One question we have: should the inspection costs be passed on to end buyer?

Will fine tune the contract based on your additional tips! Will keep you posted.
Going to drive for dollars today!

Rob & Gail

Hi Rob & Gail,

You'll be passing on the inspection costs indirectly to the buyer. Here's how I see it based off what you mentioned:

- If the bank accepts your offer, you'll have the standard 10-14 days inspection contingency and you'll have to pay out of pocket for the inspector.

- During that time you'll also get your final end buyer.

- They'll pay you a non-refundable earnest money deposit, which will reimburse yours to the bank (due to the bank at the time of P&S agreement), and the inspection fee (give or take some $).

- Finally you'll do the simultaneous close (mentioned above that was your strategy). The difference between the price to your end buyer and your price to the bank, less closing / transactional costs, will be your profit.

- Tom

Hello everyone. I need a little help with this one. I have a seller that has an inherited house here in Philadelphia that only needs cosmetics and is a good sized property (1400 sq. Ft.) She had it appraised( she says) for 60k but when I go on Totalview the comps come back about 22k! Which number should I go by? This would be a great rental with rents around $650 a month. I just need some feedback on how to wholesale this.

I also have another where the seller is looking to sell a duplex for 50k-55k that is fully occupied with long term tenants, needs no repairs and has 25k equity. He gets 1k a month cash flow but needs more liquid capital to do other things. How should I proceed?

Thanks for ANY help given.

Ogal Gaines
LAGO Acquisition, LLC