DG FAMILY * PLEASE HELP! NEGOTIATING FIRST DEAL! I NEED GUIDANCE! =)!!

Caroline I am closing on my 1st deal monday & will make humble 1k but this doesnt seem like a deal they want too much if the ARV is only 116k & they are asking 197k or so that is a huuuge diff. I would just walk away, are they motivated to sell? By the price it doesnt seem like or you can just offer on it and see w/happens but it doesnt seem like they will go that low, you would have to offer anywhere from 60%-80% below the ARV and no you would not contact your buyers until you have a potential deal ready but if this was a deal and you know you could get it under contract then you could tell your buyers the numbers (without telling them the prop address!)& see if they are int. Hope im helping.

Thank you for your answer,and yes you are helping

The 116k is the estimated value without any repairs.
I haven't calculated the ARV yet, I'm not sure if I go down
to see the property (its far from where I live or if I ask for a repair estimate..)

The assessed value is 159,622

The kitchen needs total remodeling

and the whole house needs paint

Zillow estimate 142

what do you think?.....

Hi Cj,

What I would suggest is to first get the property under agreement/contract. You may choose to use an initial Letter of Intent to Purchase to lay out the basic terms of the purchase offer to the broker you are working with and then proceed with a purchase agreement. Since this property is an REO, you may be able to use your own assignment contract to the end buyer, unless the lender specifically states that the purchase contract cannot be assigned. Contrary to popular opinion, some REOs can be assigned and some cannot and it varies per case. A good way to determine your maximum allowable offer (MAO) on this rehab property would be to "back out of the deal". Take your ARV or After Repair Value, the value of the property fixed up and put on the market, and then deduct your title/closing agent costs and broker fees based on that ARV, then deduct the estimated repairs needed to fix the property, then deduct your profit as if it were a fix and flip and be sure to include any carrying or maintenance costs. This will give you a range of what your estimated purchase offer should be - it may be higher than this number since you can cut into your profit margin since you are assigning the deal/selling it to an end buyer instead of being in the chain of title and doing the rehab work yourself. As far as locking it up, you can include "purchase subject to buyers inspection and approval of bids within 14 days" or "earnest money subject to approval of inspection" in the addendum of the purchase agreement that can be used as escape clauses in case the deal falls through. Once you get the purchase offer signed, fax it to the title/closing agent you are working with, then call up your cash buyers and market the property to them, send them a proforma with property info, price, repair cost, ARV etc. Put a sign in the yard with similar info. Continue to market the property online - put an ad out. I hope this is helpful.

Loren

Are they behind on payments? I was thinking that you could do a subject too but the numbers are not looking right.. what does owe....what are the payment's. Looks like it needs to be below 150k to even work for any type of deal. Think it through before you move on it. Hope I helped and didn't hurt.

Cj,

I wanted to add that they may be asking too much for this property, but it never hurts to make a low ball type offer based on the property condition and the repairs needed to bring it to full value. If the ARV is $140k and it needs about $20k in repairs and you wanted to make $25k on the deal, you are looking at about a purchase offer of $75k-$85k, but you also have to factor in the nearby comps (best ones to use are 1/4 mile and 3 months or less) and how fast properties are selling in that neighborhood (see DOMs). If the similar type properties nearby are selling in the $110k-$120k range, then you may have to adjust your purchase offer lower - even $60-$65k is not unreasonable. Whether or not they will consider your offer is based on their motivation to get it off their books as a non performing asset. If this one doesn't work, no big deal, just keep looking and making offers, eventually you will land one.

Loren

Thank you everyone!

You guys have really helped and I picked up a lot of things
from the posts. I'll put those into action when the time comes.
Thank you so much.
So far no updates.

I'll keep in touch.

__________________________

"in all these things we are more than conquerors through Him who loved us."
(Romans 8:36)

Caroline,

to get a rough estimate, you need to lock up a property at 30% below fmv in order to wholesale it to another investor... (if you already have your buyer ready, then you will know what he is looking for)
and you will need to know the costs for repairs and comps to present them to the investor.

There are several threads on this site that tell you how to calculate the numbers. Here's a link to one of them...
http://www.deangraziosi.com/node/3975

Good luck!

Not all banks want or need properties off their books, now. A few years ago, before most banks got their "bailout" $ from the gov't, yes. I found out the hard way on a short sale deal I eventually said no to. They basically told me to throw bricks, bc their BPO value came in $40k under what the CMA told me. All of us were a little shocked! Oh well, lesson learned.

For sharing with us your journey! We like to hear your accomplishments as much as what you learn to do and what not to do. Keep us informed!

Hi AJ keepyour eye on those numbers!!!!!!!Let us know how it goes, thanks, Jim