Is there a standard percentage % reduction to use when making an offer on an REO property? I'm looking at a REO in a coop w so-so financial history. The purchase would be AS IS and ALL CASH. I found out that banks wont loan on the building, and on top of that the property is an REO. The financial situation is bad, but they aren't going bankrupt. It seems like they are chugging along. Its just that... [more]
Is there a standard percentage % reduction to use when making an offer on an REO property? I'm looking at a REO in a coop w so-so financial history. The purchase would be AS IS and ALL CASH.
I found out that banks wont loan on the building, and on top of that the property is an REO. The financial situation is bad, but they aren't going bankrupt. It seems like they are chugging along. Its just that this probably isn't the safest investment.
I figure it is worth the risk, and that a bankruptcy and foreclosure on the whole cooperative in the near future is not likely. My hope is to buy and then sell in 3-5years.
The apartment is in terrible condition. It needs a complete renovation. NO appliances.
The bathroom, kitchen and flooring all need to be replaced. The kitchen is missing fixtures such as the sink. There is also a hole in the ceiling in the bathroom. I'm figuring about 10-20k in renovation.
I want to make an offer, but don't want to pay what the Bank has listed. It looks like the bank has done a 10% reduction from standard pricing. HOWEVER, the bank has basically ignored the fact that the property is a gut renovation, not mortgageable, has a bad financial history, is ALL Cash and AS IS condition.
10% doesn't seem like a reasonable price being that the resale value is greatly affected by the coops financial history. I know I can offer what ever I feel, but I want to be taken seriously.
What % do you think is a reasonable offer? Thanks for your time!
[less]
Response by Aaron2
almost 11 years ago
Posts: 1698
Member since: Mar 2012
If it's not the safest investment now, what is going to make it more safe when you try to sell it in 3-5 years? Certainly not a paint job and a few shiny appliances. Unless you're doing a bargain basement reno, or it's a tiny apt, you will spend more than 20k in replacing / repairing everything you list. Run away, or offer to take it off their hands for 50% of the asking price. Then get on the board of the building and turn around their finances.
Ignored comment.
Unhide
Response by alanhart
almost 11 years ago
Posts: 12397
Member since: Feb 2007
hdfc?
Ignored comment.
Unhide
Response by jelj13
almost 11 years ago
Posts: 821
Member since: Sep 2011
It doesn't sound like a good investment if the banks won't make loans on the building. People I know who "flip" foreclosures would hesitate on this one, especially with all the renovations. I agree with Aaron2 on your reno budget being a little small.
Ignored comment.
Unhide
Response by jseorti
almost 11 years ago
Posts: 1
Member since: Apr 2012
Question - how is it REO if banks don't loan on the building? Some kind of private lender?
Ignored comment.
Unhide
Response by REMom
almost 11 years ago
Posts: 307
Member since: Apr 2009
The important distinction is if banks won't mortgage the building or this particular unit. If it's the building, run. If it's only the unit (because it doesn't have a kitchen or is considered inhabitable), then you could assess the value of the unit in marketable condition, less the cost (carry + labor) to bring the unit to a marketable condition, less the costs to close on the purchase and future sale as a starting point for what you may be willing to bid.
Ignored comment.
Unhide
Response by cc2015
almost 11 years ago
Posts: 43
Member since: Jan 2015
I think it might be time to run. YES it appears that banks will not loan on the building. This is a more recent problem.
In fact their has been a stop on sales in the building. Well I think there has. None of the recent sales have closed. Furthermore, there seems to be a lot of sellers in a small building ( about 10% of the building). And apparently another 10-20% are renters. Of the sales w mortgages none have gone through. The taxes seem paid, but they might be defaulting on the mortgage.
I maid an extremely low offer, and asked to see the financials. The realtor got back to me and said the purchase was as is. Of course I already knew that. She didn't even counter offer.
They're just looking for someone desperate or stupid.
'/%3e%3c/g%3e%3c/svg%3e)
If it's not the safest investment now, what is going to make it more safe when you try to sell it in 3-5 years? Certainly not a paint job and a few shiny appliances. Unless you're doing a bargain basement reno, or it's a tiny apt, you will spend more than 20k in replacing / repairing everything you list. Run away, or offer to take it off their hands for 50% of the asking price. Then get on the board of the building and turn around their finances.
hdfc?
It doesn't sound like a good investment if the banks won't make loans on the building. People I know who "flip" foreclosures would hesitate on this one, especially with all the renovations. I agree with Aaron2 on your reno budget being a little small.
Question - how is it REO if banks don't loan on the building? Some kind of private lender?
The important distinction is if banks won't mortgage the building or this particular unit. If it's the building, run. If it's only the unit (because it doesn't have a kitchen or is considered inhabitable), then you could assess the value of the unit in marketable condition, less the cost (carry + labor) to bring the unit to a marketable condition, less the costs to close on the purchase and future sale as a starting point for what you may be willing to bid.
I think it might be time to run. YES it appears that banks will not loan on the building. This is a more recent problem.
In fact their has been a stop on sales in the building. Well I think there has. None of the recent sales have closed. Furthermore, there seems to be a lot of sellers in a small building ( about 10% of the building). And apparently another 10-20% are renters. Of the sales w mortgages none have gone through. The taxes seem paid, but they might be defaulting on the mortgage.
I maid an extremely low offer, and asked to see the financials. The realtor got back to me and said the purchase was as is. Of course I already knew that. She didn't even counter offer.
They're just looking for someone desperate or stupid.
Thanks Aaron2