Need guidance-don't know what to do :(

[Brenda Sacchetto]

Hi Experts,

I need some guidance. I am considering placing a bid on a home in an upscale area in Orange county Ca. The house needs a lot of work (the sellers agent estimates 4-500,000.00) it was involved in a recent drug bust and it has been foreclosed upon and then I guess sold at an auction to a bank I think, ( the name of the listed owner is Cic Inc The Cic Trust 8) for 1,515,000.00 it is stripped and considered uninhabitable because there are no appliances and missing some flooring. The comps in the area range from 950,000-2,500,00 but most homes are sitting for sale for years. My question is considering the lowest comp was 950, is it reasonable to offer 400,000. with a two week escrow, As-IS considering the amount of work it needs and the drug/ foreclosure history? We were planning to buy as a personal residence-not an investment.

[Will Barnard]

SO primary residence is a far different animal than for an investment. That said, your particular budget and what you personally want in a home have a lot to do with the decisions.

For me personally, I would not want to have my home back up to a busy street. Even with investments, I shy away from them as they reduce the value of the home typically by about 10% from other comps that do not have the negative issue. If homes this size are sitting for $2.5M, then they are not worth $2.5M. Therefore, lets assume they are worth $2.1M at best. You need $500k to bring it to the $2.1M ARV so you are down to $1.6M. Now, you have holding costs and effort to put into the home to get to the ARV, which would be at least 10% so another $220k. Therefore, if you offered $1.38M, in my opinion, and based on these estimations only, you would be paying full retail at that price.