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Updated over 16 years ago on . Most recent reply

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Frank Z
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14
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How Low Until It's Insulting?

Frank Z
Posted

Long story short, I'm looking into my first foreclosure purchase to rehab and flip. This is all hypothetical because I don't even know if I'll be making an offer yet.

Potential property is listed with an agent I'm friendly with. I know she can't give me much information on the seller's situation. This hasn't gone to the sheriff sale yet, so I have no hard number what's owed. Luckily all mortgages deeds and tax liens are online in my county for pennies a minute to access so I have a rough idea.

Purchased for 46,000 in 1983 (41,000 mortgage). That Mortgage was paid off with a 2005 86,000 refinance ARM at 9.125% that got adjustable last November. Just spit balling (assuming she's 60 days late and paying penalties as such), I can't see her owing much less than 85,000 after 28 payments.

I haven't been inside the house yet (it just came on my radar this morning and I did a drive by to make sure the roof wasn't caving in and the windows weren't falling out), so I have no idea on repairs.

Even the worst houses in the area are going for 150,000-160,000 on the actual retail market. She's asking 180,000. That's not going to happen with me on a foreclosure flip in a soft market.

My question is this: When I pin down mathematically what she owes (and get a title search done to make sure there's nothing I missed), how low can I go without getting blown off and ruining my relationship with the agent?

Say she does owe 90,000 and it also needs some repair. Am I a jacka** if I offer $110,000 or 120,000?. She gets a nice chunk of change even after commission and tax despite her bad financial decisions, and I take on a property that needs repairs in a depreciating market. How about $100,000?

I don't want to pay too much just to save someone's feelings or maintain a friendly relationship with the agent, but I also don't want to come across as a low balling joker either.

Do you guys totally disregard the asking price when determining the offer?

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