How much should I offer for this foreclosure in Portland?

Question

I want to buy SFR foreclosure in Portland with the following debts/liens, but I don't know how much to offer. What would you offer based on knowing the following?

Repaired house would be worth $500K easily and needs $100-200K work.

On the market for $315K

$10k bankruptcy carve out fee paid along with 7% in closing costs to seller (and/or any other selling fees)

$77k owed to Wells Fargo (no payments made for quite some time so there may be additional fees; payoff fee requested but we don't have it yet)

City of Portland liens that including the following:

Code Enforcement Fee:  $84,360

Nuisance:  $3,374

Code Enforcement:  $856

Code Violation:  $16,431

Code Violation:  $9,729

Code Violation:  $9,688

Code Violation:  18,676

The debtor is allowed a $40k homestead exemption

7% in closing costs to the seller.

Above equals roughly $295k to pay everything. House needs $100-$200K to get make it liveable/rentable.

How much would you offer and/or what should I negotiate? Trustee will accept or negotiate the offer (not the RE agent).

PS: I don't have all cash to offer. I need a 203K loan to rehab or I suppose I could do a hard money loan but have no idea how to do that (so if your advice is all cash, then how would I structure a hard money offer?)

Thank you! Eternally grateful and happy to return the favor some day!

Jessica S. · Answer

Hi @Kelly Maestri,

Is this the house at NE 9th and Alberta?

The Portland market is smoking hot right now.  Good deals get snapped up in 24 hours and even not so good deals will sell in a few days.  The fact that this house has been listed since late July should tell you everything you need to know.

I suggest that you keep looking.

Neal Collins · Answer

Sounds like a very complicated situation. $100-200k in rehab is a big range, especially if you're trying to convince one, maybe two banks to trust you in order for you to first acquire the property and second to borrow a lot more than the place is worth.

Negotiating short sales in Oregon require special licenses I believe. Someone else should be able to weigh in on this though.

I would walk from this one if I were you, but if you do just make sure that your offer gives you some flexibility in case things don't go as smoothly as planned.

Account Closed · Answer

Is the repair cost $100K or $200K? A $100K gap in the repair estimate is substantial for an error margin. If repair cost happens to be $200K and the house is listed for $315K, you would have spent $515K when the ARV is actually $500K.

Kelly Maestri · Answer

Thanks for the feedback Steve. You're right. It's way complicated!

Jack Butala · Answer

@Kelly Maestri

Run from this deal.  It's way too complicated.

Your first deal should have you saying something like this: "I need to get to the bank before this seller changes their mind."

I will suggest that you put a sustained direct mail campaign in place to find your own deals vs. reviewing properties that are already for sale.

Kelly Maestri · Answer

Neal Collins rocks!

So, I took Neal's advice and went to this amazing website PortlandMaps which allowed me to find a human at the city who explained the lien process and options.  Here's what I learned:

• The city can take a 2nd position regarding liens for a period of time so sale can go through.
• I would talk to person X at the city who has authority to lower or remove liens and get a commitment for what that would be.
• If I do $500+ in repairs, then I can get a renovation waiver for 6 months so the property doesn't generate any more fines.
• Violations exist beyond the liens and I'll need that list of violations to walk through with the inspector/contractor to ensure I take care of those in the remodel.

Boom! Yes, it's complicated but sometimes the best things in life are.  :)  Thanks, Neal!

Kelly Maestri · Answer

Hi Neal,

That's amazing feedback. Thank you!  Yes, I'm under contract. I'll follow your advice and let you know what happens!

Neal Collins · Answer

@Jessica S. Thanks for thinking of me at least. How's the project in Piedmont coming along? Would love to check it out one of these days.

@Kelly Maestri Do you have the place under contract? In my experience negotiating with the city about liens is middle of the road and they are somewhat flexible. I haven't specifically dealt with a fire department lien, but I have dealt with code violations. For the most part they are willing to work with you if you are proactive and file permits to correct the liens in a certain amount of time.

What exactly is the lien for? I would either call BDS or visit their office and see what they require to waive the lien. If you go to PortlandMaps and go to the property there should be a case worker assigned to handle these things if you click on the Permits tab. Report back and we can all try to help as much as we can.

Kelly Maestri · Answer

The house is a hot mess and worse than the photos but I believe the following as of now:

If I buy it at a substantial discount

And fix it head to toe at a cost to be determined by an experienced contractor

that brings the house value to market level, plus generating 20-30% equity

And I hold/rent it

Then I'm golden

There are a lot of ifs in this. I'm checking them off one by one and will keep you all posted AND will give you a tour.

I still need any advice from anyone who has negotiated liens with a city. I'm trying to remove or reduce a $80k+ fire department lien :)

How much should I offer for this foreclosure in Portland?

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