Foreclosures

[Joshua Frost]

Hello everyone,

My question is can you really get foreclosure properties using the 70% rule? It seems this would be an extremely low ball offer. Specifically REO properties that have been on the market a long time. Do banks really entertain these offers? For example, I have a 3/2 2-story 1800 sq ft property I'm looking at and Zillow has it's foreclosure estimate at 175k, so at 70% that's 122,500 minus my expected rehab costs of 40k and I'm down to an 82k offer. Am I doing this right? Do banks really entertain this?

Thanks for any assistance.  I'm in the central FL area for those who are familiar with this market.

[Allen Fletcher]

@Joshua Frost

The 70% rule applies to the ARV or after repair value. What you need to do is figure out how much the property will be worth after you have done all the repairs that the property needs. (You do this by looking at comps.) After you have determined the ARV you take 70% of that - rehab costs and offer that. In your example, say the ARV is $220k, 70% of that is $154k after your rehab costs ($40k) you offer $114k. As for whether or not a bank will accept that, it really depends on a myriad of factors, but the worst the bank can do is say no. They may try and counter-offer and then you can do a little negotiation. Best case they accept. It never hurts to make an offer.

Hope this helps,

Allen Fletcher