Auction starting bid

[Jeremy England]

So there is a property on hubzu I'm interested in. REO auction that starts at 99k. ARV about 155k. Initially I thought it was a great prospect. Went by the house and estimated repairs to be about 26k.

Take away buying costs of 5pct plus title insurance etc (about 6-7k)

Take away holding costs of 3k

Take away selling costs of 11k

Take away minimum profit of 15k

Max offer 93k

Property is in a great neighborhood and LOOKS like its a paint/carpet rehab from the pics 

However, roof is 20 years old, ac condenser is 20 years old.  The roof LOOKS ok, but Im hearing appraisers are reducing values if the roof is 20 years old.  If I don't do the roof I could save about 4-5k

garage door needs to be fixed/replaced, windows need fixed/ replaced, appliances/cabinets need replaced, 2 exterior doors need replacing.  

Cabinets look ok from outside but they obviously had plumbing leaks and the interior of teh cabinets are all warped.  To sell for top dollar I think they need replacing.  Perhaps if you refinish the cabinets you save 2k

I could replace SOME light fixtures and save about 1000 probably, vs replacing all fixtures.  I could do the work myself and save another 500 probably.  Now we are talking time.  

So, If i cut some nice to haves out  I may be able to save 10k, but then I risk not getting as much on resale

That would put my MAO at 103k.

This house can be conventionally financed as well.  An owner occupant has a huge advantage because they don't pay selling costs or profit.  

Question would be if the bank would take an offer outside of the auction.  

[Account Closed]

@Jeremy England A couple of things you should consider... 

1) When doing rehabs, don't take the short cut. The appraiser will point out to the end buyer all the issues in the inspector report, including that the roof is in its third stage of its life and will need to be replaced soon. 

2)If this is your first rehab, I'd add an additional 10 % of your current rehab expenses as a cushion. You'll most likely forget something. I'm assuming you're using cash as your holding costs are somewhat low. Make sure you are taking into account potential permits and fees incurred from the sale. Some counties charge you more money than others on transfer fees or additional expenses you might not be taking into account. 

3) Just remember that there is a reserve price in most REOs in auction websites. So even if you're the winning bidder, they will re-list the property at the same price or a slightly lower price. The strategy here is to make sure you are always bidding on the same property after they re-list it. Until they finally decide to let it go. 

And no, banks don't sell properties outside of auction.