REO Offer Advice

[Matt Duffey]

I have had an eye on a unit in my building that was going through foreclosure for 3 years and it finally just was foreclosed on. I spotted the listing firm that represents the investor and had a nice chat with him to make friends. I now have his son, same firm, representing us as buyers, while the dad is the listing agent.

The unit had a leak years ago and was totally ripped apart and needs a lot of work. We have several 203K quotes that are all around $100K in total repair costs.

The agent representing us has appraisal knowledge and valuation knowledge since it will be listed by their firm. They have the after-repair valuation at $350K.

The problem we have is that we do NOT want the investor to make any repairs since we would like to make the repairs how we would like them. I can see the situation where it is not as major as this where all they needed was some paint, tile and hardwoods, but this is a full rehab down to the studs. Our estimates are around $100K, but I bet the investor could do it half *** and get it in minimal shape for half that.

The property is in pre-marketing right now and is not listed, so they can't entertain an offer from us yet, but I am trying to figure out the best steps we can take to convince them not to make any improvements. Along with our offer, we will include a no-contingency clause for inspection and buy as-is, close fast as we are already approved, etc.

Are investors really investing in heavy rehabs on their REO properties? They KNOW that we are out there as a genuine buyer in the building - not that they care, but the amount of money needed for the repairs seems crazy to think they will actually recoup that.

Any advice is appreciated. Also, since we know their repaired valuation is $350K, and we have a rehab estimate of $100K, and I know there are many factors involved here, but where would you start for an offer? How do you value the time/energy/time of year/etc. in your offer price?