How much too offer for REO/Post foreclosure bank owned home?

[Josh Wood]

How low do you go when making an offer to a bank on a REO Property?

I am looking to flip a property in West Michigan. However, in my opinion, the bank is asking way too much for a property in which they own. They are asking $110/sqft for a home that needs a complete remodel. Remodeled homes in my market sell for $135-145/sqft depending on the neighborhood. A home three doors down just sold for $143/sqft. I estimate the home would need $50-60k in repairs/upgrades. If I paid the price the banks asking price I would lose about $25k.

I did my research and know what the home sold for in 2011. The bank is asking 195% of the price in which the home sold for in 2011. I have done some math and to clear a $40-50k profit on a three to four month remodel, I would have to acquire the property about 75% of what the bank is asking. This sounds low, but assuming the former home owner maintained payments for a minimum of 8 years I would be offering 50-60% higher than what the bank has the home in their books for. Not sure if it matters or not, but we would be putting 30-35% down on the purchase. Down payment would be with liquid assets, so we could close on the home pretty quickly.

Looking for advice and feedback from individuals with experience buying and flipping REO homes. Thank you for your time!

[Ron S.]

What the home sold for in 2011 is completely irrelevant to everyone except you. What your profit requirements are, are completely irrelevant to everyone except you. Your assumptions about what the previous owner did payment wise are just that, and again, completely irrelevant. The home should be listed for fair market value and will more than likely sell fair market value, all things being equal.

If you can't convince the bank to reduce their recovery by reducing their net proceeds so you can make a profit, i'd move on to the next deal.