Foreclosure, realistic offer?

Question

I found a foreclosure nearby I am interested in making an offer for. I was wondering with other peoples experiences of what a good offer to be accepted could be? The property is listed for $130000 currently, with one rejected offer from elsewhere. It is almost at the 30day mark so I believe it may get a mark down soon. I was entertaining the idea of putting in an offer to the bank of $110 or $115. Once the property meets the 30day mark how low could you make an offer (Im sure it varies with banks) in your experiences?

Tom Mole · Answer

@Josh B. So, did you find this one on HomePath? I trust that you're beyond 15 day "Owner Occupant Only" period. I think you said you toured the property. What did you think of the neighborhood?If the property is in Cook County (my best guess), you can get the current tax status online. Go to the Cook County Treasurer's Office, click on Payment Status and enter the Property Index Number (PIN). You may need to do address search on the county assessor's site to get the PIN. (I never said it was simple, but it is easy). The page that comes up will tell you how much is due. I would expect that FNMA has the taxes up to date, but I would check just the same.As long as your property is on HomePath there will be links for whatever county about halfway down the Listing Details. They're there precisely so you can easily look up tax records.Now let's have a go at the comps. You said $220k+ in your area (meaning the area around the subject property). How many comparable properties did you find? How far away were they in distance? How far in the past did they sell? I would try to stay within one year (six months is way better) and I look for inside of a 1 mile radius, if possible (1/2 mile is way better). Further, I'd ask my realtor, but I would not depend on his findings alone. And, I'd look on Redfin or Zillow for their area analysis, such as average price/sqft and average time on market, in order to get a sense for the local market.To make sure that the rent guess is in the ballpark I like to use Rentometer.com. There are a host of other sites provide similar results, but that's the one I usually go to. You put in your property address, the rent you would want to get and the number of bedrooms and they return a gauge showing how your rent stacks up against the local market. They also give you a small pile of statistics about the market, all good stuff.Of course, we still don't know if this is a good deal. What do you plan to do with the property if you got your offer accepted? Are you looking for capital gains or cashflow? What sort of return on your investment are you looking for and how much of your own money do you plan to put into this project? If this is a killer deal, you'll probably be bidding against other folks like yourself looking for a deal. You need to know your own numbers really well and never overbid them. It may be hard to go broke by making a profit, but it's really easy to go broke when you aren't making a profit because you don't know your numbers.So, are you planning to flip this, buy and hold or wholesale this project? What do you need to get out of this project for it to be a good deal? If you could acquire this home for $115k, spruce it up for, say, $10k and sell in two months for $205k (a bit below market makes selling go faster and more reliable), you're bound to make a good profit. My question would be "is this the profit you planned for?" Or did you mean to buy for passive income? Is the cashflow enough to justify tying money up in long term financing? Is this the profit you planned for?Sometimes it's better to be lucky than good, but usually it's better to be good. Luck is for rabbits. If you're not making profits on purpose, sooner or later you're gonna stick yourself with a portfolio of bad investments. Whether or not a project is a good investment depends more on whether or not you are good investor.I did a quick bit of poking around in Cook county and selected a HomePath home in Oak Forest listing for $129,900. Using my arbitrarily choosen subject property I could validate that your numbers are feasible, though for my case $220k seemed about $45k too high. So, I think you're in the ballpark. Now go take a shot at vetting this deal and post back what you find out. If there's something your not sure about, post your questions. I'd love to see you get a profitable deal. Isn't this fun!

Isral Konopa · Answer

Hey Josh,I would make your offer based on the math. That is, depending on what you intend to do with the property, do a rigorous analysis of the property and only offer an amount that will make you money, whether that be positive cash flow, or profit on a flip. There are calculators on this site that you can use for free to do this. Good luck!

Josh B. · Answer

"@Tom Mole" It is a a bank owned property. I contacted the listing agent and he got me in touch with a great real estate agent. We met a few days back to see the property. It doesn't have any tenants currently and has been unoccupied for a bit. The agent told me Fannie Mae is working harder to present better properties and is working on them prior to marketing. It was very nice! Brand new carpet in all rooms, freshly painted, and thoroughly clean.Similar properties have gone closer to $220+ in our area and I feel confident with renting at $1350. Would the agent know about back pending back taxes?

Tom Mole · Answer

@Josh B., take a few minutes and go back to the basics. Just because a property is in foreclosure does not make it a good deal. As @Isral Konopa suggested, make your offer based on the numbers and good business acumen, not on what the seller will accept. #1 BIG question: Why do you feel this is a good deal at $115k? What is your analysis?Is this a HUD foreclosure?What have comparable properties sold for recently in the area?What do you plan to do with the property, if your offer is accepted?What condition is the property in?Does anyone live there?Is the property "under water"?Are there back taxes pending?Who's selling this, the homeowner or the bank? Is there a realtor listing the property?That's plenty of questions for now. Without knowing these issues, at least, no one is going to be able to tell you if this a good deal. Do me a favor and post back answers to as many of these questions as you can and ask for help with the ones you don't know how to answer. Put "@Tom Mole" in your reply so that I get a notification and I'll help you evaluate the deal through the forum thread. That way others can learn whilst you do. DO NOT post the site address, names or phone numbers. Let's have fun with this!