REO in pristine condition (situation doesn't seem quite right)

[Account Closed]

This is a continuation of my last thread with more detial. 

I'm a relatively new rehabber in central Kentucky and so far I've had a fair amount of success flipping REOs from the MLS.

Today I took a look at a 4/2.5 SFR currently listed for $118,000.


It's owned by Wells Fargo and has been listed since October.


The original list price was $140,000.


I valued the property at $145,000 based on comps. About a dozen similar properties have sold in the area over the past 6 months in the 125,000-155,000 price range, but this house has an extra bathroom half bathroom.


The odd thing about this house is that it's in pristine condition. Even the kitchen appliances look brand new. It's almost as if the people who lived there had recently upgraded the house, weeks before it was foreclosed upon. The one caveat is that the house has been winterized by the bank's preservation company. Because of this, we're not 100% certain the plumbing is in order (although the house was built in 2003, so it's doubtful anything is too messed up).


Now, I know value is mostly created by purchasing REOs at a discount. I also know that no potential buyer will accept $140/130/120,000 if they know I purchased the property for $95,000 and made no additional improvements/ repairs etc. I feel like this could be a trap house (no pun intended). My intuition is telling me something isn't quite right about this situation. It really concerns me that my valuation is $145,000, but the bank was unable to sell it at $140,000 (they've been lowering it by $6000 every 2x weeks).

Is there that much of a "foreclosure bias" among owner occupants?

Has anyone been in a situation like this?


Do you have any general advice?

There do seem to be a lot of houses fore sale in the area.

That being said, there have been a lot of recent sales (average ~40 days on the market which is pretty damn fast).


I checked to see if the school districts had recently changed. I checked to see if there had been a recent spike in crime. Neither of these seem to be the case.

Sorry if this was a wall of text.


Thanks for reading,
Patrick 

[Joe Marcum]

This is all just my opinion, so take it for what it's worth :)

If I have the right house, based on one of the pics from Zillow, your intuition about some plumbing issues may be true. There was a 24 hour plumbing service truck in the driveway on 8/8/2014 :)

There seems to be a stigma with this type & age home, ie ~10 years old, foreclosed on, etc...

It's been my personal experience that home buyers in the Lexington area seem to now have much higher standards, especially first time buyers. They want granite\hardwood, all new and shiny, just like they've seen on HGTV.

From their perspective, for the same or slightly more money, ($130-$140's) they can build a new house to suit them, picking colors\appliances\floor plans\finishes etc, and be the first occupant.

Additionally, I've seen the banks start to do some minor rehab\freshening up of this type of home, exactly what appears to have been done here - new stove\microwave, carpets cleaned or replaced with builder grade, some fresh neutral paint etc, in hopes making them more appealing and moving them faster.

Also, the lot seems tiny, less than 1/10 of an acre, and there do seem to be A LOT of recent foreclosures in the immediate area, which may scare off some buyers.