Can? and should I flip this house?

Question

Hello BP, I got a potential wholesale deal and I would really appreciate your feedback and suggestions on it.

So the house is in Maplewood New Jersey, off market. Owner wants 300k, Zillow has it as a single fam 3/1 and estimates it close to $430000. However the house is actually a two family both units rented out - the 3/1 is for $1450/mo and the other 2/1 goes for 1200/mo. a bit of fenced backyard. Rents in the area are about $200-300 higher. Bare with me please.. I got the lead trough a bird dog and there's an agent representing the seller(aka brother in law). The Agent told me to show proof of funds in order to be able to view the property and gage the condition. I think it's possible to obtain a proof of funds online but not sure I want to pay for the service.

My current financial background wouldn't be nearly sufficient to buy and hold this property so my option is to flip it. I overruled Double closing (thought to get at least $30K of it) because I can't qualify to buy it then sell My invesor friend said that title companies wouldn't let me double close unless I can show that I can buy.

So now I've texted the agent, told him that after I did the numbers it didn't look like a deal to pursue for me but my friend investor is very interested and would like to get more info on the property condition before showing proof of funds along with the offer.

With that being said Please feel free to share your wisdom and give me an honest feedback on my thought process and maybe a more beneficial outcome available.

Thanks for your time.

Lydia R. · Answer

@Andrey Budu As a wholesaler I would say this situation is a pass for several reasons. 1. Typically when a seller uses an agent they want as much money a possible and negotiating is more difficult. If you dont have proof of funds agents will typically not deal with you. 2. If you dont have access to the MLS its going to be very difficult for you to have an accurate ARV. Without an accurate ARV there is no way to know if its a deal. 3. Without seeing the inside you dont know the repair cost.

Personally I see too many obstacles and you could spend a lot of time on this only to have it not be a deal. Especially if you dont have a strong buyer or 2 that you know for sure would be interested in buying this property. My suggestion is pass and move on to something that has few obstacles. Just my 2 cents

Kyle Shankin · Answer

@Andrey Budu I'll offer some things to consider based strictly off my opinion.

First, if you are relying solely on the Zillow zestimate to assess the value of this property, I wouldn't. Zillow is only accurate to a certain degree, and here's what it looks like for Essex County, NJ:

What I gather from this is that the actual value of the property has roughly a 38% chance of being within 5% of the Zestimate. With this table aside though, I would be skeptical of the value because it's reported as a single family home. Using zillow to find  out recent MFH sales in that area would give you a better idea in my opinion.

Second, why do you need to pay someone for proof of funds? Is that service also financing you? It's VERY possible that I just don't understand what you're using the service for, but it seems backwards to me. If you don't have the money to buy this house or don't have a partnership/loan lined up, then I don't see how you could offer proof of funds without it being fake. Maybe take the specifics of the deal to whomever you'd use to get the funds and have them give you some sort of proof of funds.

Jonathan Curcio · Answer

@Andrey Budu , yes-that is correct.  We only take our comps from recent SOLDS that are arms length transactions and we try to make it as "apples to apples" as possible when it comes to all the features.

Zillow should only be echoing data and not manipulating it.  Therefore, if a home is listed SFH when it clearly is not, it's likely due to input error into the local MLS by the listing agent.  Listing errors are incredibly common, maybe not to THAT extent, but it's why we always advise clients not to buy sight unseen.  You could probably head into the public facing MLS covering that county and do a history search on the property for previous listings to get better data.  Now, I say all that because I just reviewed an Inman article about Zillow pushing it's own listings to the top of searches in areas where it's rolling out it's iBuyer program....but that's a story for another day.

Moral of the story: if you ever have a question/concern I recommend speaking directly to your trusted agent/broker for their insight.

Jonathan Curcio · Answer

Zestimates take the deed recordings in a geographic area to determine value. That includes refinances and deed transfers from family members, and they don’t include the condition of the home or any upgrades. They can often be too high or too low.

Zillow puts their Zestimate’s national median error rate at 7.9 percent, meaning half of Zestimates nationwide are within 7.9 percent of a home’s sales price and half are off by more than 7.9 percent. If you wouldn’t trust a Realtor giving you an 8% range above & below market value, why would you trust the Zestimate?

On February 29, 2016 Zillow CEO Spencer Rascoff sold his Seattle home for $1.05 million. If the Zestimate were accurate, it would mean the chief of the biggest name in real estate and the recent co-author of a book about “The New Rules Of Real Estate” would have sold his home for 40 percent less than the Zestimate of $1.75 million shown on its property page a day later.

^^^^^^^Some fun facts taken from my listing presentation-Agents you're welcome to steal.

Finally, proof of funds just means a letter from the bank, screenshot of your portfolio, etc.  It's the same as us requiring a pre-approval prior to showings.  Don't take the request as too forward, we ask for these to A) keep out the tire kickers who waste everyone's time and B) do so in the interest of realtor and owner safety.  When else would you allow a complete stranger to come into your home or a home you're showing lol

Lydia R. · Answer

@Andrey Budu I would suggest building a good relationship with some agents because if you dont have access to MLS they will be very helpful for getting you comps and helping you nail down ARVs on your deals.But my thought is that something major is wrong if seller is selling for 100k under value. Now it could be that the agent (you said it was a relative of the seller so insert eye roll here) is not savvy and missed something but more than likely the property needs a lot of work. And you said it is rented so maybe the tenants are terrible and the lease doesnt expire until the end of this year. There are so many things that could be wrong. Spidey sense says pass.

Steven McCutcheon · Answer

@Andrey Budu

Don’t trust Zillow for correct estimates or pricing of a home. They are better at lead gen for agents than estimating home prices. Also, just by what you gave us, I’m not sure why you have to pay for proof of funds. I would avoid this deal, doesn’t seem like you have the financial capability for it, or if there is even enough to be profitable. Don’t forget about the holding costs of properties during a flip too!

Matthew Paul · Answer

https://activerain.com/blogsview/684692/world-s-bi...

Its done

Allan Szlafrok · Answer

@Andrey Budu I don’t think you can pay someone for a proof of funds but you can get a lender to let approve you for a certain amount and they will furnish you with a proof of funds for that amount.

Brian Pulaski · Answer

What are you looking to do? If you are looking to wholesale it, I wouldn't. This isn't a good wholesale deals being listed by an agent. If you are looking to flip it, you will need money. If you are looking to buy and hold, you also need money, and I'm not sure $2600-2700 rent on a $300,000+ house that needs work (I assume) is a good rental.

Andrey Budu · Answer

@Eric Johnson haha, perhaps.. I use Zillow only to look at recently sold comps (that couldn’t be a different number in other sources) or rental comps. But definitely have to get MLS data to get my numbers right.

Can? and should I flip this house?

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