Would you do this flip?

[Andrew Nissen]

Bank foreclosure listed for 90K Needs about 45-50K rehab/clean up. Comps 125K conservative We would buy and rehab with cash but would take a good amount of time and work. Should I offer the bank 45K? It's been on the market for 2 months. Thanks, Andy

[Darrell Shepherd]

I make offers from MLS fairly regularly. Its a low percentage ballgame in a hot market, but it still works if you fire enough of them off. I do wonder sometimes if whoever decided the listing price was smoking crack when they did. I quit even looking at HUD stuff because they are so far off the mark most of the time around here.

I make offers at my numbers if I see a situation I can remedy. Just being bank owned doesn't do it. If it needs big repairs it will definitely narrow the field of buyers, but keep in mind the yahoos setting the price dont have a clue what it costs to fix them. Doesn't hurt anything to make the offer at half listing, I've done worse if I think they've mis-priced it that much and its been sitting, but my agent usually shoots them an email or calls to check the situation before writing things up. I do a lot with my agent, though, so she doesn't mind doing that kind of stuff she probably wont get paid on. Most agents will look at you funny if you tell them to offer half the listing price. Mine actually gets laughed at on some of what we send in. Gotta use your numbers, though. So the answer to your question is NO. Don't offer $45k if your 70% less costs is $37,500. I'd question your rehab numbers, though. That's a huge renovation on a smaller house, which I'm assuming is the case at $125k. I've cheated on the 70% at time or two, but only when its close to home and I liked the project. The biggest/most consistent mistake I see newbies make is altering their numbers to make them fit the deal. Hell, I've been guilty of that when I haven't bought anything in a while. Usually comes back to bite me in the ***.

Time and circumstance changes things when you're making offers, I've had them come back several times after rejecting my original offer. I probably make 40+ offers to get one accepted right now. So much of that depends on your market, you could buy them all day long at 65-70% in MLS here before the hedge funds came into town about a year and a half ago and started buying everything in sight.