REO with Mold & Water Damage

[Dawn Psaledas]

Would love some feedback from experienced investors regarding this REO.

Property had some localized flooding due to burst (frozen) pipes on the 2nd floor. From what I've been able to piece together, the water damage probably occurred 7-8 months ago, and there has been standing water since. There is significant mold damage (and yes, the "bad" kind) in the basement and at least 1/2 of the first floor.

My husband is a mold remediation professional, so I'm not concerned about that aspect of the job as far as cost to demo, remediate and get "clear" mold counts.

The put back numbers will be high because most of the walls & ceilings have to come out, and some beautiful 1950s hardwood floors may be beyond drying/repair. (such a shame!)

There's a laundry list of pricey items that will need to be addressed & power is off, so I have to assume that anything that could have been affected has been affected.

I ran hard numbers on repairs, including an analysis of sweat equity vs the sit-on-the-couch-and-let-a-contractor-deal-with-it approach. I know what I'd be getting in to and it's a huge project, but one that I think could be fairly lucrative if I can get the property for the right price.

As of a couple of weeks ago, the bank had the property listed at $180. Move-in ready comps are high $190s, low $200s. The bank just recently dropped to $165, which I think is still way too high.

My thought was to offer $75-80 (10 days cash), which is really the point where the deal would make some sense to me. I'm using the listing agent, and he believes the bank will not even look at or respond to an offer that's below asking. I'm thinking, make the low offer and give the bank the justification for the reduced offer.

The real crunch is that the weather has been fairly cool and this has prevented the mold/water damage from getting to the point where it's not worth touching the property. Weather reports are that it will warm up very soon, so I'd like to include a provision in the offer that if the bank accepts but can't close in 10 days that they grant no risk/no liability access to the property so we can at least get the water taken care of and stop the bleeding.

Sorry for the super long post! If anyone has thoughts, opinions, etc., I'm all ears! Thanks!!

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