Is this realtor BS'n me?

[Herm M.]

Well here's the info for the property I'm working on:

http://www.biggerpockets.com/forums/88/topics/35152-can-someone-analyze-this-please-

The owner bought it for $37 million in 2007. They are aware that they are going to take a hit.

There is a loan of $19.4MM that MUST be assumed (there's a pre-pay penalty).

The realtor is saying that there is no other options but to assume the loan....so the down payment will be whatever the amount is over $19.4MM.

My goal was to work on getting funding to purchase this property at $22MM, or $25MM maximum.

We called today to confirm that the Freddie Mac $19.4MM has to be assumed, and he said yes.

He told us that right now they have received 11 offers on the property...and ALL of these offers range from $27MM-$31MM. This property has been on the market for 6-8 weeks.

NOI on the 2008 and pro forma numbers states $2.3MM.

I'd say that most invesors will use an NOI of $2.0MM on this property to be safe.

Debt service on the Freddit Mac will be $1.45MM yearly.

That leaves a net income of $550,000.

So here's my questions:

1) How is it possible that there's already 11 offers?

2) How is it possible that ALL of these offers are over $27MM?

We all know that anybody with funds right now is going to buy something at rock-bottom price, so I have a hard time believing that there's 11 idiots out there (with money) who are offering $27MM-$31MM on this property.

Remember, at a $27MM purchase price, the investor is to put down $7.6MM. With that down payment, the cash-on-cash return is (550,000/7,600,000) 7.2%. This is somewhat believable, but I still think that any smart investor in this market (and there's only smart investors out there right now, because the stupid ones don't have money) will put a max price tag of $25MM for this property (same view as me).

At $31MM, the new owner is paying $11.6 as the down payment. That brings their return to (550,000/11,600,000) 4.7%. I don't believe this at all.

Basically....I called the agent. I said "let's say I offer $22MM on the property, 20% would be $4.4MM. The 80% would be $17.6MM. Does that mean that I would have to pay down the Freddie Mac loan (currently at $19.4MM) down to $17.6MM through escrow, to bring it down to 80%?"

He said "the down payment will be cash anything over $19.4MM, but if you're looking to offer $22MM, you're wasting your time. There's already 11 offers, and they all range from $27MM-$31MM."

I'm sure this agent is BS'n me. But what do you guys think?