Can in make a low offer on a foreclosure?

[Mitch Turgeon]

I am a new investor looking at a foreclosure as a live and flip. The ARV is $400k, the rehab costs should be between $130l-$150k, the property is bank owned and asking price is $260 with a $20k assessment. My thought is to offer $170k cash and finance the rehab. Am I wasting my time offer $90k under asking? Any suggestions on how to proceed?

[Mike Warder]

Submit the offer. You're running a business, not a popularity contest. I'm putting an REO offer in tomorrow far below asking price. $160k ARV, Asking $137. With $50k in repairs necessary, I'm offering 80k. If they say no, I move on and look for another opportunity. I want it to work because of the time I've spent getting bids, etc, but it's not worth it if it puts me in the red.

[Account Closed]

Banks have really tightened up a few years back you can get lucky at 7-8% of price but 35% is excessive Are you using an agent for advice and did you get a reliable rehab bid

[William Murrell]

If your first offer doesn't embarrass you, you might be offering too much.  And if they say "no," you're no worse off than you are right now.  You can even come back with another offer.  You aren't going to lose money on a deal you don't get and there is always another one.  

You might also try telling the listing agent "I'm thinking of making an offer, but I'm coming up with 170k.  Is that offer worth putting on paper?"  Now, they're supposed to be representing the best interests of the seller and they're also supposed to present any offer, no matter how stupid.  But sometimes you might be surprised how far you get with that.  They might agree that the asking price is too high.   They might know that the bank is ready to go ahead and be done with it.  And they might also realize "if I convince them to take this lowball offer sure the seller will net less money, but I'll get both sides of the commission."  They're not really supposed to do that, but that's a different discussion. 

[John Leavelle]

@Mitch Turgeon

Howdy!

2 Questions.

1. How accurate is your$400k ARV? Did you get comps from a Realtor?

2.  Are you an experienced Rehabber?  At that amount of projected Rehab Costs I would hope you are. 

I agree with @William Murrell, submit the low offer.  The margins don't work any other way.  Explain in you offer why you need to submit such a low offer.  Provide your proof (comps) and Rehab costs.  If they accept it great, you win.  They may meet you in the middle.   Or, if not, no harm no foul, move on.

Good Luck.  :)

[Mike Warder]

Submit the offer. You're running a business, not a popularity contest. I'm putting an REO offer in tomorrow far below asking price. $160k ARV, Asking $137. With $50k in repairs necessary, I'm offering 80k. If they say no, I move on and look for another opportunity. I want it to work because of the time I've spent getting bids, etc, but it's not worth it if it puts me in the red.

[Mitch Turgeon]

Thanks for all the information. I originally thought I might go direct to the listing agent, but other agents on BP said I would be wasting my time if I was represented. The ARV is fairly accurate based on my own comp analysis on like properties that are not updated. Being this would be completely updated it might get a slightly higher ARV, but I won't bank on it. I am in the construction industry and have rehabbed a house already so I aimed high on my repair costs. I should be able to get the work done for less as I know the labor force and can skip the GC's, bringing that repair cost down.