All Forum Posts by: Eric Frissell

Agreed, it was such a weird thing for her to say.  I think she watches too much HGTV

So, to keep this post alive, here is what I offered and from a GAAP accounting standpoint I think it's reasonably generous.  To sum it up they have a property that requires $65,000 in immediate repair - siding, new AC unit, and an unknown amount of mold remediation which I planned to do (drywall removal/installation and paint).  The property was foreclosed, according to the realtor it was then purchased at auction by the bank for $255,000, originally listed by the bank for $650,000 and has been trickling down to $400,000 and the most recent offer they've had was "between 300 and 350."  The property is 3,200 sq ft, last sold for $500,000 in 1994, and fixed up may be worth $650,000.  The prices in the area are very inflated and most properties in the area that are listed above 400,000 are on the market for 6 months or longer.  This one is no different and has been on the market since October.

The offer: 280k for the house, 60k into an escrow account for repairs, and I'll take out a mortgage through the listing bank at a 4% interest rate which is slightly above market for a mortgage.  Generous for the bank because GAAP accounting allows the bank, upon selling the mortgage, write the profits of the entire mortgage into their books.  It's called "mark to market" accounting and they would be able to record a sale of the house for 280, credit 60k for the escrow, then record the 280k mortgage as a debit of $480k.  Pretty reasonable of an offer to put the repairs on the mortgage because it inflates the value of the mortgage while still giving me some $$$ to do the repairs.  The bank would probably sell the mortgage at this point but they'd still be able to record decent profits on the sale of this house.

Here's what I did; I called the listing agent and asked if she would be interested in dual representation and naturally she said yes.  Viewed the property with the field manager, she bragged about how most of her business is hedge funds, and when she asked what I was thinking basically walked off and said the bank is going to put the money into fixing it themselves.  Okay lady, I'm sure those hedge funds will take care of you when you need it just like you did them.

I have no contacts at the bank and the realtors are going to make the process impossible so I've decided to walk away and save myself the trouble of doing 3 months of drywall and dealing with contractors.

Oh and another question William.  There is some mold growth on a first floor wall from a leaking toilet shut-off valve in an upstairs bathroom so in the scope of work are you able to state something to the extent that to completely remove the mold it will require new drywall and removal/re-installation of carpets?  Or will you have to get a quote from a mold remediation specialist and do whatever they recommend? 

With that kind of knowledge I bet!

Thanks William!  That is great information! Did you have someone quote all the work that needed to be done or did you use estimates based on your location and the going rate for the work that would have to be done?  Did you need to have an official inspection that you could point to tell the bank an inspector has determined such and such needs to be done, here is a quote from a general contractor for that work?  When the contractor quotes it can you use that tell the bank the property requires xxx in repair costs but keep some of the work for yourself such as redoing the painting and the floors if that is a mess?

Thanks Brant, I'll check out his channel when I get home!  Does that mean that banks do not mind holding on to houses?  I could be totally wrong but my understanding was that banks generally don't want to hold onto a house so if a house hadn't sold after 3 or 4 months they would be more willing to accept a larger loss?

66% of asking is pretty good!  Do you know if the bank took the appraisal value minus repair costs to get the price down?  Unfortunately for me I think the land the house is on is worth 250 alone

Hi guys, long time listener, first time caller... I have found an REO home in Florida that needs some work that I would like to fix up and move into. It's a dream house, in a dream location, but has a few issues that would need to be taken care of before I can move into it. The bank has held the property for 7 months and is asking way too much for the house given the work that needs to be done to it.

The situation: First and foremost the original wood siding is rotting all along the base, under some windows, a bit under a gable, and a few random spots so it NEEDS to be replaced and I'd prefer to replace all the windows at the same since they're single pane and will need to be replaced eventually.  In the interior there is some mold on an interior wall from a leaking toilet valve and the A/C will need to be replaced. Outside of the siding and windows the house is what an investor would look for to have an easy flip; carpeted floors, laminate kitchen counters, old paint etc... .

The financials: The house was sold last in 2004 for 500k, was foreclosed on in October of 2018 and went to auction for 650k where it didn't sell.  The bank has then listed it for 650k but has come down to 400k.  Comps in the area have it priced between 400 and 600 with all the repairs finished.  I don't want to pay any more than 280k to buy the house and complete the siding and windows so if the bank isn't willing to negotiate I'll walk away and find something else.  The house is 3,200 sq ft so I estimate vinyl siding and windows to be approximately 40~50k (25~35k for vinyl siding, 10~15k for windows).  Full disclosure I grew up in Michigan where vinyl is the siding of choice so if vinyl is a no-go in Florida then I'll have to refigure the cost for siding. 

What kind of financial tools do I have? I will be taking out a mortgage loan for the property and would prefer the mortgage covers the house and repairs. I believe my realtor has suggested making an offer of 270 but having 50 of the 270 placed in escrow for repairs to the siding/windows/air conditioning so that it's livable however I've never dealt with an REO nor placing money into escrow for repairs. If this was you how would you do this?