All Forum Posts by: Simon Campbell

Just make sure that you are well informed about what is exactly being sold at the auction. I am not talking about condition or property but rather the equity position. Many auctions are only for the equity position and do not transfer title via a warranty deed.  In these cases, all liens that were made prior this the one up for auction transfer with the property. If the foreclosure is on a second mortgage and you win the auction, you now are responsible for paying off the first mortgage to gain clear title to the property. If not, the first mortgage can foreclose and you loose both the property and your money paid.

Ha it is an indication of a desperate seller who is willing to train any fish that bites. Backing away maybe one of the best decision you could make. Running a successful restaurant is a risky business to say the least. 

I would tuck this lead away and keep your eyes open for a bird dog fee. As a sign of good will, you might even pass the lead onto a couple of commercial realtors with a mention that you will be happy to accept any unwanted residential leads. A good reputation builder.

I agree with @Brian Stephens here. I highly doubt that $1k will cover the replacement of all the windows in the house. I would suggest bringing a licensed contractor with you and get a hard estimate of the true costs and then run your profitability projections with the actual bid.

@Illan K. these "We Buy Ugly Houses" people are 99% of the time property wholesalers. They are looking to put a house under contract for well below market value and then "resell" it to their end buyer. Usually that means that they transfer their purchase contract for a higher price then what they offered you. They then keep the difference. 

Here is a formula that a lot of active wholesalers are using to compute whether a house will be a good deal or not. The formula is solving for the After Repair Value (ARV) or what would be known as the market value if in good condition.

(ARV x 70%) - Rehab Costs = Wholesale Price

This means that if the house is in marketable condition, they are going to offer you 30% less than market value. If you do not want the hassle of paying a real estate agent 10% and having multiple showings etc and that amount is okay with you, then by all means give them a call. But, if you are in a sellers market (more buyers than sellers) and you have a house that would be in high demand, I would recommend trying to get market value for the property. Why should you give away your equity?

In my opinion, never ever rely on Trulia or Zillow's opinion of value, zestimate, rental rate etc. According to Zillow’s own Zestimate data accuracy report, they have a median error rate of 6.9%. In fact, further down in their report they state that only 38.3% of the time are they within 5% of the actual sales price. The reality is that they are 20% off the actual sales price 84.7% of the time.

The only way to know the true market value of the property is to manually compare recent comparable sales. This is a job for a real estate agent. Since your agent is on vacation, she must have left someone else in the office in charge of her clients. Give them a call and see what they can put together for you. 

With the little bit of information that you supplied, it looks like this would be a great deal. Let me explain why:

If each unit rent equals 1% of the purchase price or $1,890 per side and you take out 50% for expenses including vacancy, taxes, insurance, repairs, utilities and capital reserve you would be left with $945 at the end of the month to pay towards the loan (assuming you are living in the other unit). 

If you get a VA loan (i.e. your military picture) with 5% down at 4.5% for 30 years, you are looking at a payment of around $910. This would leave $35 a month in your pocket and you would have free rent.

Honestly, if that is close to the rental rate - I would buy this property tomorrow!

If you have not submitted the second offer, then you can offer whatever you want. It is a new transaction. Also, I would make the offer subject to a property inspection. That way if there are other problems, you have a loophole to either adjust the purchase price or walk away from the transaction with your EMD.

Good advice @Eric Black . If permits were pulled, they will still have to pass final inspection. This should be done and the permits closed before selling the property. If they did the work themselves, I would recommend bringing in a qualified inspector (i.e. a contractor or electrician friend) to make sure the work was quality.

Also, I do not recommend ever buying homes based on the tax value. Tax assessors do not value a home on an individual basis but rather in bulk. Additionally, it is not market adjusted each year. It may or may not reflect market value. The best advice is to always go off other recent comparable sales.

My first question is to find out what they are actually selling. Restaurants are not an easy sale. If they own the building, they may be selling just the real estate. Or they may be selling the business (also called the going concern). Then there is the equipment value.

Yes, I would definitely pass on the lead. You may want to contact some of your investors to see if they are interested or know of someone who is interested. Just find out exactly what they are selling first.

It may be possible that the owner got confused between a real estate agent completing a BPO and an official appraiser's inspection. I could see a lender getting a BPO completed, but unless there is a pending buyer, I see no reason why there would be the expense of an appraiser.