When a lowball offer TOO low???

Often times in frantic real estate markets where there are more properties for sale than buyers (a.k.a a buyer’s market) buyers will automatically get very aggressive on initial offers and even go as far as submitting offers on multiple properties at a time! A practice usually common among investors, is now common among all types of home buyers. The reasoning may be anticipating a desperate seller, testing the waters, or no knowledge (or clue) of the fair market value of a home. But to understand or find logic in the low ball offer you have to look at it from both sides.

On the buying side, before even presenting an offer you and your real estate agent (you thought I’d tell you to go it alone? Ha!) need to determine fair market value of the home in it’s current condition. Next you need to determine the bottom line you think a seller will take for a property by taking into account numerous things (payoff, commissions, seller’s anticipated profit, taxes, etc.) and then see if the number you are thinking of makes sense. One thing I’ve learned over the past year is not to let the seller’s payoff deter you because some sellers actually have the ability to satisfy second mortgages or shortages on the primary loan in order to close WITHOUT doing a short sale. The most important thing about a ‘low ball’ offer is that it has to make sense and be well put together. A realtor or the seller will not take an offer seriously if they don’t see the basis of your offer; especially if its incomplete, missing docs, contains misspellings, etc.

On the selling side, you should anticipate low ball offers and not be offended when you receive one. The proper response is to either reject the offer or my favorite is countering the offer at full price. Many buyers will submit low ball offers because ‘they just had to try’, but are still serious about purchasing. Cash buyers are usually always aggressive, but analyzing your bottom line against the offer and factoring in carrying costs, some all cash offers are not bad at all! Always be open-minded and look for ways to structure the deal to make it work. When selling a home, leave the emotions on the table and let the buyers deal with that! On the selling side it’s about making the numbers work!!!

Myths about buying foreclosures

Now more than ever it is hard to look for a home in any area or price point and not come across a foreclosure. These REO (real estate owned) properties are everywhere and ready to be purchased. Just like any other type of home for sale, some of them are over priced, some of them are deals, and others are steals! However, as more owner-occupants purchase these homes some of the myths surrounding them are beginning to wane. Here are the myths I hear the most frequently:

Banks don’t pay closing costs
Only when you are paying cash will you run into a bank that may be unwilling to pay any of your closing costs. But if you’re paying cash $500-$1,700 is chump change right! Banks will pay up to 3% towards a buyers closing costs and some Fannie Mae properties will contribute up to 6% on FHA loans.

Banks don’t do repairs
Foreclosures are sold “AS-IS.” Banks usually will not do any repairs that are the result of a home inspection. However, banks may consider repairs that are required by your lender such as FHA repairs. Banks will do these because they know that any buyer that is interested will need these repairs done because their lender will require them. You may even be able to get a bank to do a termite treatment if active termite infestation is discovered by the inspector or appraiser.

Banks won’t pay for home warranties
Untrue! Banks will usually pay up to $500 for a home warranty. Just because it says no warranties doesn’t mean you can’t get an after-market warranty.
Properties are sold with no EXISTING warranties on what is currently in the property.

All foreclosures are run-down and need repairs
All foreclosures are not alike! You do have more that need cosmetic work at the minimum, however, it is not uncommon to find an REO property that was well maintained. Some lenders now spruce up the property before listing it, installing new carpet, flooring, paint, and light fixtures to command a higher asking price.

Investors get the best deals
Cash buyers will always get the best deals because the though of closing in 4-7 days versus 30-45 days is appealing to any seller–bank or human. However, some foreclosures (like HUD homes) require a 2-week period where owner-occupants are given the opportunity to vie for the property. If no acceptable bids are submitted the seller will then review the investor offers. This is why it’s important to run the numbers and know the value and not low-ball with unrealistic offers.

You can always contact me directly for more information.

Flip that house?

With the new changes in guidelines of sellers needing to own a property for 90 days before FHA will finance has investors looking to get back to the days of flipping rather than holding. Flipping is always attractive because of the quick income. HGTV made numerous shows based on people buying, renovating, and selling homes for a profit!!! I’ve represented numerous investors who buy beat up homes, make them beautiful, and they re-sell them at a tidy profit–preferrably within 2-4 months. I posted the most recent flip here done in Washington Park on a duplex– we’re in negotiations to buy another on the same street. But knowing how to use the right contractors and lose your shirt is an art within itself! You can eat into most if not all of your profits if you are not careful!!!

Buying and holding was always my personal preference for the tax write off, but not everyone is cut out to be a landlord! Even with property management companies in place, not buying the right home at the right price can cause you to hemmorage money monthly. But in this market, there are alot of unsaleable homes being leased and with the interest rates low, fair market rent is in the toilet! So you may get a good rental property, but you’ll need to get it at a GREAT price to compensate for the rents that you’ll be able to reasonably collect.

The same pitfalls of flipping from years past are still the same. A nationwide change is that now if you’re financing an investment property you’re going to need a minimum of 20-25% to put down. Gone are the days of 100% non-owner occupied properties!!! The big change in the Metro Atlanta area is theivery of the copper plumbing, light fixtures, appliances, and the infamous A/C units!!! Even when caged these units can be stripped for the interior metals or some theives just remove the cage!!! I honestly think rouge contractors are stealing these as there is no why the ‘common theif’ has the tools to pull this off! Vandalism is at a fever pitch on vacant homes. My listing in 30314 has a VPS system installed to deter anyone even thinking of getting in this house!

I’d definitely recommend buying and holding for novice investors, because it allows you time to heal your wounds if you over pay or under estimate costs of repairs. In this market it’s hard to overpay but it happens everyday!!!

You can always contact me directly for more info