Need Suggestions From The More Experienced
When making offers for REO properties, what do you usually offer initially? 80-85% of listing price? Does that sound reasonable? Also would like some input on all the costs I need to consider before buying one of these homes besides the sale price. I know theres the propertie taxes, closing costs, cost of rehab...anything else? I am just starting out and any input would be greatly appreciated. I have a realtor who works closely with REO's and pre-forclosure homes and he sends me listings when they come his way. I just want to make sure i do my homework before i buy my first property.
I offer what I feel the property is worth based on repairs needed and market comps. Sometimes that is 50% of list price, sometimes it's 100% of list price. Let me be more direct...List Price doesn't matter.
When buying REO's you'll need to consider these costs: repairs, holding costs (incl prop taxes, insurance, utilities, interest), buying costs (inspections, loan fees) and selling costs (advertising, commissions, signs). All these apply if you're rehabbing. If you're holding as a rental you don't need to factor in selling costs.
Tassod
Please forgive me but you are asking some vary basic questions in real estate investing and what KevinIL has some great merit.
Listing price does reflect a large percentage of the amount the lender has invested in the subject property.
I use the following information to run numbers on subject investments. (I base my numbers on a 6-month hold time
MARKET VALUE
REPAIR COSTS
CARRYING COST
Interest = Purchase Price x .05 / 2
Real Estate Taxes = yr. taxes / 2
Insurance = MV / 100 x .09 x 6 mos
Utilities = MV x .001 x 6 mos
REALTOR COMMISSION
Realtor fees = MV x .06
CLOSING COSTS
Closing Fees = MV x .015
TOTAL VALUE LESS EXPENSES
PROFIT
PURCHASE PRICE
[addsig]
Thanks guys, this is certainly great info and i will put it to good use. Do you typically use a realtor to get comps or do you research them yourself? If you look on your own, what would be a good place or website? The only one i know of is www.Domania.com
If you need comps, go to a local realtor in the town where you plan on buying. Tell them that you have a house (the one you plan on buying) and that you would like some comps to get an idea of how much it can sell for. You don't need to supply the specific address, just give them all the info about the house - type, rms/bds/bths, acres, sq ft, area, etc. I've done this a couple of times with great success. I believe that the realtors are helpful at this stage because they may think that they are vying for your business. It doesn't hurt to make them feel good by saying that you'll consider listing the home through them when you are ready to sell.