Question on a house in foreclosure?
Question:
The outside area is in total disarray though. The yard needs major work, new fence, and landscaping. It also has a pool that they never covered last winter, so yeah lots of work.
The inside has real hardwood floors and a beautiful kitchen. So the inside seems to be in good shape.
The home just needs some TLC. It really is a nice home- just needs someone to take care of it. Since the house has some equity, when could we take out an equity loan for improvements?
What's a good price to offer (contingent of a home inspection)and would we have a good chance to get it since the outside would turn off most buyers? Wouldn't most people overlook it?
We look forward to a project! Just seeking opinions and planning ahead and needing a strategy. Is this home worth the effort?
Answer:
my apologies for what will be a long answer.
the most important concept, that ill state later again, is that you make money when you BUY. you only collect it when you sell. buy wrong and you are in a lot of pain.
assessed tax value doesnt mean market value. sometimes appraised is lower, sometime higher... for ex i fought to keep mine low because higher apprasied means higher taxes... it doesnt necessarity mean the home is tax assessed at what the market will bear.
so you should find your local assessors web site. search using the name of the county and "assessor"... at the site you can pull up useful information to get you started.
for ex, you can look up the address of the house and find its history. who owned it? what was their buying price? when did the bank get it? you might find the sheriffs deed the bank had for it when it went to sale in foreclosure. loads of info here. all can help you understand how much the bank was owed... remember, they dont want to be in the real estate business on run downs... they was to cover their losses. if you give them a profit theyll take it... but they are mostly trying to get out of the home as clean as possible.
also, at the website, you probably can search for sales of homes in the region that match the house size, year built (at least older homes), etc. this can give you a feel for what comperable homes should sell for in the market... of course most of these may not be in as bad condition. you can also see what homes are selling for now versus a year or two ago since the markets changed.
so knowing real market value and knowing what the bank might have it for are key. obviously some assumptions here, but if the previous owner had the house for some time you know they had some equity... you know their mortgage was lower.
also, talk to the bank officer handling the home. ask what they have for assessed value (again, this is market expectation in appropriate shape). ask them if this has gone through forclosure sale yet. if so, you have more room to bid lower.
and... you need to be able to cover your expenses. if you are cash rich thats great. but you need room to make the improvements. most of what you said was cheap cosmetic labor. but what if the property doesnt sell? can you cover overhead exp for a year or two?
so... the answer is you need more answers. obviously youd love to know the banks bottom price, but you can do your own estimation using likely market value when fixed versus the $ invested and the return you would like. make sense? what about cash reserves for unexpected expenses? knowing YOUR top price is critical. and it means stepping away emotionally and doing some due diligence.
also, you need to be willing and financially able to hold the home. a home in my neighborhood was bought as a flip home three years ago. after fixing it up the owners couldnt sell it for two years. they finally did... at a 17K loss off their purchase price, not to mention utilities, etc. look around and youll see homes for sale where the owner clearly ran out of money while remodeling.
you make money when you BUY. you only collect it when you sell. when you are not sure, being more conservative is better when you are new. this might mean bidding lower and risking not getting the home... again, it depends on your cash situation and your tolerance for risk.
when not sure, figure out a conservative top dollar youd be willing to spend (with all the mentioned expenses and costs built in) and then bid below that, maybe 20% if you dont get it, ok. it wasnt right for your financial model.
The assessed value of a home by your county assessor may or MAY NOT be your home's true value. That value is only used to determine how much property tax you pay.
You need to get an appraisal of the home from an appraisor. This is a requirement if you get a mortgage for it.
How much you can borrow against it is dependent on that appraisal and the price you want to pay for the home. That ratio, called Loan to Value, in addition to your credit score, are the big determinations for your borrowing power and interest rate...
simply put offer alot less say about 100,000 b/c you will not be able to get the equity until the house is seasoned which typically takes about 6 months to a year hope that answers your question
Your probably not getting the best deal on this unfortunately.
I would suggest trying to get the property in the pre-foreclosure stage so you can work with the owner of the property direct and not the bank. You can then negotiate with lenders with A Lot more leverage when you get the property in pre-foreclosure.
If you need a good coach to learn the process so you don't get stuck paying more...I would recommend trying to get Chris Harris from http://scbuyshouses.com
More Related Questions & Answers...