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Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-27-2014, 8:48 AM Reply   
Due to some recent bad news about my mother-in-law's health my wife and I will be moving back "home" .... there is a house on the water we currently would like and I've been doing my homework on it and I think its the one, but it is a foreclosure and in this area, its a rare thing; the realtors there aren't much help since they don't see this often.

The property was for sale for 6 years by previous owner, bank took it over December of 2013 (6 months ago).... so on the market forrrrever.


The facts:
* Asking 280k (assessed at 325k), bank appraisal from Dec was at 285k
* Listed as 3 bed / 3 bath ... septic tank is 35 years old and steel, its probably shot. Also is only 750 gallons so technically a 2 bedroom septic, e.i. the house is technically a 2 bedroom house because of that.
* Roof needs replacing in the next 2-4 years
* Dated, shows like ****, and smells weird since its all closed up
* This lake on average is selling for 75% of assessed value (at 325k that means 245k puts it as average)

Almost a shot for shot comp in every single just sold for 240k .... only difference was 50' less frontage but the house didnt have septic or roof issues.

Another foreclosure is up for sale right now with only 65' of frontage, 3 bed / 2 bath house across the lake and is asking $145k


.... based on everything I know, I am torn between two offers (both lowballs)

Do I lowball EXTRA hard knowing all the problems the inspection will find and just move forward once they're found.

or

Offer higher to get their attention / my foot in the door, then drop the price when the septic inspection comes back **** (which I know it will)... then just drop the price after that?


Any advice would be great! Thank you!
Old    Spencer Coon (spencercoon)      Join Date: Mar 2011       06-27-2014, 9:38 AM Reply   
If there are no other offers on the home and it has been on the market for a while I'd say throw out your low ball offer. Chances are they'll look at anything. Just make sure you note in the email with the offer or on a cover letter all of the known issues with the home as well as recent comparable sales that will help justify your offer.

FYI most banks aren't up for negotiations after the initial terms are accepted. If you were to want the price lowered after your inspection period is over they will most likely have you cancel the contract and submit your offer all over again.

Hope this helps....Good luck!
Old    Andy Graham (ottog1979)      Join Date: Apr 2007       06-27-2014, 9:48 AM Reply   
FYI: Assessed value has almost nothing to do with current market value or what you should pay for a property. It's only what the tax assessor values the home for RE tax purposes. A purchase price is very likely to affect the assessed value, but never the other way around.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-27-2014, 11:06 AM Reply   
Quote:
Hope this helps....Good luck!
It totally does! Thank you! Like you mentioned, I figured that given how long it has sat, annnny offer would be looked at given the circumstances.

Quote:
Assessed value has almost nothing to do with current market value or what you should pay for a property.
I would agree, but a MLS report on recent solds on the lakes in that area were 75% of assessed +/- 3% max.... based on that market value seems to be easy to estimate because of the strong correlation to sold prices and assessed. Having that data in with my offer should only strengthen my lowball.
Old    Big D (bigdtx)      Join Date: Feb 2005       06-27-2014, 2:44 PM Reply   
I'm no real estate expert but I think on foreclosures they are not required to tell you about anything wrong with the house that they know about. So I would be doubly careful on the inspections. I tend to not trust inspectors so I'd always get a 2nd (or 3rd) opinion if you're serious.
Old    Jason Buffalow (buffalow)      Join Date: Apr 2002       06-27-2014, 2:45 PM Reply   
If it looks to good to be true......
Old    Spencer Coon (spencercoon)      Join Date: Mar 2011       06-27-2014, 3:22 PM Reply   
Quote:
Originally Posted by bigdtx View Post
I'm no real estate expert but I think on foreclosures they are not required to tell you about anything wrong with the house that they know about. .
This is a very common misconception (even among real estate agents) so I don't fault you for it. There are two reasons for this:

1. Most bank owned homes are sold "AS-IS". I don't mean to bash on my fellow agents out there but most think that an "AS-IS" sale relieves the seller from his/her responsibility to disclose any known past or present issues with the home. FALSE

2. The shot callers at the bank have never stepped foot inside the home so they cannot disclose what they don't know. They have however hired real estate agents and asset managers that most likely have been in and around the property, giving them "limited" knowledge of the homes condition. Ask the listing broker to help the asset manager fill out a disclosure statement.....

Disclosure in a residential real estate transaction is required by law. ALWAYS GET A SELLERS PROPERTY DISCLOSURE STATEMENT.

***Disclaimer*** I am only licensed in AZ so the statements above may or may not apply in every state
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-27-2014, 7:25 PM Reply   
Quote:
If it looks to good to be true......
I knew the family that use to live there, was buddies with the kid growing up. His dad is really a "slimy" kind of guy ....they had the house for sale for years, and then like 2 years ago they borrowed against the home, bought a 2nd home in Florida and a boat to go with it... then just sort of stopped making payments, bank took the house but they had already retired to FL with a new house and boat.... so didn't really matter if their credit was shot.
.... The houses that sell quick in the area are turn-key because its 80%+ Chicago / Milwaukee vacation homes, so they don't want a project 4 hours away, I think thats why this has sat, it is stuck in the early 90's.

Quote:
Disclosure in a residential real estate transaction is required by law. ALWAYS GET A SELLERS PROPERTY DISCLOSURE STATEMENT.
The agent I'm working with mentioned this today, so good to know he isn't totally helpless.
Old    Surf Addict (Desi) (phathom)      Join Date: Jun 2013       06-29-2014, 9:35 AM Reply   
I can tell you that if you're looking for a FHA loan, you might as well pass looking at this one. With most bank owned and foreclosures, they are sold as is and they will not go about doing any repairs for you.
With a FHA loan, things like the septic tank and roof you mentioned will likely come up as red flags. Unless everything passes with flying colors, it's not going to happen as the bank won't fix those issues. They just pretty much get the keys, lock it up, cut utilities off, and want to flip it as is to get their money. They are not like a regular seller.

If you are doing a conventional loan, well go have a whack at it.
Old    Hate N Pain (hatepain)      Join Date: Aug 2006       06-29-2014, 5:50 PM Reply   
You can do a FHA 203K loan on it.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-29-2014, 7:26 PM Reply   
This will be a conventional loan, not and FHA.

.... there is a chance I would do a balloon mortgage through a local bank. I've been banking there since 14 and spoke to their GM last weekend and he said that he would do a balloon with the following terms:

* Assuming we get the place at the "top" of what we're okay with, he said any gap between sales price and appraised value he would count as "equity" on the home. There was an appraisal done when the bank took it in Dec of 2013. It came back at 295k. I won't go over 225k for the property based on comps / assessment / problems I know exist with the home.
.... based on that 20% of 225k = 45k.
.... Assume appraisal comes in 5% less than when bank took it over, puts it at 280k, so with the balloon loan, we cover our 20% down.
.... After that we're sitting on around 60-70k in "cash" from the sale of our condo + relocation money to do what is needed to make the house what we would want.
.... The balloon loan would be fixed for 10 years, then require a "full payoff" at the end of 10 years, or we could do another balloon / conventional 15 or 30 year fixed after. There is also a "MAX RATE INCREASE" clause that would only allow the rate to jump a maximum of 2.5% over that 10 year span. So potentially in 10 years if we switch don't pay the place off in full could potentially jump to a 7% loan, but if rates don't increase, won't matter.

The balloon loan is ideal since we'll have enough cash to do:
1250 gallon septic (for a 4 bedroom house) - $10000
Roof - $7500
Add a 4th bedroom in an unfinished part of the basement - $10000
Kitchen and upstairs flooring - $25000
Then have ~10k left over for OH **** money, or can just be plopped into savings (or go to principle of the loan).

... I am putting in the offer the Monday after the 7th, They're asking 280k but am offering 180k based on the following factors:
100% exact comp just sold for 240k and was in great shape (only difference was 40' less waterfront - 304' vs 264')
Roof is shot maybe 2 years left in it, if I roll the dice and hope for a hailstorm
Septic is original from 79' and steel (probably rusted out) and is only 750 gallons (rated for 2 bedroom home)... they're advertising it as a 3 bedroom home
Has been for sale since 08' .... first old owners and then eventually the bank took over
Bank will be hit with another 8k in taxes if they can't get it unloaded in the next 2 months
Another foreclosure across the lake (3 bed 2 bath) but 100' less feet of frontage asking 140k.

Hopefully it all works out.

Last edited by sidekicknicholas; 06-29-2014 at 7:28 PM.
Old    Steven Pederson (sppeders)      Join Date: Jul 2011       06-30-2014, 7:24 AM Reply   
We were ready to make an offer on a place in MN but the septic wasn't up to code, if we would have had a purchase aggreement we would have had to had the monies in escrow at time of closing due to code on that one issue (many other issues so we passed)... Might be something to ask your realtor.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-30-2014, 7:52 AM Reply   
Quote:
if we would have had a purchase aggreement we would have had to had the monies in escrow at time of closing due to code on that one issue (many other issues so we passed)...
I've got the money set aside for the septic already, I'm betting that the inspection will turn up problems with it... which isn't a deal breaker for me, just hopefully a bargaining chip. I contacted the listing agent's office today via email with a copy of the zoning / planning board's records involving the septic size and how it should technically be a 2 bedroom + den / bonus room (based on the county's rules and regs).

Going from a 3 bedroom to a 2 bedroom makes the home's value go from a realistic 250k +/- to sub 200k (based on comps).
Old    Hate N Pain (hatepain)      Join Date: Aug 2006       06-30-2014, 9:23 AM Reply   
Sounds like you're good to go and have done your homework.

I don't know your market but in mine I wouldn't dream of offering a bank 100k under list. I do this several times a year and I rarely get them for list anymore. In fact the last one I did I went 20k over list and today I'm upping a full price offer by $5k and crossing my fingers. I'm sure we are in very different markets but I'd be blown away to see the bank even drop 50k off of it. Do you know if its been to auction or how many times and how it did? If it has and it hasn't sold they likely had a high reserve on it based on what they owe and what they're willing to lose. The same thing will come into play here. When you're dealing with a bank all they're looking at is what they owe and what they need to sell it for, that is their only rational. Their current assessed value (done by real estate agents) should include all the deferred maintenance. My wife does 15-20 REO listings a year. When she does them she sets the price with them based on current condition. In your scenario the only one they might not know about is the septic.

I don't want to sit here and burst your bubble because again I don't know your market but rather give you my experience in dealing with banks.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-30-2014, 9:42 AM Reply   
Quote:
I don't want to sit here and burst your bubble because again I don't know your market but rather give you my experience in dealing with banks.
No worries! There is a huge influx of homes on the lake for sale right now... all going way below assessed / market value... so if this one doesn't work out, on to the next.

I figured 100k less based on a talk with my dad a few weeks ago, he is coming out of retirement to be my broker for this.... but he said there was similar house on a lake 4/5 miles away that was a similar situation....
House sat for years, could sell, bank took it, couldn't sell. Appraised at 299k, assessed at 275k, and ended up closing at 135k.

...other shocker prices he has mentioned was a golf course home that was asking 215k just closed at 98k.

his exact works were "Asking price doesn't really mean **** around here these days".


Quote:
When you're dealing with a bank all they're looking at is what they owe and what they need to sell it for, that is their only rational.
This is my thought too, all they are going off is numbers. Unfortunately for them, all the comps suggest their number is ****. And every year they sit on it, there is another 8k in taxes + all the additional carrying costs to have the home doing nothing for them.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       06-30-2014, 9:50 AM Reply   
Our house was a foreclosure. Was on the market for 18months. We offered 30k under asking got in a bidding war and got it for 15k under asking. But over 35% under market value.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       06-30-2014, 9:59 AM Reply   
Quote:
ur house was a foreclosure. Was on the market for 18months.
Like Hate said
...and this place has been on the market for 7 years now

Quote:
I'm sure we are in very different markets
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       07-01-2014, 8:18 AM Reply   
And of course, someone else put in an offer yesterday too.... seriously, 7/8 years on the market and nothing... the week we are going to offer so does someone else.

Fingers crossed they take ours.
Old    Boarder 42 (jhartt3)      Join Date: Jan 2012       07-01-2014, 8:25 AM Reply   
if its bank owned and they have 2 offers they will come back and ask both of you for your best and final offer. so start thinking about that... this is what happened to me
Old    Hate N Pain (hatepain)      Join Date: Aug 2006       07-01-2014, 8:33 AM Reply   
They will for sure ask for your best and last.

For the record I didn't get the house that I offered 5k over ask on. Lol. I'd normally go higher but the margin just wasn't there in this house.

Fingers are crossed for you Nick, it could just come down to who has the cleaner offer.
Old    Tom (boardjnky4)      Join Date: Dec 2011       07-01-2014, 8:43 AM Reply   
Quote:
Originally Posted by sidekicknicholas View Post
And of course, someone else put in an offer yesterday too.... seriously, 7/8 years on the market and nothing... the week we are going to offer so does someone else.

Fingers crossed they take ours.
The bank probably gets lowball offers on the house frequently.
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       07-01-2014, 9:51 AM Reply   
Quote:
The bank probably gets lowball offers on the house frequently.
Seller's agent said they have not had an offer in over 14 months on the home.

Quote:
Fingers are crossed for you Nick, it could just come down to who has the cleaner offer.
From what I understand, I think we came in 20k higher than the other guy, but the offer we threw out was our best and final... so at least we'll know sooner rather than later if it works or not.
Old    Hate N Pain (hatepain)      Join Date: Aug 2006       Yesterday, 8:21 AM Reply   
Any updates?
Old    Nick Tomsyck (sidekicknicholas)      Join Date: Mar 2007       Yesterday, 9:42 AM Reply   
Yes, but nothing inked up yet.

Lots of chaos surrounding the whole deal. So I knew the old owners from when I was on a show ski team years ago... ended up bumping into them this past weekend at a 4th of the July party and he filled me in on a ton of stuff.

.... so we planned on going 225k and that was it assuming we needed to do the septic and roof... well, he informed us the septic is perfectly fine. I mentioned the county records state it is the original steel tank from 78' and undersized....he started laughing at this. The next day I went to a local septic company's store per his request and asked for "Rick XXXX's" file.... sure as ****, in 1998 a brand new 1250 gallon two tank septic, new well, and new drain field were all put in (when they did a large addition to the house). So that was a problem solved and $15,000 saved. The reason the county didn't have record is the final follow up inspection, so it was never signed off on... but the septic company said they could give me all the records with signed permits and photos to go get it added after we buy. He also provided the paperwork getting it out of the floodplain, their shoreline modifications approved by the county (this is a big new DNR hassle), and info on the new furnace, water heater, and electrical updates (from the mid 2000's).

So the bank countered at $260k but was offering a 10k allowance for a new septic because they did not know what we knew... per their wording we would need to actually do the septic to get the credit. So their offer was essentially 250k. We have countered at 240k without the septic credit (since we wouldn't get it anyway).... so took our 225k + 15K we thought we would be paying for the septic = $240k.... in the bank's eye we're up 15k and they're down 10k from the first counter.

They have to respond by 4:00pm today, so we'll see! They also allowed the contingency on the sale of our condo (60 days til offer - 90 days to close).


So if anyone wants a new condo : http://www.zillow.com/homedetails/56...71815625_zpid/

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