Alright real estate folks - what would you offer?

sean1 · Apr 26, 2007

Condo on the water in FL - falling market.

Similar units have sold for $750-765,000 in the last 4 months.

Unit was offered for $675,000 for a month - no takers.

Unit then repossessed. Bank if offering it for $585,000.

Through reliable sources, bank loan was $570,000 (Amount they are due) and I have been told I could have it at that price. Realtors said if I offer $540, chances are 50/50 but obviously realtors like to sell for as much as possible.

Unit has been appraised by two banks at $700,000 and $720,000 and both are willing to write a preapproval for a 100% HELOC up to that amount for the amount beyond the purchase price should I so choose.

Unit generally in good shape, but needs new appliances (stove, fridge, dishwasher (Stolen))

I'm considering $520,000 or $530,000 as an offer and just standing firm with it.

How much of a loss is a bank usually willing to take to unload? 10%?

Any thoughts?

Sean

Kruser6 · Apr 26, 2007

Sean, are there other people going after this thing that you are aware of?

If not, hell offer 535 and see what they bounce it back to you at. All they are going to do is counter, and who knows they may just take 535 and dump it. If not, they'll fire back a number and you will know where you stand.

Timetopay · Apr 26, 2007

sean1 said:
Condo on the water in FL - falling market.

Similar units have sold for $750-765,000 in the last 4 months.

Unit was offered for $675,000 for a month - no takers.

Unit then repossessed. Bank if offering it for $585,000.

Through reliable sources, bank loan was $570,000 (Amount they are due) and I have been told I could have it at that price. Realtors said if I offer $540, chances are 50/50 but obviously realtors like to sell for as much as possible.

Unit has been appraised by two banks at $700,000 and $720,000 and both are willing to write a preapproval for a 100% HELOC up to that amount for the amount beyond the purchase price should I so choose.

Unit generally in good shape, but needs new appliances (stove, fridge, dishwasher (Stolen))

I'm considering $520,000 or $530,000 as an offer and just standing firm with it.

How much of a loss is a bank usually willing to take to unload? 10%?

Any thoughts?

Sean

Ill never understand it. People owe $570 but try to sell for 675 and no one bites. Why not try to sell at $575 so it doesnt kill their credit.:WTF:

Anonymous1 · Apr 26, 2007

At this point, price is less the issue. You need to calculate the breakeven on a rental basis, I assume that this is an investment buy. Thus, terms including interest rate, index/margin...if adjustable loan...down payment, and all cost of rehabilitation. With your cost of rehab, can you finance it with the new bank loan or is it out of pocket, in any event, you must calculate at least a 30% profit on cost for doing the work of rehab or you are not being properly paid for your risk. Thus, breakeven to hold helps to protect against a falling market, and the profit on cost is required for your time, work and management of the deal.

sean1 · Apr 26, 2007

To answer the questions:

They had 11 offers that were unable to get mortgages. Most of those 11 had 8-10 investment properties and were turned away as banks have stopped letting people get so leveraged. I don't know what those offers were, but they were unable to get preapproved.

A big problem for sellers in S. FL right now is that the investors are leveraged out.

My parents were considering buying the place, but arent at the point in their lives where they wanted to deal with stolen kitch stuff, possible sketchy title, liens, etc... The realtor I spoke with said they had a number of legit buyers turn away when they found out that the previous owners had stolen a bunch of stuff out of the building and there is an ongoing police investigation into their theft (I spoke to an attorney and he said since the bank had the first lien it does not matter that they stole the stuff to the new owners, but you know how older risk adverse people are...)

Just cause a 1st lien bank can foreclose and sell for $580 doesnt mean the old owners could... These guys could not offer it for $570,000. They owed condo fees for almost 3 years ($30,000) + some property taxes (which the bank has since cleared in foreclosing - probably another $20,000). There may have been a second mortgage lien, which is obviously gone now. The $690,000 was preforclosure. The $580,000 is now that the 1st lien foreclosed and knocked all the other crap off... (The other crap can go after the old owners, but can't come after a buyer)

I am reasonably certain there are not a lot of takers as it has not sold and I keep getting called to see if I want to make an offer. I am thinking I'm gonna offer $535,000 and see what happens. I've heard of banks taking 5-10% hits but have 0 experience in this.

-Sean

fhmesq44 · Apr 26, 2007

Where is the property? What are similar units selling for (selling, not listing) in the complex? What can it be rented for? What is your monthly outlay with a 100% LTV at $540k, including taxes? What is the rental market like?

You had better check with an attorney on the taxes and association dues. In California a foreclosure wouldn't wipe out those liens as the taxes are surely prior in right to the foreclosure and the association fees may be. No idea how it works in Florida.

As was discussed in a previous thread on here recently. Appraised value is irrelevant. From what I understand FLorida markets are pretty over built and depressed and dropping further. You might be able to get a similar unit in 6 months for $500. Just a thought.

Anonymous1 · Apr 26, 2007

BTW...if you are considering a flip or turn of the property in less than 2-3 years...go ahead and throw in the cost of sale and deduct that from the offer price.

Doug · Apr 26, 2007

Falling market, so you presume its bottomed out, and will reverse,right ?

sean1 · Apr 26, 2007

At this point, price is less the issue. You need to calculate the breakeven on a rental basis, I assume that this is an investment buy. Thus, terms including interest rate, index/margin...if adjustable loan...down payment, and all cost of rehabilitation. With your cost of rehab, can you finance it with the new bank loan or is it out of pocket, in any event, you must calculate at least a 30% profit on cost for doing the work of rehab or you are not being properly paid for your risk. Thus, breakeven to hold helps to protect against a falling market, and the profit on cost is required for your time, work and management of the deal.

To answer the above -

This is an investment buy (With a 10+ year horizon), but a buy I would use - not rent so it is also a recreation buy. I am moving out of Miami for job reasons (NYC and Chicago) and want a place in S. FL for weekends. I was renting. That being said I was going to wait a year or two for the market to come down, but always keep my eyes peeled for good stuff.

Repairs would cost $20,000 cheap and $30,000 to be done nice - which is what I would do. This can easily be taken care of based on an equity line - two 100% eq line banks appraised it at $700,000 and $720,000. To be honest, I would take the additional $100,000-$140,000 and use it offshore. I can make the mortgage payments with work, but can make far more than $4,500/month with each $100,000 I am able to throw offshore but that isnt the conventional way of thinking.

Another unit in the building, on the wrong side (Non water side - this one is water side) sold for $780,000 in February. I think that that buyer was retarded, but the exact same unit 2 floors higher sold for $765,000 and 3 floors lower for $745,000 within the past 4 months.

I think I'll offer $535 and see what happens. If they take it, I'll fix it up, and debate putting it back on the market and looking for another opportunity or keeping it. If they stick with $580,000 the numbers get closer to what I anticipate happening in a continued downturn and I will probably pass.

-Sean

sean1 · Apr 26, 2007

Regarding taxes - the bank paid them to take the unit back.

Regarding the condo fees, they were wiped out. I am not sure if the condo building dropped them to let the bank sell (Uncollected fees for 5 years is worse than 3 years) or if FL law wipes them out.

In any case, I will 100% get all this in writing, would only buy with a clean title, and will have title insurance.

I do not intend to flip in 2-3 years (Honestly, I intend to keep any real estate I buy forever unless I get a ridiculous offer)

And no, I don't think it is bottomed out. If I did, I'd pay $580 yesterday. I think there is another 0-20% downside, but think 5-10 years down the line it goes back up. If it goes down no more I am ahead. If it goes down 20% I am even. I can't see the market going down more than that (It's already down 30-40%) but that is where risk/reward comes in. I do feel that waterfront units can only fall so far. I feel bad for all the people who paid $500k + for units not on the water...

-Sean

sean1 · Apr 26, 2007

Really, I've gone through all the numbers, my financial situation, the offshore world situation, rental numbers, tax numbers, write offs, maintenance, etc.. In my opinion based on risk, it's a good deal for me at $550 or less. What I had no clue about is whether banks go lower than their owed amount and how much lower has a chance....

Doug · Apr 26, 2007

what's a fair rental price ?

Seymour · Apr 26, 2007

Sean, all I do is buy properties down here - I have not seen any banks taking losses yet - you could offer less and see what happens - banks are not in the business of buying and selling properties so they will not be interested in holding out for the best price - where is the unit/what building? - don't worry I only buy vacant land so I not going to pick it up myself.

sean1 · Apr 26, 2007

I could rent it immediately (With new appliances) for $2400. Most in the building are at $2600-2900 - but I don't plan to rent it.

I would probably rent it out a few weeks (Allowed by the condo building). Certain weeks like Winter Music Fest, Super Bowl when it comes back, MTV awards, etc go for $5000-15000 but don't have much intention of renting it all the time - plan to use it 2-3 weekends/month.

Sean

sean1 · Apr 26, 2007

Seymour - I will email you...

Sean

GrandMasterB · Apr 26, 2007

read up on HELOC loans here if you need to:

http://www.mtgprofessor.com/A - Second Mortgages/what_is_a_heloc.htm

it's a great site.

Doug · Apr 26, 2007

sean1 said:
I could rent it immediately (With new appliances) for $2400. Most in the building are at $2600-2900 - but I don't plan to rent it.

I would probably rent it out a few weeks (Allowed by the condo building). Certain weeks like Winter Music Fest, Super Bowl when it comes back, MTV awards, etc go for $5000-15000 but don't have much intention of renting it all the time - plan to use it 2-3 weekends/month.

Sean

just curious because I consider a rent of 1% to be great for landlord, but some of these slum places for dirt cheap look like they can pull near 5%.

VaultedTreehouse · Apr 26, 2007

This market is nowhere near a bottom. You are catching a falling knife.

sean1 · Apr 26, 2007

Doug, 1% is great. 5% is even better. Places near Ohio State, U of Rochester, U of TX all are much higher than 1% rent.

Unfortunately, there are no 1% rents in Boston, NY, Miami, SD, LA, SF, Chicago, etc on the water.. The places where rent are 1%+ are in areas where people think appreciation will not be as great.

-Sean

sean1 · Apr 26, 2007

Vaulted! And that's the concern and why I've been kicking the thing around for 10 days.

Alright real estate folks - what would you offer?

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