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I'm not sure how this works - are these situations hopeless?
If a house, in short sale or foreclosure (although a 'regular' for sale might have the same problem? ) comparative's are a certain price based on sq footage, lot size, location come to one price. But the house condition make it much less to the buyers view - will the bank ever see it that way?
I'm getting ready to look at an almost 4 acre property with a 1500 sq foot older house. Its in short sale, heading toward foreclosure. County records show bought for 216 in 2005 , there are 2 liens. County assessor for taxes has full market assessed as 198.
Initially priced at 199 it was soon dropped to 179 with a short sale approval.
I did have the opportunity to walk around the outside when it was 179 and passed. The back porch would need to be ripped off structurally and the front porch is just to stupid looking to leave. The garage doors needed replacing, the front door facade was broken, the windows looked cheap, the roof rough, the siding tired, the ancient corrigated pole barn covered by brush with panels missing. About 20 large piles of sandy gravel positioned around perimeter of the back yard. (??) I asked my realtor 'has all the money been put into maintaining the inside? is it nice?" His response was no - "it is squirrely". I got the impression that not only hasn't it been maintained at all but there have been some things done (moving walls, cutting up rooms that might have to be undone) So that's a pass.
Now the price is 159,000
So here I am knowing I'm would have to have major renovations done - and at the end of the day the house can't cost me more than 200,000 max. because of resale (appreciation here was only 2-3% in good times which they aren't anymore) and taxes.
I think its going to take a lot more than 41,000.
159,000 seems too high.
Doing sales comparables though won't make it look that way. Moderate sized houses on 5 acres do usually sell for above 200,000. But those are in good shape.
So how does this work? I would imagine the bank isn't even going to go for 159 but I have no idea. I know the buyer isn't going to appreciate me going lower than that but I forsee that to take this place back to "nice" it would probably take 100,000 although sure you could do 40,000 less and it would probable be "ok" by some standard. And I'm not talking granite, stainless steel, wood floors either. That's IF the septic, well are ok.
The best scenario for the seller and bank would be if a construction type guy who can do the work cheap swooped in either to live there or flip.
If that doesn't happen.......what do the banks do with these? Dayton Oh isn't Detroit but its not going to see some big resurgence and steep climb in values either. This house the way it is isn't worth 200,000. How do banks determine how bit a hit they will take? The comparables will give a false impression of worth I think.
There really is no way to know what the buyer will take, and even if the bank will except what the buyers will take. Short sales can get pretty messy. If you are not in a huge rush to move, i'd just wait it out and let it go into full foreclosure. When it does i wouldn't be surprised if it dropped to 130 and at that point you will be dealing directly with the bank.
The listing agent for the property should have taken pictures and given the bank an idea of the condition of the property. However, depending on who the bank is makes a huge difference in how easy it is to communicate with them even for a listing agent. If it is B of A, move on and don't waste your time. Other banks, in particular some of the smaller local banks can be very good to work with. If you can find out who the bank is, that might help in getting some additional input.
So if it doesnt get sold short sale and goes to foreclosure - it goes to a sheriff's auction right? The bank usually buys it there but there is the possibility of a 3rd party buying it there correct?
If it is a short sale the owner/seller was able to choose the listing agent and worked a deal with teir lender. If it doesn't sell, then the lender will forclose, after that it could be listed again but the owner may me Freddie Mac (for example) and they choose the listing broker. If it doesn't get re listed then it will sell at the courthouse steps/Sherrifs sale. You usually need cash to buy at these forclosures sales.
I'm in a similar position to yours. I've been looking for a long time so have looked at other properties in disrepair. I don't know if I'll be able to use them as comps yet. Still, I think you should do as much research as you can &, if you have a realtor, I think they should help you find the comps.
I've asked my realtor how the listing agent determined the list price, but I haven't received an answer yet. Should be interesting.
Also, do a Google (Bing) on "short sale" & 'bpo' --- answered some questions for me.
My experience is that, in this situation, one has to do a fair amount of legwork. Get an estimate how much it's going to take to repair the place.
Had my builder go look at my place today >>> IT'S SOUND !
First step -- done .... Now I'll get some written estimates.
So if it doesnt get sold short sale and goes to foreclosure - it goes to a sheriff's auction right? The bank usually buys it there but there is the possibility of a 3rd party buying it there correct?
Yes Giesela, if it is not sold durring the short sale, the next step is it foreclosed on and is put up for sale at the sherrifs auctions. Here in Tucson it happens every Tuesday morning at 11:00 on the steps of the courthouse. At this point, as you mentioned, anyone can bid on the property. If you get the chance you should go to one just to watch, it is an interesting process. Here, one must register ahead of time, have a certified check for a down payment, and pay the balance in cash in 24 hours. Most the homes up for auction at the sherrifs auction do not get sold in this market environment. The last one I was at only one home of the 50 or so up for auction sold. Those that are not sold at auction the bank then takes them over and assigns to to an asset manager, which starts the process of having them listed on the market as a REO / Bank Owned / Foreclosure property through a local realtor or however else they choose to dispose of them. The sherrifs sale is the legal process that sets everything else in motion. One home in particular that I had an interest in, it was about 3 weeks from the sherrifs sale till the time it was listed with a realtor as an REO property. That's how it works in Pima County AZ anyway!
How much are the liens on the house? I dont know how that works but it doesnt sound good. Would you owe that money if you bought the house? I was looking at a fixer upper that was already foreclosed but backed out because i found a better foreclosure by a local bank instead of Fannie May. It was appraised at 200k, listed at 170k and i bid 150k and got it without even a counterbid by the seller. It was built in 2006 and in great shape. There are great deals out there but you have to bid LOW, if they take it then great and if they dont then walk away. But i would look for a better deal somewhere else.
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