This seems to be happening more and more around the country, since the stock market slump a lot of people are turning to real estate.
They make unrealistic offers like you describe, and lose their money.
There are a couple of ways to use this to your advantage.
One is to be more aggressive in hunting for deals that are not listed. When you get one, resell it right away. If you could make practically as much as you would if you did the rehab, without the time and work, why not?
The other is to keep an eye on the deals you lose to higher bidders especially if they are newbies. Be ready to buy from them cheap when they get discouraged, get in a financial jam or just run out of gas.
Advice/Guidance Requested…Rehabs - Posted by Jason Brown
Posted by Jason Brown on June 24, 2003 at 17:12:24:
My partner and I have looked and lost out on several homes in the last three months. We are looking to break into the rehab market. There are plenty of properties here in the Detroit area. We are able to find many run-down houses in decent neighborhoods. We have concentrated our efforts in one part of the City. The last one was the most frustrating. Here are the rough details:
ARV = $95,000
List Price = $54,900 (bank owned)
Estimated Repairs = $19,000
Estimated Holding Costs = $3,600
Estimated Sales Costs = $4,750
Maximum Purchase Price = $44,000 (assumes a 25% profit)
We have access to cash plus cash investors (we could do two of these deals simultaneously). We started our due diligence and were ready to make an opening offer of $38,000 to $40,000. Luckily we called the agent who then informed us that the property sold two days ago for $50,000 (no phone call to us). Our $19,000 in estimated repairs was a pretty hard number, who would possibly buy this deal for $50,000? My thinking is either another investor who didn’t account for realistic costs or an investor who would do only simple repairs ($8,000) and rent the house out.
We are obviously frustrated, but not deterred. Any thoughts on this? Anyone else running into this problem more frequently?
Drop me a line as I have been rehabbing in Detroit for several years if interested (on and off), but have been doing alot of the work myself. What are you looking for as I am a realtor (99.9% of the time for myself) and I could lend some assistance.
Yes, it is happening here too. Many new investors paying too much for properties then getting into trouble later.
As GL said, keep looking and try to be first. Make sure your list is brand new and not 3 days old, other wise if it is a good deal you will loose it. We just got an REO for $16K below what they were asking. We were first to get an offer in. If we had waited, we would have missed it.