REO vacant for last 5 years. Need Advice. - Posted by Karen

Posted by michaela-ATL on May 17, 2005 at 06:46:21:


what is your exit strategy? This would be difficult to flip to your standard rehabber. It’s not a standard rental property. It’s not easy to find a normal buyer after you rehabbed it yourself.

Maybe this can be turned into an ‘assisted living facility’, if the zoning allows it. There are some investors, that specialize in that, but it’s not a common thing, because that’s a business and not an investment.

Think about what you’re planning to do with it and how come it hasn’t sold, yet, in 5 years.


REO vacant for last 5 years. Need Advice. - Posted by Karen

Posted by Karen on May 17, 2005 at 24:40:23:

I know of a property thats been listed and vacant for the last 5 years, he’s the deal,
Original listed in 2000 @ $ 900,000+
Currently listed at $ 450,000+

This home is huge, 10000+ square feet, 19 acres…etc.
It does need updating, but nothing major.
Problem I see that’s keeping it from being bought is:
#1 The taxes are $8,000 a year. (way higher than normal)

I did a market analyst and there are no comps as large as this house the closest match

is 3912 sq ft, and that house sold for $290,000 but the taxes on it was only $2000.00

My way of thinking is that the bank is more than likely tired of paying $8,000 x 5 years = 40,000 in taxes, not to mention all the other holding cost, that they will just about take any offer, say…$50,000? What do you all think?
BTW, the home hasn’t even pended since 2001 and that deal fell though

Re: REO vacant for last 5 years. Need Advice. - Posted by Karen White

Posted by Karen White on May 17, 2005 at 11:40:29:

I don’t want the house for investment, I want it to live in, I have 5 kids, and my parents live with me which makes 9. We need more space. Just trying to get a feel for how you all think the lender would respond.

Re: REO vacant for last 5 years. Need Advice. - Posted by Frank Chin

Posted by Frank Chin on May 17, 2005 at 07:41:28:


From what you described, a 3,912 SF home, taxes of $2,000.00 a year sounds like a relatively inexpensive area. I own a 3/1 rental in Long Island NY, less than 2000 SF, in an older develpoment, and taxes run me close to $7,000/year. Taxes for a typical larger modern SFH in a newer development in Long Island runs over $12,000/year.

I once turned down an excellent deal on a modern ranch because it was more than twice as expensive than all the neighboring homes. I reasoned that a family who might rent from me, and eventually buy will want a better neighborhood with better schools.

One observation is a 10,000 SF home on 19 acres in NOT the HIGHEST and BEST use for the area. A better use is if its zoned for a development of many homes, if the area can be zoned as such, and buildable. You’ll also have to check for the cost of brining in roads, utilities etc.

Do you know the land value of a typical home in the area?? I would estimate this by taking the FMV of a typical home in the area, and subtracting the replacement cost of the home. This ROUGH value I get by calling an insurance broker, and asking them how much the replacement value would be.

Lest say a typical home has a FMV of 250K, and it cost 125K to construct the home, then the land value is 125K (250K -125K). And if the homes sit on one acre lots, then the land value would be 125K/acre, assuming the area is zoned for one acre lots.

And did you say the home sits on 19 acres?? A 10,000 SF home costs more than over 250K to build in my estimation, so you’re getting the land inexpensively or close to nothing.

You said “can I offer 50K”?? Of course you can.

I was in the REO game for a while, spoke to some bankers, and was told the IRS, and banking suthorities would probably place the bank and the banker repsonsible under a microscope. Which is why its been around so long. Why is that??

A banker told me that a banker doing such a deal MUST be paid a bribe in CASH.

They told me that in case such as these, they would hand it over to an auctioneer, and sell it via auction. If 50K is the lowest bid, so be it. At least they can blame the auctioneer.

The funniest story I heard in this regard is a condo in a complex where I own one. The bank put the condo up for auction after the owner stopped paying, and the bank was tired of waitng, and the market was terrible.

The condo was hurredly advertised for an “absolute” auction, and few people even heard about it. Well, the owner’s twin brother was the lowest bidder, and I heard it was sold for several thousand dollars.

Where can he get a mortgage you asked. He paid for it on his credit card.

This was explained to me when the HOA circulated a bylaw change that required the HOA be notified, and given a right of first refusal. BUT I don’t think a banker would have the nerve to sell a condo for several thousand dollars when it was originally sold for 90K.

Frank Chin