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:
Karen:
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