Upcoming Foreclosures

Making an offer on a home?

My husband and I are getting ready to put an offer in on a foreclosure. It is a Fannie Mae property. They are asking 298K which is in range for the average cost of homes in the area. The homes does need repairs. Not cosmetic, but necessary. Drive way is collapsing over the culvert, carpet is shot, new AC etc. Estimated cost of repairs is 15K. What would be an acceptable starting offer for this home? When making an offer on foreclosures what do you suggest about the closing costs? Should I just plan on paying all closing costs since I am making a lower offer or should I ask for partial closing costs by the seller?

Public Comments

1. The seller should pay partial closing cost, the house needs repairs so you may want to reduce your offer to cover all the repairs and other costs involved.
2. Determine the value of the home. What would it be worth in decent condition. You say $298,000 is the value for comparable homes. Verify that. Assuming other homes without those repairs are selling (note: not listed for, but really, truly selling at) $298,000, then you subtract the need repairs from the price. You say the estimated cost of repairs is $15,000. That sounds low to me. A new AC: $6,000. Carpet: $3,000. Driveway: $6,000 (or more). We're at $15,000 right there. Then there are things you haven't mentioned. Roof? Electrical system? Plumbing system? Plus, you always want to estimate on the high side regarding repairs. Rehabbers will thoroughly inspect a property, come up with a number, then add 20% for the unexpected. You should, too. So, your repair number is probably $25,000 or more. Subtract $25,000 from $298,000. The most you should pay for the house is $273,000. Your offer should be lower. And certainly ask to have the closing costs paid. (Ask up to 3% of your offer. So if you offer $269,000, you'd ask for about $8,000 in closing costs. Again, though, check with a Realtor on the comps to pin down the $298,000 number. Have a contractor take a look at the place (or you could pay for a home inspection; it'd cost maybe $300) for an evaluation to pin down the repair cost. And work with a good Realtor who can construct an offer that makes your case regarding the value of the house. Finally, even with these calculations, you wouldn't be getting a bargain. You'd be paying (or making an offer at) full price. If you want a good price, offer less. And remember, too: There will be a lot of hassle in getting those repairs done. You should be compensated for your efforts in doing so. I know investors who, with the numbers you've presented, would offer around $200,000. The odds of getting the house drop, but that figure protects them against unexpected repairs as well as a further decline in the value of properties in the area.) Hope that helps.
3. Ok, let me set the record straight: the asking price is just that!! the asking price. Sit down and figure out what you can afford to pay comfortably each month (please figure out a payment that you can make on only one (1) income! You must take into account that one of you may lose your job and only have one income for a period of time and you certainly don't want to fall behind on your mortgage payment. Then figure what the utilities (roughly. You may ask the current owner). There is so much more to owning a home than just the payment. Find the house in the local neighborhood that sold for the very least and adjust your offer accordingly. The asking price is not carved in stone, these people are selling this house for a reason (to make money). You can own the house you want but be steadfast and show them you are willing to walk away from the deal if they are not willing to negotiate. Oh yes! Interest is also negotiatable, so don't take the first offer (NEVER). Ask about upkeep (maintainence costs, repairs, etc.). Remember this will be your home, do your research, the worst thing that can happen is (and you don't want this) losing your home. Buy what you can afford to pay for. Good Luck and Happy Home Buying.