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Started By
Message
Buying a "flipped" house
Posted on 12/11/14 at 7:07 pm
Posted on 12/11/14 at 7:07 pm
Ok here's the story, I've been looking at this house now for about a month. It was a short sell. It was appraised for 400K, I put a contract on it for 365K about a week ago. Today, my real estate agent calls me and tells me the bank foreclosed on the owners of the house and they were auctioning the house today at 11am. So I get in the car and drive to the court house where this auction is taking place, and I came to find out you had to have cash money, or a cashiers check to buy the house at the auction. There was only one other individual there who somehow knew what the opening bid was. The individual bought the house for 265K. Cash. He told me he and a business partner flip houses. So I said I would buy it from them for 320K. His attorney (the business partner) called me that afternoon and offered to sell me the house for 350K. This is less than I previously intended to pay, so everything was sounding good, until he told me they wouldn't pay any of my real estate agent fees or closing costs. I was wondering if anyone knew how this works? My real estate agent (who is also a client of mine) expects 6% so that's around 18K that i don't want to pay out of pocket.
This post was edited on 12/11/14 at 7:09 pm
13
Posted on 12/11/14 at 7:18 pm to MSU5
Sounds to me like you shouldn't be in this business as a for profit venture if you are posting here asking for advice from random people.
Posted on 12/11/14 at 7:18 pm to MSU5
Damn. I'm in the wrong buisness.
Posted on 12/11/14 at 7:24 pm to notiger1997
I'm not in the real estate business and I'm not looking for a profit. I'm looking to buy a home and have never experienced auctioning, short selling, or flipping. I was just wondering if anyone had any experience with these things.
ETA: You are the kind of person I hoped wouldn't comment.
ETA: You are the kind of person I hoped wouldn't comment.
This post was edited on 12/11/14 at 7:25 pm
Posted on 12/11/14 at 7:44 pm to MSU5
Sounds like you are just buying a house, but that you are having to pay all the closing and attorney fees...change your offer to a lower amount and see if they take it
say 300k and you cover all closing and atty fees
say 300k and you cover all closing and atty fees
This post was edited on 12/11/14 at 7:45 pm
Posted on 12/11/14 at 7:53 pm to MSU5
I'd tell your real estate agent to take a hike. $18k for what? really what did he do to help you buy that house?
Posted on 12/11/14 at 7:53 pm to MSU5
Your realtor won't get anything because they aren't listing it. I am a realtor so I'm not for cutting them out but it sounds like a good deal for you.
You could offer the people $10,000 less or any counter back. They will probably take it if they can make that much in 30-45 days.
If you just want to pay your realtor, which would be good if they have helped you, do this. Whatever your agreed upon final price is add 2-3% and let your agent write the contract.
You could offer the people $10,000 less or any counter back. They will probably take it if they can make that much in 30-45 days.
If you just want to pay your realtor, which would be good if they have helped you, do this. Whatever your agreed upon final price is add 2-3% and let your agent write the contract.
Posted on 12/11/14 at 7:53 pm to MSU5
1st - standard commission for a buyers agent is 3%. A 6% commission is a standard commission for BOTH sides of the transaction. No seller in their right mind is offering a 6% commission in residential real estate to a buyers agent. So your client is retarded.
On a 265k flip my investors would be looking for a 25%-30% ROI. I'd stick with the 350k offer and say your buyers agent wants his standard 3% commission, you misunderstood his fee.
If you told a person who does this for a living you wanted a 6% commission for your buyers agent and showed up at auction not knowing protocol, I would imagine that person would immediately red flag you as someone who isn't serious.
Edit - if he entered into a legally binding buyers rep agreement he legally owes his agent commission agreed upon per the contract. That's why they make contracts. If he agreed to 6% he's just dumb
On a 265k flip my investors would be looking for a 25%-30% ROI. I'd stick with the 350k offer and say your buyers agent wants his standard 3% commission, you misunderstood his fee.
If you told a person who does this for a living you wanted a 6% commission for your buyers agent and showed up at auction not knowing protocol, I would imagine that person would immediately red flag you as someone who isn't serious.
Edit - if he entered into a legally binding buyers rep agreement he legally owes his agent commission agreed upon per the contract. That's why they make contracts. If he agreed to 6% he's just dumb
This post was edited on 12/11/14 at 7:56 pm
Posted on 12/11/14 at 7:56 pm to MSU5
Dude is about to make 85k just by having cash on hand 
Posted on 12/11/14 at 8:09 pm to AUCE05
And people get excited over a 12% return in the stock market.
No easier way to wealth than real estate imo
No easier way to wealth than real estate imo
Posted on 12/11/14 at 8:11 pm to I Love Bama
True, but you need cash, and that's why very few can do it.
Posted on 12/11/14 at 8:21 pm to I Love Bama
quote:
And people get excited over a 12% return in the stock market. No easier way to wealth than real estate imo
This is my opinion as well, but I'm biased. Already got 1.4M on the books to close in 2015
Posted on 12/11/14 at 8:48 pm to MSU5
A 32% profit in a month. Damn.
Posted on 12/11/14 at 8:54 pm to MSU5
quote:
There was only one other individual there who somehow knew what the opening bid was.
The opening bid is always 2/3 of the appraised value.
Posted on 12/11/14 at 8:55 pm to MSU5
I would have my money in line. Offer a quick close and $325 if I knew the condition of the house.
Have you been in it? There is a very good chance if the owners couldn't make the payment they didn't properly maintain it either.
Forget the appraisal. Means nothing.
The house has been on the market a long time if the bank has gone through the foreclosure process. It was not BTW a short sale if the bank had it in foreclosure. The buyers knew more than a month ago that foreclosure action and the possible auction was in the works too so the heck with the agent.
If that agent was half way working for you, you would have made the bank an offer before foreclosure.
Have you been in it? There is a very good chance if the owners couldn't make the payment they didn't properly maintain it either.
Forget the appraisal. Means nothing.
The house has been on the market a long time if the bank has gone through the foreclosure process. It was not BTW a short sale if the bank had it in foreclosure. The buyers knew more than a month ago that foreclosure action and the possible auction was in the works too so the heck with the agent.
If that agent was half way working for you, you would have made the bank an offer before foreclosure.
Posted on 12/11/14 at 9:00 pm to Sprocket46
quote:
quote:
There was only one other individual there who somehow knew what the opening bid was.
The opening bid is always 2/3 of the appraised value.
I suspect the bank bid and the other guy bid and that was it. I don't know where you get that always 2/3 from.
They are going to bid the amount remaining on the mortgage if they believe the property is worth it and will sell in a reasonable time.
Posted on 12/11/14 at 9:04 pm to I B Freeman
quote:
I don't know where you get that always 2/3 from.
Having actually been to auctions....
When there is an appraisal, the opening bid is always 2/3 of appraised amount. The appraisal is a "drive by", and even the appraisers are not allowed in as far as I know.
Posted on 12/11/14 at 9:06 pm to I B Freeman
Here ya go:
LINK -
quote:
When a foreclosed property goes to Sheriff sale for the first time, Louisiana state law requires that the opening bid be no lower than 2/3 of the appraised value of the property, and must cover all superior claims (i.e., all of the outstanding liens, taxes, and administrative costs associated with the property). Under the law, the property owner has the right to have the property independently appraised to help determine this amount.
If 2/3 of the appraisal results in an opening bid insufficient to cover the superior claims, then the opening bid will be raised to reflect those expenses.
If the property doesn't sell at the first sale date and is rescheduled for a second Sheriff sale date, the 2/3 limit is lifted and the starting bid is no longer required to be any higher than the costs of the superior claims.
LINK -
Posted on 12/12/14 at 8:31 am to Sprocket46
6% is a crazy number! He never listed the house and 3% would be the most he should expect if anything on a foreclosure.
As other posters have said, there may be issues with the property. You should have it inspected.
The appraisal may or may not be accurate. I have seen them all over the place when done for foreclosures. Your lender will require one.
I see no reason not to negotiate with the new owner. He is looking for a huge profit, but probably will not try to get retail unless he fixes it up and has to pay listing fees, etc.
Good luck and keep us posted!
As other posters have said, there may be issues with the property. You should have it inspected.
The appraisal may or may not be accurate. I have seen them all over the place when done for foreclosures. Your lender will require one.
I see no reason not to negotiate with the new owner. He is looking for a huge profit, but probably will not try to get retail unless he fixes it up and has to pay listing fees, etc.
Good luck and keep us posted!
Posted on 12/12/14 at 8:41 am to MSU5
Your agent must not expect any future business from you. I have been in similar situations on several occasions and had agents agree to withdraw from the process. These are situations where I have had an agent but found the buyer myself or made a side deal on a house. I think agents should get their dues, but not in a situation like that.
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