Whale REO advice - negotiating, funding, rehabbing - Posted by Zed

Posted by Mike on November 18, 2006 at 20:51:39:

Ahh, ok. I didn’t realize the property was in an area with like-kind priced properties. I thought it was a three to four million dollar house amongst those only around half a million to a million, as per your post.

In light of that, the only change I would make is to try the traditional route of trying to sell it through a Realtor if you don’t mind waiting around for a while for it to sell in this current market. Of course, if it doesn’t move well, then you can still do the auction thing and get it over with. :slight_smile:

Have a great day!

Whale REO advice - negotiating, funding, rehabbing - Posted by Zed

Posted by Zed on November 18, 2006 at 14:40:15:

We’ve got an opportunity for an REO in the few million range, which is a step up from our usual $500k-$1m range, but not daunting. The bank’s looking for 56% ARV with our rehab estimate bringing it to 60-65%.

Since I can’t find a “Million Dollar REOs for Dummies”
book:

If the bank’s looking for 56%, does that give anyone any clues about what they actually need? I.E. - At this price range are there typical mark ups, given as a percent, they build in for their negotiations?

Does anyone have advice/techniques/contractor tips they use at this dollar range for bringing a 1980 decor to the present?

Can anyone guide me to sources for creative marketing solutions for this price range?

We’ve got two private money sources we’re courting, but we’re still shopping. We want to roll in the rehab and accrue interest. Any advice on structuring?

Thanks!

Re: Whale REO advice - Posted by Mike

Posted by Mike on November 18, 2006 at 18:58:22:

Hi Zed,

Sounds like you?ve got something that is a little out of your comfort zone ? good! That?s how we grow. Now onto the meat of things.

Most REOs are valued by the broker?s price opinion, which many times is a ?drive-by and click a picture? scenario. With a property like this, perhaps the broker actually walked up to the windows and looked in. Either way, they look at comparable sales, condition and repairs that are needed, and make an educated guess as to what they should list it for, gauging for what the lender has in it of course.

You can always offer a lower price (and should) and let them play the counter-offer game. Your side of the equation should be based on what you think you can get out of it in the end after all expenses are paid. (It?s not like I have to tell you this.)

Usually doing a professional auction works well with this scenario as long as you have the place in top shape by sale time. You should also plan on getting less than retail price for it, but the idea here is a quick sale with plenty of profit for you, and a deal for your buyers. Use a professional auctioneer. They require people to come with deposits in-hand in order to bid in the first place. Put up signs all over the place about the sale, hand out flyers, etc.

Heck, you also might get people looking at it along the way who offer to take it ?as-is? right in the middle of you rehabbing it. If so, perhaps that would be a good way to go.

The reason I would shy away from going the traditional Realtor route is only because the house is so much higher in price than what is in your area. Of course, someone may very well want to come in and buy it for retail price that way, and if so, great! But how many people are around there looking for $3M+ houses? That will be a judgment call for you. However, if your lenders are willing to wait and gamble on that, you could try it. But if it doesn?t sell, be prepared for the auction as a backup.

This is all just my opinion for what it?s worth. Doing the auction is a good avenue for multi-million dollar houses that you want to sell quickly. The auctioneer will drive up the bids, you should clear more than enough for a profit, and everyone will be out of your yard within 15 minutes!

By the way, if you?re worried you would not get bids to clear the debt you have on it (and I can?t imagine that you would not), you can always have a required minimum bid that must be attained, or you just take the property back with you and perhaps try it again another day. It?s not an ?absolute auction? so you don?t HAVE to sell it to the highest bidder if their bid does not exceed your minimum selling price.

Just my ideas. See ya!

Re: Whale REO advice - Posted by Jack

Posted by Jack on November 18, 2006 at 17:08:50:

Zed,
Is this some creative writing project? Because a lot of what you are asking doesn’t make sense from the perspective of someone who “usually does rehabs in the $500k-$1m range”.

Re: Whale REO advice - Posted by Zed

Posted by Zed on November 18, 2006 at 19:14:24:

“Sounds like you?ve got something that is a little out of your comfort zone ? good! That?s how we grow. Now onto the meat of things.”

Thanks. My kinda attitude!

"The reason I would shy away from going the traditional Realtor route is only because the house is so much higher in price than what is in your area. "

Interesting. The home is nestled amongst it’s peers in a upscale area, one of many such areas, so I wouldn’t have thought to forego the Realtor as there should be some very qualified agents for this level of clientel. But it gives me some ideas.

"This is all just my opinion for what it?s worth. "

The exact point of my post. So far so good!

“Doing the auction is a good avenue for multi-million dollar houses that you want to sell quickly. The auctioneer will drive up the bids, you should clear more than enough for a profit, and everyone will be out of your yard within 15 minutes!”

Definately didn’t think of this for this property. I’ll look into it!

“Just my ideas. See ya!”

Right on, Mike. That’s got me thinking.

Anyone else?

Re: Whale REO advice - Posted by Zed

Posted by Zed on November 18, 2006 at 18:01:52:

Thanks, Jack. I can see where you might say that.

I replied but it disappeared, so sorry for any duplication.

Well, in my area $500k to $1m is median to second level. $3m + is an order of magnitude greater and I was looking for anything that we may not have run across before. Marketing faux pas as well as must do’s, ideas on what people will expect vs demand vs expect to bring their own, etc.

We’ve never done an REO, so not much creative writing there, and we’ve already got two lenders ready to roll rehab and holding into the loan.

Basically just looking for creative ideas specific to the $3-4mm range that I may have not thought of.

Anything not disparaging the question would be greatly appreciated.