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!