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Missed Property #1 – Estate Sale

December 24, 2011

We make many offers before we finally get a property. I have heard the rule of thumb of “100-10-1”. (You look at 100 properties, actually make 10 offers, and then you might close on one). This sounds ballpark close, but I have never actually kept track to this extent so not sure. 

I anticipate that we look at more than 100 properties. However, the term “Look at” is subjective. We can often look at the online appraisal site, googlemap views, along with other information and can many times eliminate a potential property without physically viewing it. We NEVER offer on a property without viewing it thoroughly.

A property we just offered on last month and lost was from an Estate Sale. Attached are the details:

Property specs:  3-2-2, 1,550 sq ft with buildout, built in 1978.

List Price: $79,000

Estimated Retail Value:  $95k

Rent ready repairs needed: $2k

Market Rent: $1,050

When we noticed this property it was already listed on the MLS for 4 days – We put our offer in that day. I talked to the listing agent and got some information. It was an Estate listing and the agent said it already had 8-10 offers. He went on to say that I would need to get mine in right away as he had just submitted what he had to the seller yesterday. This is a common ploy used by agents. When he said he had 8-10 offers, he might have 4-5 and probably 2 decent offers.

We still liked the property as it was in a good neighborhood where we already own 2 properties and manage another one. It is also less than 3 miles from our primary. The home itself was in good shape and only needed to have the carpets cleaned and a few minor cleanup items. Total out of pocket would have been less than $2k to get it ready. It had a small buildout on the back part of the house that I did not like, but potential tenants might view it as a fourth bedroom.(no closet and a window unit for AC)

Given the location of the property and it’s almost rent ready condition we submitted the following offer:

  • All cash offer: $76,000
  • “As-is” condition with no inspection clause
  • No termination option
  • $5,000 earnest money
  • Can close right away

This was an aggressive offer that yielded slightly below our minimum acceptable return. However, this neighborhood and proximity to our primary was big for us. We even had a couple of potential tenants that were looking for a home in this area. We typically don’t offer anywhere near the list price, but this was an aggressive list – probably meant to generate lots of interest and bids. After submitting the offer the agent called right away and notified me that a higher offer was already with the seller, but that he would immediately turn to ours if it fell through.

The agent called us back a week later and said the high bid has fallen through. I asked why? He disclosed that there was a termite inspection that showed evidence of termites at one time. He went on to say the seller is now offering a termite treatment and one year warranty with the treatment. The primary still refused and backed out. This should have put our bid front and center.  However, in this one week period another bid came in that exceeded our bid. Not sure if the agent was looking for me to raise my bid, but I feared he was bluffing. I held our line and reminded him again that we were taking the house as-is, All cash, no termination option. A slam dunk in my mind.

They still went with this late high bid. The agent said if he was the seller he would take our offer, but he had to present both and the seller went with this latest offer. It sounds like the offer was just slightly higher than ours, all cash, but not the same terms we presented. They had a 5 day option period, but it closed.

It was a tough miss, but on to the next one. It would have made a nice rental. This does show there are investors bidding aggressively even this time of year.

 

   

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6 Comments
  1. This property looks like it’s in extremely good shape for only $76k. Thanks for wharing those photos.

  2. Well there is a for rent sign in the yard already. They are asking $1,150 a bit high for a January vacancy in my opinion. I always make a mental note of when I saw the sign go up and then see how long it stays up – just another temperature check.

  3. Cesar permalink

    What is your primary method of finding properties? I’m a starting investor in Pennsylvania and am trying to determine the best way to find properties in my selected area.

  4. Cesar,

    I wrote a post here about some of this… https://landlordinvestor.wordpress.com/2011/03/26/what-kind-of-property-should-you-buy/

    My wife and I are finally getting to the point where people are approaching us with properties they want to sell. But we are out there still hunting as well. Our primary methods are the typical ones: driving for dollars, patroling the MLS, looking at foreclosure websites, FSBO’s, HUD’s, Fannie’s, Freddie’s, etc.

    I will put this on my list to go into more details here..

    Thanks for the comment.

    • Cesar permalink

      Thanks for the reply. I read your linked post and it looks like my criteria is very similar with the exception of perhaps the garage. I’m not sure how important it is to renters here in PA.

      I’m looking forward to your post about house hunting. You mentioned many methods that I’d like to learn more about including driving for dollars. Thanks!

  5. Cesar,

    Driving for dollars is nothing more than driving around your farm areas and checking for vacant homes, distressed properties, etc. You can then pull the tax records and mail them a letter like most people do.. I typically take it a bit further and try to contact them via the phone or other methods.

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