Lowballing an REO?
We had planned to build our dream home in a few years, but recently I came across a custom built home that is now bank owned and we are considering making an offer. We could never build for anywhere near this price, so it might make sense.
The home was build in 2007, but has been vacant the entire time. It is almost complete. The kitchen appliances, some plumbing fixtures, light fixtures, landscaping and driveway are missing. All pretty easy fixes, but obviously some work is involved. If we were to buy the house I'd probably replace the bamboo flooring and kitchen cabinets which are both in fine shape but not what I'd like.
The exterior of the home needs to be repainted, or maybe even resided. It looks like natural wood siding and has been neglected. The paint is peeling in some areas and I would imagine there could be mold too. Aso, the roof has a good deal of moss. Might be fine with just a cleaning, I don't know though.
The home has been on the market since June of this year and has been reduced about 90k from the original asking price of 320k. Right now the price per sq foot is $101, which is low for this area- but not that low. I tried looking for comps, it's not that easy as most homes in our area are tract homes on micro sized lots. This house is on a couple of acres. Most homes on acreage here are much larger or much older. If I do enough digging it seems that I could find comps to support an even lower price, or comps to justify something higher.
Regardless, I think the current list price of 235k too high, and the fact that the home still sits proves it. We still need to do an inspection and get bids, but as a rough estimate I was thinking about 50k for the work needing to be done. With that in mind I am considering an offer of 180k. Does that sound like a crazy lowball offer?
I know many think banks are pricing properties right and that lowball offers will the ignored, but clearly this home hasn't been priced right. The condition the home is in, the work that needs to be done and the lack of curb appeal (home sits back between two other lots and is at the the end of a long torn up gravel driveway that has unattractive chain link fences on either side) are turning people off.
So 180k on a REO listed at 235? That's a little less than 80% of the list price. I'd be willing to go up some but not over 200. What do you think?