Hunting Happiness

I know what you’re thinking — is this guy nuts? Well, no. I am referring to the market for REO/bank-owned/foreclosed properties in our neck of the woods. Such properties that are selling “as-is” but are priced well are receiving multiple offers within hours of listing.

One such example happened recently. A foreclosure in a neighborhood desirable with first time home buyers appeared in the MLS around 2PM. Our real estate investment company made an offer by 8PM and it was competing with two other offers received in that same six hour time period. We eventually submitted a best and final offer and the bank accepted another offer.

We don’t know the terms of the winning offer. We are not to the point yet of wanting to make cash offers and it is possible the other offer was cash. We also came up to a few thousand below the asking price while the winner may have offered full price. We figure this property would be bought for $100-110K, require $10K of work, and be worth $140-150K.

We didn’t bid more aggressively because of some issues timing cash flow and availability of the repair team. We also have taken the philosophy that we’d rather risk missing a deal (and an opportunity to make money) than risk rushing into a potential disaster (and losing money, perhaps a lot).

The bottom line is that while the market for homes at a normal level of repair and price remains very soft, the market for good investor deals is extremely competitive.