There’s a fine line between buying too high, buying right, and losing the deal. We lost another deal today by only a few hours. There was a REO (Real Estate Owned—it’s a banking term that means the bank owns the property after foreclosure.) house in the same neighborhood as the Ash House. We had been keeping an eye on it for a while, but the bank wanted too much money for the shape the house was in.
We kept submitting offers over time in hopes of eventually landing this deal. Even though the bank had steeply discounted its original asking price, the discount wasn’t sufficient to cover the cost of repairs. The roof was past its expiration date, and the foundation had problems. A floating slab foundation built in the 60’s on highly mobile soil will eventually fail. It’s just a matter of time. When it does we can repair it and bring it to today’s state of the art, which has improved dramatically over the last 50 years.
The picture to the right shows several red flags that indicate a higher than average repair cost.
- The foundation has cracked and is pulling parts of the house in different directions, resulting in the crack running down the wall.
- This has also let water get into the wall, which exposes you to rotted studs at best.
- The window framing has failed, which also lets water into the wall.
We submitted another offer today, expecting it to be rejected. It was but not for the reason we thought. The bank finally relented and sold it for a price where a reputable investor could:
- Repair the foundation
- Replace the roof, fascia, and gutters
- Rebuild the fence
- Retain a reasonable budget to repair the interior of the house
The problem was that our offer came in two hours after the bank accepted another investor’s offer. We don’t know what that offer was, but we were told ours was “in the ballpark.” Timing is everything. You snooze; you lose. Yada, yada—just keep working to find the next one.