I recently lost an investment deal over $500.00. Looking back on the negotiations, I realized I have become accustomed to the low prices this market has afforded. A few months back I wrote a blog about a home our company had listed for $89,000.00 and we made a short sale offer of $58,000.00. The bank turned it down and through the REO process we were able to buy the home for $17,000.00. We recently finished the rehab for $13,000.00 and now have a completely redone home for $30,000.00 that will rent for $850 - $900.
The property I recently lost was the home right next door. It was the same investor who lost the property, the same lender, and the same REO agent. We put our offer of $17,000.00 in for the 2nd property. It worked once right? The REO agent came back and said there was another offer and we were in a highest and best. Again, same situation as before. This time however, we did up our offer to $17,500.00, but not a penny more. Well the other offer came in at $18,000.00 and we were out.
My current reflection on this situation is this: Really what is the difference b/t a $17,500.00 and a full price offer of $19,500.00. $2000.00 right! Yes, but this is a long term hold. Divide that over the 10-15 years we are going to hold it and it is minimal. Don't get me wrong, I don't like to pay more than a seller is willing to take, but it I am getting $850 in rent and my mortgage payment goes up $7 a month because of the extra $2k in our offer, does it really matter? I think not.
I know, I'm bringing everyone into my misery, but I truly believe that just as alot of people in real estate lost perspective in the boom, some of us are starting to lose perspective in this downturn. I for one am trying not to let that happen. ....again.
Chris McClatchey
Housing Market Realty
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