Tax Auction -- Bidding on this property ???

[EllieW]

Saturday there is a tax auction up here -- this time they have an unusual house on the auction block.

This county does a preliminary title search and wipes out all liens that they find. When you do your own title search -- if a lien shows up that they missed - they do refund your deposit.

This house is in very good condition - 1 family - 4 bd, 2 1/2 bath, very big yard for this area. Most of the work is new kitchen appliances and cosmetic. Furnace is good - central air is good - electric is good - house is vinyl sided...

*Only big fix is the stone stairs going up to the house -- ground has apparently frozen and heaved -- So these stones need to be re-set -- I have no idea on a price for that!

Comps on this house - my RE Agent says it should go for about $175 -- and to be on the safe side - I am looking at the lowest it should go for is $160

For this auction - winner needs to be able to write a check for 20% of bid and then close in about 45-60 days. My partner and I can do that -- we have cash available and are pre-approved for a mortgage of over $170 - which this would not be that large.....

Obviously there is a lot of people looking at this house - I want to get a price in my head for the maximum bid we will go to.....

Here are the costs that I see:

Closing Cost (from my mtg guy) --- $8,800 approx
* $18.00 Flood certification
* 250.00 appraisal
* 79.00 tax services
* 400.00 bank attorney
* 850.00 title insurance
* 725.00 NYS mortgage tax
* 800.00 commitment fee
* 4900.00 full year taxes (may be a couple hundred dollars higher)
* 360.00 home owners insurance (estimated)
* 338.00 mortgage interest based on closing on the 15th of month

Rehab Cost -- $12,000
* That is a totally made up figure!! I think it is high - but I am brandie new at this! And -- I do not have any idea what those stone steps will cost!
House inside needs to be painted -- hardwood floors sanded --- kitchen sink and appliances -- yard needs to be spruced up - but it is in good condition.

Real Estate Commision when it is sold -- $10,000 approx
Yes -- we could probably sell it by ourselves -- but this agent is a good friend and has been showing us around to lots of bank owned properties and has been supplying us with lots of comps... And she came with us to see this house.... So I am believing we should use her to sell it - so she can finally get paid!

So -- we are looking at a cost of about $31,000 -- In my head I am saying $35,000. Am I missing anything?

I'm thinking our maximum bid should be -- $105,000 -- too high? too low? just right?

That would be our cost of $140 -- and minimum profit should be $20

Yes -- this would be our first deal!! So I am feeling very much like I don't know what I am doing!!

Do you think I am missing something here?

Any info/advice you can share....Please share away!!

Thanks so much!!

Ellie --
*brandie new with lots of questions*

[Dan Auito]

I think you've done a good job on your conservative over estimating! That's a safe bet. But without being able to do things yourself like sell it for one thing a more seasoned investor will be able to bid $10,000 more for it then you and still make the same profit.

A seasoned investor also will have all those repair costs and holding and closing figures narrowed down to lower actual costs and beat another $5,000 out of the estimate to offer at least $15,000 more than you can and still make the same return so, sure make your conservative offer!

But don't be surprised when the more seasoned investor out bids you due to their ability to know exactly how and where that profit is going to be made.

Numbers, numbers, numbers SHEESH :icon_roll

[Bill H]

Ellie:

Your numbers appear to be OK as Dan says. However I have a couple of things to ponder.
Frozen steps...what caused it? Do you hve a leak in the supply line from the street? Could be expensive.

House need painting...currently painters charge from $1.00 up per square foot to paint the inside including trim and molding. Outside depends om accessibility ( need scaffolding..or wil ladders do)....and....Is there lead based paint here...could be expensive.

Floors need sanding...have not had this done in some time. Have they been done before? Needs to be done professionally or else it can come out looking like a mini-skateboard arena with lots of little hills and valleys. Have a pro come in and tell you if there is enough left to work with to refinish again...If you get down into the tongue and groove of the wood it is tooooo late.. this will be your most expensive part of the rehab.

Tax Auction? Are you getting a deed? Has the property been passed over at a tax lien/certificate sale? Can you get clear title? Do yo have to wait for any type of redemption period? Will you have to go through a quiet title action to clear matters? How long will this take?

AND: Do all your homework...make a FIRM decision as to how much you can afford to bid and STICK with it. Do not go overboard and regret it later.

Food Luck,
Bill H

[EllieW]

Thanks for reply Dan & Bill! :thumbsup:

Front Steps: These are stones in an upgraded ground (small hill) -- I'm guessing they were never set in properly -- and frost up here that will heave the ground is not that uncommon up here in the Great Northeast!

Tax Auction: The deed is now in the name of Albany County - they did a preliminary title search and wiped out all liens. I spoke to the director and he told me after I win a bid I should have a full title search and insurance done. If any liens show up that the County missed -- they will refund our deposit and let us out of the deal......

Floors: Hmmmm - Looks to me that there is enough to work with -- and these are really nice hardwood -- so I am hoping that they can be done.

We have a firm of $107 -- this will give us a profit even if the house goes on the low side....

Yes -- I am aware that there are seasoned investors out there -- but I really am a positive type -- and I truly believe that the end results will benefit all involved!

Yes - some of my friends call me Pollyanna!! But I have found the more positive I am -- the more positive things just keep happening!! :SM039:

Thanks!

Ellie

Well then Ellie, your sure to like this: http://www.changethis.com/14.PositiveAttitude

[smidgen]

Dear EllieW,

I do agree with the guys here when it comes to the legal matters of the deed. It could get really messy if things are still in limbo. One thing that I don't think was mentioned is, does this property have a Federal Lien on it as well? Please know that the Feds and the County do NOT work together when it comes to their liens that they place on each property.

I think it is wonderful if you have a positive outlook on something like RE. But I also feel that you need to be doing complete and thorough homework on all possible problems and what if's before you get in a bind.

[brianb_cobbres]

Ground heaving is a common problem up north. From PA so i am familiar with the problem.


I do not see where you allowed for ongoing carrying costs (electric, gas, water, etc). You will also have to pay the mortgage during the rehab and while on the market. You may also have to consider a buyer asking you to contribute to their closing costs.