Pre-foreclosure lead under contract at 168k, deciding whether to assign or close it myself

Lead came off a pre-foreclosure pull combined with equity over 55 percent and 19 years of ownership. Owner is behind, wants out before the sale date, and has been clear he does not want a sign in the yard.

Numbers as they stand. Comps put ARV somewhere in the 240k to 250k range for a renovated 3/2 in that pocket, and I'm using 245k. Reinstatement plus payoff is about 141k, and I have it under contract at 168k with 21 days. My walkthrough scope is roof, one bathroom, kitchen, paint and flooring throughout, plus a panel I don't like. I have that at 48k and my last three jobs all came in 15 to 20 percent over my own estimate, so call it 55k.

At 168 plus 55 plus say 22 in holding, closing and selling costs, I'm at 245 against a 245 exit. That is not a flip. So the exit is an assignment.

Problem is my buyer list for that zip is three people and two of them are slow. Best verbal so far is 176k, which is an 8k fee before I pay the title company. I could double close, which costs me more in fees and depends on the title company being willing, and practice on that differs by state.

The decision is whether to take 8k and move, or spend a week working buyers I don't know and risk running out of contract time with a seller who has a hard date. What am I mispricing here?

2 replies

1gregpowell66AG4BPRO8

Your 48k scope is the part I'd argue with, and it changes the whole question. Roof, kitchen, one bath, flooring and a panel on a 3/2 is not a 48k job in any market I've priced in the last two years, and you already know that because you wrote down 55k. If your last three came in 20 percent over, your real number is 58 to 62 and the flip is underwater by 15k, not by zero.

Which means you're not actually choosing between a flip and an assignment. You're choosing between 8k and nothing. Take the 8k, and use the week you would have spent hunting buyers to go build the list so the next one has five bidders instead of three.

1priya_n21PO1C

I don't understand the seller's side of this, genuinely. He has 27k of equity over the payoff and he's handing it to you for speed? I get that the sale date is real pressure, but if I were him I'd list it and take 230. What makes him not do that, is it the condition, or does nobody tell him that's an option?

Pre-foreclosure lead under contract at 168k, deciding whether to assign or close it myself

2 replies