Bidding on Million Dollar Homes

The Dallas morning News Sunday paper had a interesting article last week. It said that 1 in 9 homes priced at 1 million or more are in some stage of foreclosure. There are dozens of lake front properties in my county here in East Tx that are priced from $300.000 - $1.5 million for sale, many have been on the market 6mo to over a year. The agent I work with is helping me do a 7 day sale format deal in 2 weeks. The home was listed starting at $225.000 and eventually down to $190.000 which it remained unsold for 2 yrs. Lady owns the house free and clear. My agent was dumbfounded when I suggested trying this, but after she found out the owner agreed to use me as a marketing consultant, she share's my enthusiasm. Would I try this with a 1 plus million dollar home. Yeeeeeeeeeeeeeeeeees.

Longhorn

I assume you are going to assign this property? Do you have a buyer lined up that actually has the money? If not don't waste your time. Renting for positive cash flow will be very difficult if not impossible. Some one that can pay that rent would buy right? How long are homes in that price range on the market? Hold time would be rather expensive! Is this through an agent or the home owner? Earnest and down payment could be rather pricey also. What is the actual FMV? Does it need any work? If you can get it at 50 cents on the dollar of TRUE FMV it might move quickly.

Just few thoughts on high end properties,
Good Luck,
Michael Mangham
MD Home Acquisitions LLC

PS You might concentrate on entry level SFH, they move the quickest and are the easiest to assign.

one million six hundred eighty-four thousand and one hundred ninety -two dollars. I actually was planning to wholesale to a retail buyer, and if I can't I am not out anything because if I don't put the earnest money down there's no contract. Actually the realtor had an open house and several people went through the house. And if they are willing to look at it when it's listed at 1.4 mil why not 1mil or under? That is a most sought after community to live in. These houses are brand new, never been lived in. Look up your dream home online and that would be it. I would take the house right now if i could. There are people out there with credit and money that could afford it, why not buy it for a discount? It's way under comparables in the area if I get it at my price any way.

My friend that has been an investor for years does an auction with his properties and they sell at market value. Yes I have considered a loan to hold just so I could auction it.
longhorn your idea does sound interesting. Dean said in his book that the wholesaling idea can be done with larger properties as well. I figured this was a good idea, how many investors are actually going after these homes? Close to none I bet.

But I am going after ones that require rehab and have yet to close on one of them.

The problem is most buyers need to get financing and banks aren't doing any lending anymore. The income someone needs for a million dollar home is phenomenal to qualify for loan. For every $100,000 of loan there has to be $3000 of income/month. (I have to look this up again, I'm having a brain fart, so don't quote me on that, but it is pretty high)

I had planned on doing the auction route and getting them low enough below market value to get them moving quicker. PM me.

Have you checked a couple of actual comps that sold in the area. What did they sell for and how long on the market? You say you are going to wholesale it to a retail buyer, how do you intend to gain control of the property that would allow you to do so? Do you have a retail buyer lined up? If not how long do you think it will take to attract one?
Why hasn't a retail buyer already negotiated a good price and purchased themselves? Is this property listed with a realtor? How long? How many showings?
Are you a member of Dean's success academy?
Tammy has a clear idea of one aspect of high end houses in today's market. Another is average time on market. Also, where I am at you cannot market a property that you don't have under contract or have a signed marketing (bird dog) agreement stating how you will profit.
Not that this deal cannot happen and you can't make a killing on a high end house, people do it all the time. However these guys allow for up to 6 month hold time even at a discounted price (they have money!) Doing a wholesale flip on a entry level SFH (the most demand, fastest moving)property with no money down is one thing, doing this on a high end house is 10 times more difficult in the current market.
If it does not go through remember every deal is a great learning opportunity! Take advantage and really do your due diligence (if you have not already) on this property. Do a real world CMA, ask a realtor for help (not the listing agent) if you need. Find out the terms for getting this property under your control first, for real.

Good luck and keep us posted!
Michael Mangham
MD Home Acquisitions LLC

That was alot of information to soak up. The questions Michael asked is truly alot to absorb and the comments everyuone ese made are terrific as well. I was working on a 259,000 property and was scared sh*tless that I might make a mistake and ruin myself so I stepped away. It was all FEAR I guess... Dont know what I would do if I was thinking of doing it with a $1,684,192.00 home. Luck to you and please at the very least PM me with how it works out for you, I would love to know if this is possible.

Kevin

I am not in the success accademy I just wanted to try something that noone else is trying. I can list it on cl and other sites if I have a signed purchase agreement, just not realtor.com. Once I get equitable interest in the property, I can sell my interest. It doesn't have to be to another investor it can be to a retail buyer. There are people out there that do make the money to afford this property and would take it at a discounted price. I did consider a pml just so I could auction it because it would go closer to market value, but I wouldn't even mind making 5k off this, and someone else would get it at a great deal as well. I am suprised the banker isn't letting them go cheap because there is a whole street. The builder ran out of funding so he just got rid of them. It's actually a good opportunity if I can pull it off, because I can build my reputation with the bank as well. The Listing agent actually thinks it's funny. When I put in my first offer for 600,000 she didn't laugh either. I was suprised because when I put in an offer for a house in the same area that was for sale for 179,000 the agent laughed. My offer was 87,000 and he said I must have forgotton the 1 in front of my 8. I figured I must be on the right path. I don't really have anything to loose by it, I just figured I would give it a shot and see what happens, and i do have friends helping me.

thorough analysis of the property?

That would include

-Running comps, all the sold homes within a mile radius w/in the last 3 months. If you need more comps, go further out in distance and time, but no further than 6 months. Its not the easiest comping higher end properties because there are generally not as many sales.
-Evaluating all repairs and upgrades needed.
-Evaluating all holding costs (calculate a minimum of 9 months, to be conservative at least a year). (Include utilities, maintenance, mortgage payments, insurance and taxes.)
-Adding in a potential 6% realtor fee as part of your or your investor's selling costs
-Closing costs (count on about 5% of loan amount for your estimation)
-Add in your assignment fee (if assigning)

Subtract all those costs from the ARV to get an idea of what you should wholesale it for.

You may be surprised at how much lower you need to go on the price.

Best to you! It is CERTAIN you will SUCCEED!

In order to be able to afford a million dollar home, you must have a annual income of $150,000.00.

There is a reason that there are many estate homes in foreclosure or sitting vacant and for sale. Not many can afford these properties.

I would think really hard about this. Also what happens when the realtor wants 1% earnest money with the offer?

Now, my company can provide transactional funding for these properties as long as you have a qualified end buyer who is ready, willing and able to do the deal.

didn't ask for 1%. I also said I had 60 days and the earnest money wasn't due for at least 45 and they were ok with that.

After you re read my posts and Tammy's posts 3 or 4 times. I still have one question and you really need to KNOW the answer to. How are you going to take control of this property so that you can wholesale it?

Michael Mangham
MD Home Acquisitions LLC

Okay, I must admit I am somewhat confused and really not. I know that makes no sense to you right now but stay with me here.

If you have no contract to lock this up, how can you do the deal? also, what guarantee do you have that the property will not be sold out from under you?

I did say in my last reply that there are very few buyers for these homes, however, after speaking with a realtor friend of mine who routinely sells these type homes to wealthy jet setters, NBA and NFL Stars, it could happen that this home could be one of the few in those price points to sell.

Now, with regard to a contract, a contract for the purchase of real estate must have consideration placed with the offer, and that consideration is monies.

There will most likely be a substantial earnest money deposit needed with a contract on a property of this price level to warrant a seller taking it off the market.

My guess is that the seller is in desperation mode to make a sale and the realtor joined the desperation game to earn their commission.

My advice is to lock this thing up and then begin marketing it, because if I am a buyer and I trust you to get this property for me and I spend time looking at this deal, only to find that it was sold to someone else because you didn't have it locked up, I would be suing you in court for fraud, but that is just me.

Good luck to you.

intended to market it until I have an accepted purchase agreement. Yes the bank does want to see a significant em deposit, but I did say I put a clause in there that if I don't pay the em my contract is null and void. There are people here besides nba stars that buy these homes. There are multitudes of doctors and lawyers as well as corporate ceos that buy these homes not to mention wealthy investors. Lots of other proffessions as well. Just in one zip code near my house there are more than 14 people that make over 220k a year. That's over 18,000 a month in income. That's only 1 out of 7 or 8 zip codes in that city. It just depends on the person and their taste. There are many more expensive homes than that one near my house that are for sale and selling.

the bank decided not to counter any further, after I asked for a list of cash buyers from the realtor. Lesson learned. One thing what I meant to ask for was the solds for the last month or so that were all cash buyers. That's ok, I know that house will sit for a while anyway at the price the bank is asking, so when i am ready I can go at this again.
Also, I found out from my realtor that you should advertise the property before you even have an accepted purchase agreement and have buyers ready to go. It's like a ghost ad.

So what did you offer on this property and what did the bank initially counter with?

Thanks

- Tom

you may find it easier to find a buyer for a $3m home than one for a $300k

The higher the price, the easier to weed out the amateurs and frauds, especially when it comes down to coming up with the normally 10% required

Also, with houses priced over $1m, you're given a longer period to close, generally up to 90 as opposed to 30-45.

if they are sf homes, it might be harder if its a commercial, like a 100+ unit that i'm working on, true investors show themselves as long as the numbers work.

My first offer was for 600,900 and the realtor representing the property said the banker wouldn't counter that offer because it was too low. I wrote a new offer for 700,000 and submitted that. The banker countered with 1,450,000 and em of 5,000 due on acceptance and I countered that offer with 900,000 and em of 5,000 due within 10 days of acceptance. The realtor had told me the banker wanted at least 1m, so I knew I was close with this one anyway, but at this point I decided to ask about that list of cash buyers. Now the list price for the property was much higher than the arv I pulled from total view. I don't remember exactly but it was well over what I was offering. This property is actually owned by the bank. There are a whole street of them, most worth much more than this one, all in an exclusive area. A builder had built the whole thing, and then defaulted on his loan so now the bank owns them all. Brand new, never been lived in and beautiful.

I think it would be easier to weed them out, most people won't reply for a house that big unless they are really interested in buying it. I will go back at it again once I have money put up so I can put the em down if I need to.

It shouldn't come out of your pocket.

Ask the buyer for ten business days to provide the EM, as opposed to the proverbial five for regular or lower priced homes.

Also ask for 60 days instead of 30 to close.

Hope it helps

Tell as many people as possible all at once.

that's a good idea, that way if they are really interested, they can move quickly and guarantee they get the property.