Third offer

We still haven't heard anything on our second offer. The property was a Fannie Mae property and they might all be a bit busy with the meltdown going on in the financial world so we have let that offer expire.

We did submit an new offer on another duplex. This one is a true mirror duplex. 7 rooms each side. 3 maybe 4 bedrooms upstairs. Living Room, Dining Room, and huge eat in kitchen. Over 3150 square feet plus a completely finished basement with 2 more large bedrooms and a full bath. Our initial offer is $127,200.

Credit improved

With the help of my mortgage broker we did a "quick score" Now my middle and high score are over 720 and I qualify for 10% down on 2 unit properties.

Second Offer

Second offer submitted but I am in an a multi-offer situation. Which means I am waiting to hear from the bank on wether they will accept my offer or the other buyer.

Dealed failed on inspection issues

Sunday we had an inspection done. The inspector flagged a lot of items and we took over 3 pages worth of notes. Most weren't deal breakers. There were dead roaches (my pest control guy said he could deal with that), broken windows (again not something I was worried about), soft wood under toilets etc etc etc.

The one thing we were uncomfortable with was the small split in a heating pipe we found behind a drop ceiling. Due to finding one we expected more so today I had my heating and plumbing contractor go over to the house with me. We removed covers from baseboard heating and found more splits, we carefully examined the pipes in the basement and found even more along with bulges which all indicated that the pipes have frozen. We also pulled the cover off the furnace and my contractor thinks the holding tanks in the furnaces are cracked. What we didn't find which didn't make any sense is signs of water damage. The drop ceiling had minor stains, None of the walls showed any signs that I would expect if the pipes froze and the thawed spraying water all over the place. It is odd, the property only came on the market in April of this year and it hasn't really been cold enough since. The pipes must have froze prior to the bank taking over it. They went ahead and winterized it but it was already to late.

I could deal with bugs, bad carpets, kitchen cabinets which looked like they had seen better days and a yardful of trash, but to replace the heating system for both units and re-pipe the house is way more than I want to spend. My plumber figures 25K - 30K to make all the needed repairs.
So I canceled the deal. My broker said the bank might come back and try to get me to buy it by lowering the price and adding funds to cover the repair. If they do I might consider it, but we have moved from "cleanup and light renovation" to "major rehab" and I didn't want to that as my first deal.

I am going to look at 2 new buildings which just came on the market. I already have financing in place and my mortgage broker said the credit reports they pulled are good for 90 days. I already raised my cash for my down payment so I have money in hand also. Just a matter of finding the next property.

All total I spent $360 on inspections but it was money well spent, as I was refunded my $500 earnest money and I learned a valuable lesson. I did look at the pipes prior to putting in the offer, but I didn't check in every room and I didn't carefully trace the pipes back from the heating system. The next one I am going to be like Sherlock Holmes and get my big magnifying glass out to carefully inspect the pipes prior to making an offer.

Offer accepted!

Late last night IndyMac accepted our offer. We now have to signed the purchase and sales agreement and IndyMac's addendum. We also have 7 days to complete our inspections. Closing is scheduled for Oct 3rd.

Submitted my first offer.

OK so I have crunched the numbers on at least 15 - 20 properties. I have visited over 12 of them and I have selected one to submit an offer on. I will be working with my R.E. Broker to draft the offer letter and expect to submit it on Monday.

It is a bank-owed 2 unit, 8 total bedroom property. It was under agreement but the previous buyer couldn't get funding and it went back on the market this week. Asking price is $124,900 and I plan on offering $109,912 to start. Even at $124,900 I think it is a good deal because average rents for a 4BR in this area are around $1200 a month. It is on a quiet street close to the major highways and shopping. The other properties nearby seemed well cared for and there are only houses on one side of the street. The other side of the street is the back of a large warehouse and associated fenced in parking for the warehouse.

I don't plan on wholesaling so I am mostly concerned that the offer letter have contingency clauses for professional inspection and mortgage.

How specific should I be in the offer letter? I can afford the full asking price, but I don't want to pay that much. I also can afford to do 80% LTV and cover closing but I would rather do 85% or 90% LTV and have the seller cover closing costs.

I think I want the contingency clause to state "Mortgage of at least 85% LTV with an interest rate no higher than 7.75% with a 30 year amortization period". I have already been "pre-approved" for better terms than these, but nothing is certain until the closing is over.
Also should I bother asking a "Bank" to cover closing costs on an REO? Do they ever do that?

Any other things I might be over looking?

Thanks for all the help and support you guys have given me over the last month. I can see the light at the end of the tunnel. Lets hope it is not the train coming.

Funding search going well

Just got another pre-approval letter from a lender. Based on credit scores etc they will do 85% LTV on a 2 unit property and 75% on 3 or 4 unit properties. I had hoped for 90% LTV on duos but it is a start and better than the other deal I got which was 70% on any type.

I am going to keep talking to brokers and seeing what I can find.

If anyone knows of a good broker who can still find 90% LTVs or programs with 80/10 or 75/15 please let me know.