Do you believe the myth that nobody is buying homes in December? Read on and you will be surprised. At the end of November 2011 I a listed a large ranch in Marysville for $68,000. As you can see from the picture, it looks like a nice home with 3 bedrooms, 3 garages, and a wide open backyard.
Within two days I had more than 20 showing requests from other realtors. A total of 30 potential buyers looked at the house within a week. When I stopped by this home for sale a few days ago, I hardly could find a place to park, as realtors and buyers crowded the long driveway.
Why Did Buyers Rush to See This Home For Sale?
It’s all about the price!
You need to know that this is a HUD house. The previous owner purchased it for $175,000 just five years ago. Now HUD had me list it for a mere $68,000. That’s a $100,000 discount from the previous purchase.
In addition, it is listed as insured with escrow. This means it should not need more than $5,000 in repairs, and owner occupants can buy it with regular FHA financing.
Anything Wrong With This House?
I am glad you ask. This deal is not as good as it appears. Prospective buyers need to be aware of the following:
- There is mold in the finished basement – the buyer will have to remedy it and possibly replace the drywall in the basement.
- The repair escrow does not include funds for mold remediation. You will have to increase the repair escrow to cover that cost. If you exceed $5,000, you will have to go with a 203k rehab loan.
- It is very likely that this house will sell for more than its asking price. However, FHA will only finance 96.5% of the appraised value of $68K. You have to bring the difference to the closing table.
What did the house sell for?
An owner occupant buyer won the bid. As expected, they offered way more than the asking price. Based on HUD’s published bid results, the pending contract is for a Net to HUD of $83,660. If you add realtor commissions and closing costs, the total purchase price is around $92,000.
Therefore, the buyer will have to pay $26,000 cash at closing. They also need to pre-pay the remodeling, before they can get reimbursed by the bank from the repair escrow.
All in all, this is a good deal for the buyer, if:
- they are ready to bring that much cash to closing, and if
- they can deal with the extensive repairs required to get the house in move-in condition.
If you don’t want to deal with repairs and you don’t have that much cash to invest in your home, please call me. I will help you find a ready to move-in home for sale that you can get at a discount without any additional repairs.