Yesterday morning, I talked to the fellow who will be handing me tens of thousands of dollars on behalf of his employer. He sent along a nice little letter stating that I am, in fact, worthy of receiving the money we spent a few minutes talking about.
Once I had that pre-qualification letter, I was ready to make an offer on the multifamily of my dreams. That is, if I dream about poop and probable narcotics abusers...
Backtracking a little bit, I spoke to John McCann, Realtor the previous evening to decide on an offer price. After some discussion about the merits of low balling vs. fair pricing, we arrived on a number. This number took into consideration both the amount of work that needed to be done, and the final selling price that I had arrived upon previously after much mathematics.
With this number in mind, I asked my lender contact to draft a pre-qual letter stating the exact figures John and I discussed. This would show the bank not only what I was offering, but also the precise amount I had for renovations. The money was split up thusly:
Total loan amount - $115k
Amount for renovations - $50k
Amount of offer - $65k
Now, the above can definitely be construed as a 'low ball' offer, especially considering I know what the previous, and accepted by the bank of the owner (it is a short sale after all), offer was ($82k). I don't want to pay $82k for the house. Too much needs to be done and I actually want to turn a decent profit when it is finally sold. John and I arrived on the $65k hoping that the seller's bank would be tired of the property and would want it off of their books. This is a terrible assumption, because it assumes that banks run the real estate arms of their businesses using sound reasoning.
If I learned anything from the three months it took to finally close on the previous house we flipped, it is that banks operate the real estate arms of their empires using an infuriating combination of apathy and disdain for their work. They take forever to do anything. And it sucks.
That said, I definitely expect the offer to be rejected (eight weeks from now) and I will need to get an updated pre-qualification letter for offer number 2.
In short, I signed an offer last evening and it was faxed over to the seller's agent. I will hopefully hear back about it by the end of this week. Realistically? I will not hear back about it until much later than that.