Need Some Advice - Possible Deal !
I called a FSBO. Owner called back and
indicated that he wanted to sell his house and was 'motivated' to do so. He is flexable to a good solution for his problem. For about 5 years, he has driven about 66 miles a day (1 way) to get to work and has found a new house and wants to get out of his current house ASAP. He refinanced in 2002 so his loan is at around 7% ?
He is current with all payments.
Here are the numbers:
- asking $131,900
- appraised at $136,000 (last year)
- current payment PITI $920 p/mo.
- loan balance $118,000 +/- ??
- no home owner assoc. fees
- house is a 3/2.5
- 1507 sq.ft.
- built in 1991
- 2 car garage / 1 fireplace / deck / vinyl
- tax value is $126,300
- comps = $133,250 (avg)
- comps = $147,000 (high)
- comps = $117,000 (low)
- taxes are $1587.59 (2003)
It looks pretty good from the outside, have not seen the inside yet. Most likely will need some TLC.
My plan is to:
- do the property inspection
(see what needs fixed in & outside)
- work the numbers on the yellow pad
- offer less (see what happens)
- do a L/O with the owner
(lot of equity)
- see if he will do the next 2 payments
- do a L/O and an Option to purchase
with a T/B.
- post an add for a T/B 'Rent-To-Own'
with a 12 month lease.
- collect some option money
- possibly over some rent credit
- sell the house for approx $142,000
Any suggestions / how does it look?
Thanks
Housebyr
First, his appraisal means nothing to FMV. It was done to get a refi loan and will likely be high of FMV.
Second, using your comps, the FMV of the property would be about $132k, or his asking price. Adding 3% appreciation a year only gives you about $134K to sell to tenant/buyer. It may be different in your area, but here, home prices are pretty stagnet, so getting 3% is pretty good.
Third, can you lease the place for $1k or better on a monthly basis? Again, here, these properties may sit longer because the people who can afford that kind of payment usually can get financed.
Roger
What you have here is not a deal, but rather a minor disappointment.
Things I recommend you do with this seller and all future sellers it to, "let your fingers do the walking".
There's no need to waste your time with a drive-by, an interview with the owner, a return trip with your repair figures, a return with adjusted figures, return, return; RETURN!!
It's almost a guarantee that this owner will eventually tell you to go to h***!. 'Cause he's not motivated at this point in time. He's a retail seller.
You're an investor who has to make a profit (or stay in bed) and you can't pay him what he's asking. Explain that to him on the phone and then it's a go or "have a nice day" proposition.
If he sold this via a Realtor he would receive little if anything at the closing table. This may be the reason why he"s selling the property himself. Do a net sheet.
Thanks for your insight.
What could I do to turn this into a deal?
Offer him a much lower price. Say around $122,000 to $125,000, and walk if he will not go below $125,000.
Thanks
Housebyr
Quote:
On 2003-10-16 12:51, housebyr wrote:
What could I do to turn this into a deal?
Offer him a much lower price. Say around $122,000 to $125,000, and walk if he will not go below $125,000.
If you are going to do that, I would make an appoitment and try to show him why you can offer only that much...If he wont go lower that FMV, he isn't motivated.
Sammy is pretty well on the money about the "deal." This guy doesn't sound motivated from the info provided.
Where I disagree with him is the phone offer. I don't ever do this. Why? Because it's much easier to say no to anything over the phone.
Meet with the seller, discuss his situation and get him comfortable with dealing with you. After he has explained fully his situation and reasons for selling, then make your offer based on that.
Pull out your notepad and do some figures for him:
FMV=$132K
-6% commisson=$8K (Note most FSBO buyers expect the price to be discounted by this amount if no agent is involved).
-3% Negotiating=$4K (Most buyers negotiate, and for NC, this is a good figure 5% is norm).
-3% Closing costs=$4K (Sellers costs)
-9 months holding costs (his payment a month, say $900x9 the average time on market=$8100)
Just using what I've gotten to so far (24K), he is about $10K in the hole. So an offer for payoff plus a little boot money $100-$1K would be a pretty good deal for him, huh?
Again, don't push the deal. You can't make a transaction into a "deal."
Roger
My offer would be...
Look at house... excuse yourself to your car "to run some #'s"
You came there with contract already to go and ready to sign....
offer payoff, $10 to secure contract, you need him out asap (30 days) and payments start jan 1st. (amount of mortgage) take all the monthly equity as credit.... about 100/month.... take it or leave it offer....
You provided solution and relief....
if he says no ..... thanks here's my card - if you change your mind or decide to sell give me a call...