Need Help Determining ARV On My First Deal
I am looking to buy and wholesale my first home, but I’m a bit lost as to what I should offer. To help you advise me on this let me give you a tiny bit of back ground info.
The house I am looking to putting an offer on has recent fire damage. It’s a small 3/1 house (about 1300 sq feet) in a low-income area. It needs quite a bit of work. All though I’m not exactly sure how much (but that’s not my problem just yet).
There are no mortgages on the house and the owner (I think an investor, cuz his mailing address is a physical address across town) has responded to a letter saying he’s interested in selling AS-IS.
Problem #1: I am trying to determine what I should offer. I am using the formula of ARV x 70% - REPAIRS = MAO (Maximum Allowable Offer) ((Yes, I’m a Ron Le Grand student…figured something was better than nothing when trying to learn this stuff))
How do I determine ARV when the comparable houses on the same street (and around the area) have been occupied for at least 10 years or boarded up and vacant?
Problem #2: I asked if there were any back takes he replied “NO” However, my online search of the tax bill via the local govn’t web site shows there’s nearly $3,000 in back taxes. He wouldn’t lie about that would he?
Problem #3: Should the tax assessment done by the city be an accurate way to get ARV on a home? Are they generally high or low estimates? The city has recently done reassessments this past January. The tax assessment went from $ 36K in 1998… up to 105K in 2003. This has also increased the tax assessment of all the houses in this area. The houses are just as UGLY or UGLIER today then they were 5 years ago.
Maybe I’m going about this all wrong. So, I’d rather look foolish by asking these newbie questions here rather than risk losing this prospective investment due to my ignorance.
Thanks in advance for your patience
Brian Johnson
**Please See My Profile**
it sounds like this area has gone from bad to worse, and with fire damage, you may want to look elsewhere for deals. Think about if you would want to live there, probably not. It sounds like an investor is trying to unload his problem onto you.
Well. actually I went looking for the house. I saw it was on fire on TV and said..hey that's probably a motivated seller. I figured it'd be a great wholesale deal to a rehaber.
Hi:
Here are my 2 cents. If you still want
to make an offer, do find out how much
will be the REPAIR BILL ? Otherwise
you will be groping in the dark.
sayana
In many communities, fire damage homes must be inspected and certified to receive occupancy approval. This could become costly.
Eric & Rosa
[addsig]
I am new also. I have dealt with some pretty innocent sounding people, then I do a search and get all kinds of back taxes, liens, etc. I suggest that you 1) figure out the repair cost. 2) For $25-50, do a type 2 title search. It will find any liens or judgements or back taxes. Only do this if you are interested in pursuing this property.
first, yes he would lie. maybe he did maybe he didn't - tax offices are run by humans as well and they can be wrong at times. cover yourself and get a title company to search it for you and pay the minimal fee to "certify" what they find. this is cya (covering your azz).
just remember that what average people view as problems - creative investors view as opportunities! research the place with the quick search for liens. then try to build comps from the surrounding streets (like stats) and offer very low. this could wind up being a huge turnaround for a rehabber, a contractor or yourself. don't walk away yet, look into it. the owner said "as-is" which usually means he realizes most offers will be low b/c he's not going to put a dime into it to help fix it up before selling.
jump on it and keep us posted!