How Much Would You Pay For This House???
The property is in a great location with 20 day average of resell. The home is appraised at 162k. The foundation needs 50k in repairs and the rest of the home will cost around15-20k. The foundation work will take 5-7 days to finish and probabally another 5-6 weeks to fininish the whole project. I'm just wondering how much you experienced rehabbers would pay for a home like this to make it worth your while to rehab??[ Edited by richyrich on Date 04/30/2004 ]
In my area, the appraised value means absolutely nothing, so this makes it very difficult to arrive at a figure. IE: the other day I came across a home that was listed for sale at $590K. In checking the appraised value I found it to be $230K. So this tells me nothing.
Dave,
Its not uncommon for a individual to put their house on the market for a unthinkable amount of money, just to see what it sells for.
First, you need to know what you can sell it for and not what it "appraised" for. Fair market value is the number that you are looking for. Technically, in this case, you'd want to know what the after repair value will be since that is when you'd be selling it, after it's repaired.
But let's assume that the $160K is the ARV of the property. You've already estimated $70K in repairs so naturally, you'd minus that out. That leaves you with $90K. You've got to take out your holding costs. Figure at least 6 months holding (payment, taxes, insurance, etc). Using $500/month that's another $3K off. Especially if this is your first deal (and dealing with foundation problems) I'd "fudge factor" at 10% of repair, or $7K.
So now you're down to $80K. Depending on how you plan to sell, you've also got closing costs and commissions to figure in, but this number will vary greatly on how you plan to exit the deal. For this example we'll figure $5K.
You wouldn't want to forget about your profit. This too will vary depending on how you plan on selling the property. Again, assuming a straight retail sell, I'd figure a $10K profit at least.
So going by all the above, your MAX offer price would be $65K.
Roger
Hello,
Here's another way to look at this property.
How long has this property been on the market? Is it great than 6 mos? Greater than a year? If so, offer the bank $25,000.
Why? You have a major issue: Foundation. Bank knows that. Many folks will not fool with foundation issues. Than means the bank has to hold it longer & longer.
I'd offer $25k. You can always go up on the offer; never down.
Thanks,
OTW :-D