Craigslist FSBO property

[Redstar1324]

I found a house on Craigslist that was FSBO. I verified through the property appraiser that it is in the fact the owner I've been talking to.

https://orlando.craigslist.org/reo/5989466848.html

He wants $40,000 for it. The Zestimate is $53,597.

He even emailed me the recent four point inspection. He offered to show me the house some time next week. I really don't know how to compute repair value on this. The house was built in 1934. The comps I run show an average of $33/square foot, putting the value of this house at $36,036, much less than the Zestimate. Since this house is so old, I'm not sure if my comps are accurate. Should I be looking only for comps from newly rehabbed houses that maybe could make this houses ARV at over $100,000? I don't want to start "wishful thinking," and I really do need accurate numbers.

70% of the Zestimate minus $5,000 is $32,517.90. Then, I need to subtract repair costs, which at $30/square foot, brings my offer to a total of $-242.10.

Obviously, I'm doing something wrong here. Is this a possible wholesale opportunity?

https://www.dropbox.com/s/54z7cpk2p1lx9pv/2905%20Vermont%20Ave%204-Point.pdf?dl=0

This is a link to the 4 point inspection. It definitely needs a new roof and I think the electrical panels would have to be updated. They are a brand that I've never even heard of.

The address is 2905 Vermont Ave. Lakeland, FL

[javipa]

For now assume Zillow is accurate enough.  I'm betting the seller has already had offers below $40k, and he has adjusted for repairs.  However, you have to believe that he's still asking for more than he expects to get, because even numbskulls know they need to ask for more then they expect to get.

You can't (should not) use blunt force trauma to adjust the seller's opinion of value.  That just creates resistance.  Ease in, by yellow padding the seller, using his own numbers.  Show him what he would net if he got full price of $40k, after discounting all the costs.  Here's how it might go:

YOU:       Mr. Seller, you see that after we deduct all these costs from $40,000; commission, closing costs, roof, bathroom, floor and repairs, utilities, insurance, mortgage payments, and so the bottom line comes to $22k, before my all-cash discount of $5k.  So, I'm prepared to offer $17k in cash.

SELLER:  I'm not using an agent, that's why I called you.  And I've already discounted the repairs in my price."

YOU:        I understand Mr. Seller, but anyone buying from me has to consider these costs, including me, if worse came to worse.  Meantime, you and I both need to see the same bottom line. 
(adding)
Mr. Seller you haven't been able to sell your hell hole at this price for six months, and that's partly why I'm here making this cash offer.  Meantime, it makes no sense for me to pay retail, and then try to sell retail.

---------------------------------------------------------------
***You cannot base your repairs estimate on $30 sqft.  You base your repairs on what's needed.  A roof costs $3,500 (we're talking "roof," not concrete, tile, or dimensional asphalt).  Carpet, paint, new garage door, etc. costs 'x' dollars total.

Don't overthink the estimate.  Your end-buyer will make that determination.  Every buyer has different priorities, and you're hopefully selling to the one with no major priorities, other than 'clean and functional.'
---------------------------------------------------------------

Or the conversation might go:

SELLER:  I'm not selling my house to you for seventeen thousand dollars.  I've already been offered more than that.

YOU:        I understand that Mr. Seller.  I suggest you take that offer, because who knows how long it's gonna be before you find another stupid crazy buyer willing to offer you that much.  Meantime, this is a fair, reasonable, all-cash offer, as I've shown you here (pointing to your notepad with all the figures that show how you arrived at your price), and it's good until 5:00 p.m.

The reason I have to limit the offer until 5 o'clock is because I am making other all-cash offers, and I only have so much cash, and I can't buy every house I see. 

SELLER:  I don't need to wait until 5:00 p.m. to say "no."

YOU:        Of course, not, because I'm sure if you wait long enough, your house will eventually be worth $40k, but just not today.  Maybe if you ploughed in that $15k we discussed for repairs, in four, or five years you can get most of your money back.  However, if you would rather have cash now, my offer stands at $17k.

NOTE:  It costs relatively the same money to fix a $50,000 house as it does to fix a $150,000, except when it comes to older houses.  Older houses routinely have MORE things wrong with them.  So take unexpected costs into consideration when evaluating really old houses. 

Frankly evaluating and flipping pre-WWII houses is a specialty.

 

[Randoskie]

This is probably the 5th time I explained how I do it to you. I start at 50% of the Zestimate & that is $26,500
Subtract $5,000 for your fee. Offer the seller $21,500
if he accepts you can Advertise it on CL for $28,500, negotiate down to 26,000 and walk away with a $4,000 assignment, Do not go look at the house unless you just want to waste your time. No need to estimate repairs, just assume this old house needs everything.
If seller wont consider 22K, tell him you have cash and the place needs too much work, but maybe you can squeeze out 24,000 with your partners approval and you will pay all closing costs.
If he says he wont do it, then move on, do not waste more than 30 minutes on this POS, unless you like wasting time.
Newer houses with less repairs adjust accordingly. I go up to 60 to 70% of Zestimate, but the seller HAS to be Distressed.
It's not rocket science.
This seller is hoping to find a newbie investor to buy it, he don't care that it needs 40K in foundation work and upgrades and if you buy it for 40 & repair it you will be stuck with a 80K Nightmare worth 50K

I've been slacking, but I got 100 post cards going out from addresses I got for free from my bird dogs. The ad on CL costs 25 buks, and it takes some effort to recruit and motivate these finders and keeping their addresses and names organized, but, it can pay off big.
I often wonder why nobody else takes a little time to use this method, I've made some serious ass profits from my bird dogs.
Also, I need to get my bandit signs out, havnt found a reliable person to do it, so I will spend a few hrs putting them up. The last batch was 500 bandit signs that I paid $900 for the colored pre printed ones and I made 28 frikin grand off of those and I got 100 to still put up. The best prices are at   dirtcheapsigns.com
I also made up some door knob hangers and paid 2 girls 75 buks each to pass them out in a neighborhood and I made $14,000 on a nice house with pool the seller lost her job and had medical problems and just wanted to move back near her family.
I will find some more girls to distribute these.
So not only am I trying to motivate you, but also myself.
Let's make some Money....
Rando

[Redstar1324]

I just sent him an offer for $21,500. I didn't even get into detail about the numbers. He said he estimates repair cost at $5-7,000 and thinks the home is worth $60,000 fixed up.

His response:

"Appreciate the offer but we are way off on price. I would accept 38.5k for a quick sell, but with 5-7k in repairs this will be a house that generates 1k a month  and worth 70k in 2 years. We're talking $31 per square foot. Not a bad deal."

I know it's pointless to say anything back, but we aren't even close to a contract (meeting of the minds). I might as well be talking Swahili to him.

I want to explain to him something that shows that I'm making sense. How can I show him that what I'm saying isn't gibberish.

It's no big deal if this one doesn't work, but if I'm talking Swahili to every person I contact, that's an issue.

And trust me, I will be getting as many bird dogs as possible once I can afford to start mailing again. I will put their addresses with priority over those from ListSource. Do you instruct your bird dogs to take pictures or do anything other than just get addresses?

Perhaps I could start my Swahili interpretation with:

I'm not buying it to rent it, I'm buying it to fix and sell it retail. And that it doesn't generate $1,000/month, it generates $1,000/month before expenses, taxes, etc.

[Randoskie]

Seller... The house was built in 1914 and it needs about 5-7K in repairs.
Wholesaler... Oh really, have you ever upgraded the kitchen or baths?
Seller.... no but the cabinets and fixtures are still functional.
Wholesaler. Does it have pink tile work? Have you ever upgraded the windows or electrical or plumbing and why does the back part of the house looks like it's sinking 4 inches?
Seller, Oh the back part of the house is near a sink hole that I filled in with my household garbage and sand. You can easily fix that with an old car jack and some 2/4's 2 sacks of concrete and a six pack.
Wholesaler... Is the house owned free and clear?
Seller..... Oh yea, cept their might be an old lien from when my sister got arrested and I bailed her out. Oh yea, Yea the house is owned by her also and her and I don't get along so well. Especially since I lived here for 40 years and never offered her a red cent. And she's the one paying the property taxes and the water bill and I kinda kicked her off the property when she had som gall & asked for money.
Wholesaler.... Well, I'll do $21,500 and I hope you don't call.

[Redstar1324]

That's great except that half of that stuff is inaccurate. He owns it free and clear and without seeing it, I won't be able to tell if it has a sink hole. I would venture to guess that it does not.

I wish I could accurately assess repair value. I would be glad to itemize it for him and be completely transparent about what I'm doing.

I would guess his repair figure is low, but I can't say for sure because I don't know the correct answer.

The roof would cost $3,500. It's a 3/1, so the bathroom would cost $1,500(?). I don't know the extent to which the rest of the house needs repairs. Do you know if Cutler-Hammer circuit panels need to be replaced? I wish I could itemize the repair cost accurately.

[javipa]

Well, that's one way to make an offer.  Meantime, you've given the seller zero reasons or rationale to accept your offer.

Notwithstanding ...the seller did came back with a counter, which shows me that he is motivated to do 'something.'  He didn't just say 'no.'

If this were me, I would wait a couple days, and then acknowledge that we were far apart, and that I understood his position, and add that I can only make reasonable offers where I can also make money, not become a landlord.  Then I would re-submit the original cash offer.

Until the property is sold, you can still take another bite at the apple.  So, spend a couple days brushing your teeth, and then resubmit your offer.  See what happens.  You have zero to lose.

Frankly, this house looks like something from the "Nightmare On Elm Street" movie set.  There's not a lot to love here.  Never mind the ghetto pricing. 

Redstar, you're the only one making a serious offer here.  Keep your apple-cutting knife sharp, because you're mostly-likely not competing with anyone on this.  Even so, if the deal can't be bought for the right price, it's not your deal anyway.

I applaud you doing 'something,' even if it's not the way I'd do it.

[javipa]

Rando,

You're just exactly so right on. 

[Redstar1324]

I'll get back to him, but I'd like to explain my position with actual numbers. I should be able to calculate repair cost from the pictures, but I don't know how. Is this a result of me being unprepared and not having talked to enough contractors?

I would guess that his repair estimate is too low, but I don't know what the right answer is.

Once I have that, I can get back to him and explain my position and bump the offer up to $24,000 like Rando said.

What exactly needs to be done to the house? Does it need all new cabinets? New floors throughout? Do the hardwood floors look good enough? Obviously, any carpet would need to be replaced. Is that brand of circuit panels outdated just like FPE is? I don't know.

[Randoskie]

I'm sure Javipa's method wud go farther in getting that deal. But I've got a callous where my bleeding heart used to be.
When dealing with these types of people it reminds me of all the difficult old stubborn codgers I've had the pleasure of dealing with. . This guy wont listen to reason, no matter how many figures you throw at him, he wud rather let the property go back to dust than give an inch. Repeat after me... I only want Motivated distressed sellers.
However this guy may be ready to talk in 6 months.
But for now. He wants a new snow plow and a used but clean with low miles 1996 RV to take that trip to visit uncle earl in Utah. And do a little hunting, uncle earl said there are some big elk over in sandy creek near tabletop. 
A fun aspect for me is trying to figure it all out with out going crazy.
Now get on to the next one b4 I come over there and rub ur nose in a better deal.

[Redstar1324]

I'm already looking at new ones on Craigslist. I would like to get back to this guy with exact numbers for repairs, though.

It would be practice if nothing else.

If I could learn to estimate repair cost, I can wholesale properties in other states through Craigslist "for sale by owner."

[Redstar1324]

Here's another one.

https://orlando.craigslist.org/reo/5972803707.html

Zestimate at $199,270. Listed at $85,955.

I left a message with the owner to find out specifically what needs to be repaired. I'm still not good at evaluating repair cost. That is my major hangup at this point.

[Randoskie]

Sounds like a bogus add, a newbie investor is fishing for buyers like it says to do in the course he purchased.
If you see a property listed on CL for 50% of value, you need to sharpen your spear and go for the kill or realize it's Mr. newbie taking his first steps.

[Redstar1324]

Sounds like a bogus add, a newbie investor is fishing for buyers like it says to do in the course he purchased.
If you see a property listed on CL for 50% of value, you need to sharpen your spear and go for the kill or realize it's Mr. newbie taking his first steps.

I called him. He said he's an experienced investor. I told him I'd go see it tomorrow. I don't really want to and I'm not sure it will help because I still don't know how to calculate repair cost.

What should I offer? I'll go for the kill right now.

[Redstar1324]

50% of the lowest Zestimate (there's two) mins $5,000 is $92,098. That's more than the sellers offer.

Should I offer him at his offer, then expect to resell it for more?

He said he's never even seen the property.