I am working on purchasing a larger older home through an owner that needs cash, may not be reliable, and currently is not employed. The property is structurally sound but cosmetically trashed. He purchased it from his sister in 98 for $35k, it is assessed for tax purposes at 71k (house and lot). According to the courthouse there is no mortgage. He is delinquent on taxes and has leins totalling $3100. Has not lived in the house for three years so the city has assessed upkeep fines and the water and electric has been shut off for two years. He is asking 60k “but will take less”. I have contacted my attorney to proceed with an offer. In this situation so I don’t get taken advantage of, should I let the attorney help me propose the offer or go ahead and make a verbal offer then have it written up? Also, should I propose to pay the leins off in the offer or allow that to be done by the owner before closing? Any other advice in this situation would be greatly appreciated.
Forget what it is taxed at. Go to a Realtor and get comps.
You want to know what it will be worth after it is rehabbed. = ARV
take the ARV “After Repair Value” and x.70 = $
$ - Rehab cost - Holding cost - insurance - back taxes and other bills you will have to pay at closing = this is the maximum amount you can pay for the house.
The key word is maximum. start low. It sure looks like you have a motivated seller. Tell him that you do not need this house. You do this as a business. Sounds like he needs to sell and you do not need to buy.
DO NOT FALL IN LOVE WITH HOUSE. FALL IN LOVE WITH DEAL.
Before you plug in the rehab cost. Add on at least 5% for the extras that always come up.
The holding cost is your water, gas, electric, lawn maintenance… you get the idea.
Do not use home owners insurance. Check with your agent and let him/her know that you are thinking of doing a rehab and get a price.
;D
Bruce
This is solid advice from Bruce, Gracie…he’s ‘right on the mark’
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Tax appraisals mean squat…it was probably done 3-5 years ago when the house was inhabited and not in bad condition…don’t use this figure - ever. It is rarely correct, most often in some other universe of reality.
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His calculations are REI standards
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His advice about the deal/the house is correct in all case of investment properties
If your first offer doesn’t embarass YOU, it’s too high!
Keith