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.
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.