Estate sale case help

Can someone analyse this deal and see what’s the best approach?

I found an estate sale 3b/2b house, asking price $89,900.
I offered $58,500.
Seller countered with $87,000.
I sense I’d be wasting my time pursuing a large, all-cash discount.

Based on a technique I read about, I was thinking about offering $75,000 with a $50,000 bank first mtg and a $25,000 seller 2nd mtg at 0% payable in a lump-sum when I sell the house within 5 years.

Has anyone done a deal like this, and would you recommend it? What if I can’t sell the house within 5 years? What would increase my chances of getting the vendor to accept it?

Many thanks
J. Michael

You have to realize that an astute seller will recognize your $75k offer for what it really is, an offer of about $67k. That $25k balloon 2nd mortgage with no payments and no interest accrual is only worth about $17k in today’s dollars.


I get what you’re saying. How would you proceed on this deal, then?

What are the comps for the property? Is the asking price a fair market value? Does the executor have a current appraisal that s/he will share with you?

What is your real estate market doing? Is it declining, flat, or appreciating? What is the average days on the market for a property similar to the one you are looking at?

For MLS listed properties similar to the one you are looking at, what is the ratio of the average sale price to the average list price?

Is the property listed with a real estate agent, or being sold by the estate executor?

Is the property in move-in condition or does it need significant repair?

Let’s say that the property is fairly priced, and needs paint and carpet only. Let’s say that your market is declining, with the average sale price for a comparable property at 92% of list price. Let’s say that the property is not listed with a real estate agent, and comparable properties are on the market about 100 days.

Now, take a page from John Locke’s subject to purchase technique. Take out your yellow legal pad. In front of the seller, write $89900 at the top of the page. Now multiply that by 92% to get the likely sale price for your market. From your result, subtract a 6% real estate commission.

From this answer, subtract the seller’s holding costs until his property goes to settlement. In this example, you would subtract 5 months of mortgage payments (PITI) or 5 months of taxes and insurance if the property is free and clear. Then subtract 5 months of basic utilities such as water and electric. If there is a homeowner’s association, subtract 5 months of dues.

Finally, subtract $4500 for paint and carpet as a repair concession.

The final answer is what the seller might expect to net if he listed his property with a real estate agent and went to settlement about five months later. If your offer is slightly better than the probable net to the seller you just calculated on your legal pad, then the seller should have no real objection to accepting your offer.

If your offer is much lower, then you may have to increase your offer and/or ask for larger concessions – such as $2500 closing cost assistance, and whatever else is reasonable for the property in its current condition.

Is the property furnished? Offer to haul away all the furniture and do a thorough cleaning at your expense which may save the seller another $2K.

The better you justify your offer, the more likely the seller will accept it.


Many thanks for your thorough reply. I am now more aware of justifying my offers to the seller.