Here is my situation, I am looking to buy a short sale property listed at $155k, comps in the area are at about $130k.
The property has been on the market for about 5 months. The home needs work on the exterior, (There is a “hack” job patch on the exterior in one area). The appliances, counter tops, and windows need updating, new flooring, debris removal / landscaping, and the driveway needs repair,(At least the AC looks newer and in good shape). The comps have been in better condition with updates.
What would be a good offer? or formula to figure out the offer price on a shortsale? Also what are the current financing structures available to purchase the property and fund the upgrades?
MOST IMPORTANT: What are the questions I am not asking, but should?? :anon
I have a decent credit score (700), excellent employment history. limited cash ($3000) and VA loan availability. This is in florida as well. I would like to live in the home for some time and sell in the future (no rush, great location, might even be a keeper, top 10 location to live in).
What do you estimate the rehab costs to be? Can the house qualify for traditional financing in it’s current condition or will you need hard money and complete rehab before putting traditional financing in place? If you’re using hard money, what is the interest rate, up front points and how long do you estimate your holding time before replacing financing?
These are a few questions I’d need to answer before I could determine my maximum short sale offer.
This property is priced at $155K and is in rough condition
a very rough estimate of the repairs you describe are about $10K if you plan on doing the work yourself, or about $15K - $20K for a contractor.
Again, a very rough estimate of an offer price, per Brandonman’s very reasonable formula and my very rough estimates would be: ($130K x .65) - $20K = $64.5K.
Thus doesn’t take into account any issues you haven’t already uncovered that could cost you $$$.
Get accurate estimates for repair costs and you’ll be able to come up with better offer estimates.
Thank you for the input everyone. I will have a friend contractor look at the house this week to get a better idea of the rehab costs involved. From the untrained eye i would say 15k is about right to get the property up to snuff. The formulas’ are great, thank you.
I believe the property will need some exterior work before it will be able to be funded, I hadnt thought about using hard money lenders for this until now. I need to look at this as well.
what is ARV? (actual retail value?)
What would any of you put into the escrow account on the deal? I have a few people here giving me a very hard time about putting at least $1k in the escrow account. Personally i think that is crazy. My intention was to put $1 in , MAX $100. To tie up 1k for months on a deal that may not happen dosent make sense to me. Any thoughts on this??
That 65% formula is for an investor who wants to buy the property. The OP is an end user and can certainly bump that % up quite a bit and still feel comfortable he is getting a good deal.