Here’s the scoop:
Row home in Phila area. Listed FSBO for $65,000. House directly across the street (also a row home) listed with realtor for $94,900. The owner is a mother and daughter. Mother was just recently moved into an assisted living facility, and is behind about $4k in taxes. Also, needs to make payments to facility. Said they are flexible with the price if I’m truly interested. Haven’t seen the inside of the house yet, but have been told it just needs “a little TLC”. I searched public records and so far this is what I’ve found for recent sales:
Corner home bot in 8/04 $90k
2 doors down bot in 8/04 $68k
2 doors and across the street bot in 11/03 $70k
2 doors down bot in 10/99 $58k
2 doors and across the street bot from HUD 3/99 for $30k, sold 1/02 for $66k, sold 8/05 for $65k
Ditech’s online appraiser puts it between $74k and $82k.
The last comp is the one that worries me. But I’m thinking whoever bot in '02 HAD to sell this year for some reason.
I’m thinking of offering $55k. If it can appraise for at least $80k, I’d finance $64k (80% FMV). I get about 7k after closing costs, and then rent or L/O for $750/month. This would leave me about $150/mth positive after PITI.
Does this sound reasonable? Am I missing something?
Any help is appreciated as this could be my first deal
The owner states that it was just painted inside. Her mother lived there for 42 years. She seems to think it will only need carpeting and cleaning up - a little TLC after 42 years worth of stuff collected in the house. I think it’ll probably need some new appliances and carpet, but won’t know until I see it tonight. She sounds like a very motivated seller. She is very anxious to meet with me and get rid of the house. She can’t afford to pay the back taxes, and she now has two houses - her primary residence and now her mom’s vacant house.
Sounds like a good deal! I would call appraisers and realtors and get comps prior to looking at the property here is how I did this when I started and still looked at houses…
and subtract all needed repairs to see total profit do not forget closing cost’s
The calculator shows that you know what you are doing and understand the numbers. It also creates mental mindset that you are really trying to analyze the property!
How much should I expect for closing costs?
Also, when you say to use the lowest comp, should that be for my calculations or when I’m showing the owner how I come to my purchase price?
If they are wanting to sell and are looking to have to “make payments to the facility”, you might try to see if they will owner finance…this will allow them to receive a monthly payment and not get hit with a large capital gains tax bill all at once…
You could give them a down payment that would allow them to cure the delinquent taxes and make monthly payments at a reasonable interest rate (say 7-8%)…
Went and saw it this afternoon. The owner “needs” to sell it ASAP. They owe almost $50k to the nursing home, plus $3700 in back taxes. It needs updated elec., new carpets, kit. cabinets, kit. linoleum, bathroom needs work, and it needs to be “cleaned out”. The 42 years of collecting stuff really shows. I told the owner that these things will cost me money if I buy the place. She said she would probably accept $50ish because she realizes it needs work. She had the water turned off when her mother went in the home. Why do I tell you this? Well, she’s been letting her nephew stay there on and off, and he decided he was going to drop #2 in the toilet. That helped escalate my costs for the bathroom in her mind - man, it really had a stench. For about $8k, it could be as good or better than the rest of the houses on the block. The house directly across the street is listed with an agent for $95,000. Half a block down, there’s another listed for $96,000. These are row homes - everyone is exactly the same.
if it’s worth $80,000 why hasn’t someone paid $65,000 (current asking price)???
Answer: The owner has it FSBO with no signs, and a minimal FSBO internet listing. I don’t think anyone knows about the opportunity yet.
I told her I’d give her a price within two days (mu price will be $50k), and we could try to settle within 30. She’s definitely a motivated seller. “As soon as is humanly possible” was her request.
Next step, how do I finance this with no money down and get money back at closing?
when you said she had been living there 42 yr, I could have written your next post. In those cases, there is always a ton of stuff to clean out AND you will find many more repair/maintenance issues than you can currently see.
question is what is your plan: rent or flip. If you just want to rent, you probably can get away with 8-10K in repairs/clean up and then have some on-going maintenance cost over the next 6-12 month as people start living there again. If you want to flip, you probably will need to do more. I bet to get up to the level of the $95k places, you will need to spent much, mcuh more in fixing stuff (20k?).
I would offer 50k(maybe 53k at best). I bet they will take it. Let face, it the BM in the toilet will not appear on any top 10 list of realtors guides on how to sell your home fast. This place need a lot of wrok, make sure you have margin so that you can incur a $5 or $10k unexpect cost and still make some money on the deal.
The good news is that the toilet can still be flushed even if there’s no water…just carry a 5 gallon pail of water up…it will provide for a couple of flushes.
Has anyone dealt with BuyOwner? She wants to use their forms, and also she says that I won’t be able to get in the house prior to settlement because of their recommendation! How much should the good faith deposit be? Is there a standard % I should put up, and shouldn’t this be placed in escrow with a title company?
Thanks for the help - my adrenaline is pumping since she e-mailed her acceptance!!!
You can write a legally binding contract on a sheet of white paper, so don’t be too concerned about the form that the contract takes but I would get a real estate attorney or the title company to make sure the contract contains all of the required elements and that nothing is missed.
Here in Louisiana, a good faith estimate is normally $250 but legally it can be $1 in most states…if they have accepted your offer already, it’s kind of a moot point. And, yes, it should definately be held by a third party – a title company is a great choice…