How to valuate a property with few comps or demo the home.

[Jonathan Jones]

So I am working the number to place my first offer on a house to wholesale. 2/1, 972sqft, 1.99acres, built 1948 and surrounded by solds of superior homes from $120-236K. Asking price 80K with one failed deal as previous buyer failed to show up on the last closing. Owner died and sons trying to sell it. Only problem I am having with creating a value is that homes like this one have not sold in the area yet are under .5 acres compared to most of the other homes that are either new construction or 2+ more bedrooms and baths. Also, the home is in such poor condition the seller said it should torn down and rebuilt. How do you valuate a property where the majority of the value is in the land as the house structure takes away value because of it's condition? How do you valuate a home where rehab cost are more than the value of the structure or using demo cost. Where do I get demolition and rebuilding costs? Any help will work. Thanks

[Kevin Fletcher]

You just have to be honest about the condition of the house and present different options on what the buyer could do with the land. You can get a contractors opinion for rehab and a demolition price estimate. But it seems that in general if superior homes to the one you talking about are being sold at only 120-136K, there doesn't seem to be a lot of meat on the bone to wholesale it. I don't know the specific numbers of your deal, but if the ARV is 120k or less and the purchase price is 80. And if there is substantial rehab, it doesn't seem like there's enough cushion to make it a viable deal for all the people involved. Maybe its worth just buying , doing a demolition and selling?

A few examples of basic demolition projects:

• Demolition of a 750 square foot (25×30) 2 car detached garage could cost from $2.00-$5.00 per square foot making the price range from $1,500-$3,750.
• Demolition of a 1500 square foot residential house could cost from $2.00-$6.00 per sq. ft. making the price range from $3,000-$9,000.
• Demolition of a 10,000 sq. ft. warehouse or office building could cost from $4.00-$8.00 per sq. ft. making the price range from $40,000-$80,000. Interior Demolition of the same 10,000 sq. ft. warehouse could cost from $2.00-$6.00 per sq. ft. making the price range from $20,000-$60,000.