Sight Unseen Offers

[Thomas Fortune]

For those of you who offer on properties sight unseen, what type of buffer do you give yourself for your reno budget? Every time I start to think to myself, "I've seen/done enough to feel good about offering sight unseen", I see something that changes my mind:

I looked at a property yesterday, expecting it to need a full cosmetic rehab and maybe a few mechanical items as well (roof, hvac,etc.). After viewing the property, i found some major foundation issue, a half completed addition that would likely need to be torn down (or started over from scratch), and a garage conversion that needed major improvement. - these items would likley triple the required reno budget.

How do you deal with this? Expect the absolute worst?

[Aaron Mazzrillo]

Based on years of rehabbing properties, my average, using the same contractor, has been $25/sq/ft so I use that number. Once I get an accepted offer, as a wholesaler, I send my buyers out to check out the property. If they come back with low offers that don't meet my expectations and tell me about condition, then I go back to the seller with that information.

I have found that most sellers are quite honest about the condition of their property in terms of major issues. Where they typically fib, is when it is a rental that might be great for a rental, but isn't anywhere near in as good condition as they would like to believe for a flip. However, my $25/sq/ft covers that and then some.

In your situation, I would call the seller back up and ask why they didn't tell me about those issues over the phone as they were surely aware of them. I'd then tell them that we'd need to adjust the price. FYI, in 4 years of buying sight unseen properties, this has never happened to me.

Most recently, I sent out an offer and the woman called me and asked if I saw the property. I told her I don't look at properties until I have an accepted offer. She asked if my offer was still standing. I said yes, of course. She then told me "go look at the property."

I went out and looked and it was in terrible condition. When I got back to my office I told her I wasn't really interested in the house because of the condition.... BUT, if the number was right, I might still consider it. (Used the old seller trick right back on her!) She threw out a number that was much lower than I even expected! What I should have done was to negotiate a little more, but I was so giddy I told her escrow docs would be mailed out (via FedEx!!) the next day.

This deal closes Friday and will be the largest wholesale fee I've ever done.