Duplex on market for one year, how low of an offer can i make?

Question

Duplex that has been on market for 1 year for 180,000. Price recently dropped to 165,000.
Similair SFH homes are going for 150000. They paid 100,000 for it in 2007 and it has recently been remodeled so they probably have 130k in it. It was a three bedroom but they converted it into a duplex. Though it is a rural part of maryland and approx. 8 houses over the past 2 years at that price range have sold. Theres probably 10 more houses in that price range for sale right now.

I am considering making an offer, if i get it at a good price it could  have a positive cash flow (rent 1600 mo.  ). I don't know how low to go though.  I am in no pressure to buy.

Here are my thoughts: I believe anyone searching for a SFH won't buy this house because it is a duplex. Also, unless there is another bubble, i don't see home sales or values getting much better in the recent years. That leaves only investors, but if you do the analysis, its horrible at that price. I would like to get it for 130000, but need to at least to get it for 140000 in order for it to make any sense. Assuming they have 130K into it would 130000 be too low for an offer, should I be careful not to insult them.
What am very inexperienced in this, I would appreciate any thoughts.

James Wise · Answer

Often homes that are listed for a very long time are listed by people who would like to sell if they get their price but don't really need to sell but in all reality you can make any offer you like.

Will the seller accept it? That is the real question and there is only one way to find out.

Andrew Michael · Answer

When I say "comps" I am referring to comparable properties to the one you want to purchase in order to arrive at a logical market price.  Comps are def something your agent can help you with but you will want to compare things like, sq footage, number of bedrooms, number of bathrooms, etc.  So without knowing your particular property or any of the local comps, its hard to answer your question as it relates to cash flow.

To figure out your cash flow, you need to find out what you can rent each side for and then work backwards.  First figure out potential rent.  Ask the current landlord what he rents each unit for, search Craigslist, and even try https://www.rentometer.com to get an idea of the going rates.  From there figure out your monthly expenses and subtract that from your rent sum.  This will give you a rough idea of your cash flow.  For a more in depth analysis I would highly recommend using  the calculators and deal evaluation tools BP has. They will get you started in the right direction.

Max T. · Answer

Since it has been on the market for so long they will probably take an offer that lets them out without losing money. So if you think they are into it for 130, a sale price of 137,800 will cover the agent's commission and net them their 130. Plus that number still works with your analysis.

Also, if you can get it under contract at that price you can still negotiate it down after the home inspection.

Garrett F. · Answer

Technically a penny is the lowest offer you can make.  ;P

I think you may be over analyzing this deal way to much. If the house has been on the market for over a year (with the same agent) then the sellers are inclined to look at more offers.

Approach the listing agent (gate keeper) and ask him if he would represent you on an offer for this property and pitch the 130 as a starter.  Be firm about your price points and save the supportive arguments for negotiations. The agent will now be inclined to do his best to get the deal.  What he gives up on the sale side in commission he gets back on the buy side.

An offer has 3 outcomes: accepted, denied, or countered.

Hope this helps

Garrett

Gabriel G. · Answer

I've heard of people doing creative stuff like sending the seller a video or power point slide of why you came up with that number. Also, just and FYI but have you checked that they have all the permits for changing the SFH to a multi? I ask because if they didn't go through the proper channels, it could come back and bite you in the future if you do buy that home.

Natasha M. · Answer

@Joseph Jar   I agree with the others... I use comps in the area as my reason for offering my price.

Joseph Jar · Answer

Thanks for the advice man.

You recommended comps.  Are there any comps that can potential increase monthly cash flow though?  Thats what i am basing my price on.

Andrew Michael · Answer

@Joseph Jar You said:

"I would like to get it for 130000, but need to at least to get it for 140000 in order for it to make any sense."

I was referring to the numbers/ analysis you used to arrive at those price points.  Basically break down your evaluation use that to negotiate and justify your offer.  In addition, I would use comps also like the other posters suggested.

As for "I assume I would just give them a general run down through my agent."  I am not 100% sure what this means.  If your agent is investor friendly and understands exactly what your goals are then I suppose you could.  If it were me I would do as much prep work as I could and gather all information to the best of my ability and THEN use my agents expertise to move forward.  At the end of the day, you will own this property so you need to make sure the numbers work for you.

Hope this helps

Kyle Penland · Answer

I have always used Comps in the past...May be hard to get comp on a duplex if there are no others in the area...Present your number and then give them an explanation as to why you came to that conclusion.  Your agent should be the one giving them tell your agent why you want to offer this and they should be able to make that sound nice a pretty...Good Luck to you!

Duplex on market for one year, how low of an offer can i make?

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