Buying Property After Flood Damage - Southern Wisconsin

[John Franczyk]

I contacted the heir of an estate in southern Wisconsin last Fall. He lives out-of-state (roughly 700 miles away), and his father passed away in April, leaving him a 3BR 2BA house here. He opted to try to sell it himself at retail. In December, he listed it with a realtor for $99,900. I wished him luck, and there's no problem so far.

This being southern Wisconsin, the big freeze came in December, two weeks after he listed it, and the pipes burst. Insurance handled the cleanup, but not the rebuild. Given that it was vacant, I don't believe that there are any other insurance proceeds for reconstruction. It's down to the studs, and at a minimum needs a new kitchen and bath, floors, and walls. The water supposedly did not damage the furnace or water heater, but that remains to be seen. The heir called me and said that now he is very motivated to sell and he wants to know what I would pay. I'm scheduled to look at it later today to get a better idea of everything it needs. The house remains listed at $99,900. Real ARV is probably closer to $90K. The heir knows he won't get anything close to that.

I have a slight mold concern, but given that the damage happened in cold weather, the risk of mold infestation is low. He got the cleanup done very quickly also, so mold had little time to grow.

From what I know of the place so far, I could probably get it into sellable shape for less than $25K. I want to make at least 10K, preferably $15K to $20K. I'm thinking of an open offer of $35K, with an upper limit of $40K. 

Any suggestions of how to approach him here? Are my numbers too high? What risks might I be missing with winter water damage?

Thanks for any thoughts or feedback.