Offer 1/3 of asking price ?

Question

Hi Everyone,

I'm triyng to think outside the box. I see a property  in PA. It's MLS 16-5188. Zillow Link for house info.

In my opinion, having been to the property, I think it needs about 35K worth of work (possibly more). Much of the house looks like a dump inside, but it's in a desirable location A neighaboor told me last weekend that the former owner was a "slumlord", known for being overly cheap and not fixing things the right way. But he recenty passed away. The home is now owned by his wife. It's been on the market for nearly a year. Personally, I don't feel this duplex is worth anything even close to 199K asking price, but it's in a fantastic location where properties tend to always sell for a high value (Clarks Summit, PA) area. It's also zoned commercial and residenntial. I researched the family selling the peoperty, and they owned local businesses and seem to have been semi-well known, and wealthy. The neighaboor I spoke to gave me the owners name and home telephone number. I would love to get the property on the cheap, or even have them agree to seller financing, but I haven't yet mustered up the courage to call.

So here's the question I've been building towards....If I offered 50K on this property, is that a scumbag move? I don't wish to try and take advantage of anyone but I have a feeing more work needs to be done that I'm seeing, and I'm scared to offer more.

Any opinions (positive or negative) are certinly welcome. I just aksk that realtors refrain from answering, because they tend to be biased. I also should point out that I do not yet own any investment property. I do happen to like the area this duplex is in. I have lots of family up that way, so I do have an incentive to want to house hack and live up in this area.

Sebastian Marroquin · Answer

There are several options here:

1: first : don't re-invent the wheel and don't make enemies... Go to the realtor (even if you have a trusted realtor): and ask the listing agent questions: (i'm sure he wants to sell it... as he has not made any money on it for 1 year and has been answering questions from people like you all this time).

so go to him and ask him: what is the seller's bottom line?

Can you represent me on the sale of this home and at what price?

What if you go to the seller and ask them what they would want for it CASH and i pay you on the side... (pros and cons to this).

What is important to the seller? (this way you can craft a plan of action that is solving the seller's problem).

Would the seller want to partner with me : where I fix it and sell it and we split profits?

If the realtor is unwilling:

Go to the seller and ask him to buy it from him

All the same questions above straight to the seller

Send her a letter by mail and explain your intentions

Get financing from a Hard money lender: offer cash and refinance it into a regular loan.

** and yes: I don't know how you are arriving at 50k

But go see it: based on comparable sales arrive at an ARV (after repair value): then get the estimated rehab cost from a reliable contractor:

Then get the ARV $: times 65% : that will give you X: minus repair cost : and that will equal your offer price

For example: ARV is $100k : times 65% : or 65k minus 20k in renovations:

so your offer will be: $45k

You can't lose with this formula.

Make sure you do your due diligence.

Realtors will be your allies not your enemies :)

(and you didn't want realtors responding to this right... ) ;)

Good luck:

Let me know if you want me to make the call for you (no joke)

J. Martin · Answer

@Ryan Ksiezopolski,

Here's some ideas to get the seller more on board with your line of thinking.. Why are you offering that amount?

Talk directly to the owner if you can. Has she walked through the house? Got a contractor quote?

What do you want to do with the property? Flip it? Live in it?

If you talk to her and say, "You know, I think it's probably worth $175K after it's all fixed up, I think it will take me $60K with with all the known and unknown work, plus 6 months of my own time (@$4k/mo), interest on the loan, insurance, permits, etc etc, so subtracting that from the final value, I can offer about $50-60K."

That might be something they could wrap their head around (although they still very well may disagree), instead of what just looks like a crazy lowball number, without a reason.

Also, tell the owner what you plan on doing with it. If you plan on moving in, tell them why it's important to you and what it will do for you. If you're going to flip it, tell them the vision for how you want to improve the units to get good families in there and take care of their former property the way it should be.

Some wealthy folks like you're describing will throw people a bone every once in a while. I think your odds are small, but greatly improved if you approach them with your logic, and as a human.

Good luck!

David Weintraub · Answer

@Ryan Ksiezopolski It's not a scumbag move.  Even the suggestion that it may be leads me to believe you'd avoid such a move.

Don't assume anything on behalf of the seller/owner.  Maybe they're tired of it, and don't want to deal?  You'll never know unless you ask.

Be upfront, and let the chips fall where they may.  You don't owe them anything, and the same goes of them.

At the very least there's a conversation there.

Random story:

Close friend of mine's parents (Nick) were looking for a vacay house in Killington, VT.  Budget was around $750,000 MAX.  And that's A LOT for the area.

They looked at many homes but nothing seemed to work for them, and they considered a different mountain.  Realtor showed them a house priced at $1.7MM just off the mountain, and built within 3 years.  Place is unreal.

Nick is from England, and so was the seller.  Realtor recognized this.  Nick told realtor, "this is waaaay out of our range.'  They were introduced.  Low and behold, the seller and Nick were from the SAME TOWN in England (Hull).  They hit it off.  The seller told them, "Whenever you come up to look you can stay with us..."  Fast friends.

The seller had to leave the country because of a tax issue.  Realtor called Nick and said, "Make an offer."

Nick, "I can't.  It would be insulting."

Realtor, "Just make me an offer.  Can you do 800?"

"Sure."

SOLD.

Nick told the seller, "You are welcome to stay here whenever you are in the states."

Seller wouldn't be coming back soon.

Nick felt bad, but the realtor knew the scenario - guy had to sell.

Points of the story: don't assume anything; you'll never know unless you ask.

Michael Plante · Answer

A real estate friend of mine told me if I was not completely embarrassed by how low my offer was I was offering too much.

On most cases it has served me well and I am not one of those who make lots of offers.

Michael Plante · Answer

how much is the value in your estimation of it was rentable right now

Not remodeled just rentable by county laws?

Ryan K. · Answer

Theres rusted out junk all over the property, the property hasn't been touched (mowed or pruned in a very long time), there's a hole in the back roof over the porch, and the the inside needs considerable work. I'm not suggesting I can purchase it for 50K, I was just floating the notion starting with that figure and going up from there if that would be crazy. This individual was given lousy advice from their realtor. The 11,484 is currently $0... there has been no tenants on the property for a long time (according to the neighaboor).

Florian N. · Answer

Gross Income$: 16,800; Net Income$: 11,484; from what i can see coming from this property.

What makes you think they will accept anything close to 50K in an area like Clarks Summit with that yearly income from the property? Property looks to be worth at least north of 120K as a starting point in current state(maybe even more), but that is just my opinion.

Also the fact that is on the market for a while with no price drop should tell you something as well.

Austin Hendrickson · Answer

If $50k is close to the max of what you would consider offering on the property and it's been on the market for a year then it would not hurt to try.

If you think $100k would still make sense why not start at somewhere around $80k and see if you can get some seller-financing on the deal? In essence only offer on what you are comfortable the numbers will support. You could also try asking some other investors in the area what they think it is worth.

Brian Pulaski · Answer

I have crunched numbers and offered low on some places.

One house was listed at $179k, the price dropped and after I produced a $30k issue I was able to get it for $110k.

One house they had a current appraisal (I didn't agree with it) at $160k and I offered $91,500.

The only other low offer was one they listed at $115k, I offered in the $40ks and have since bumped up to $60k but they sold it elsewhere (sounds like it went for around $70k).

You run a risk of looking like what you fear, but what could it possibly hurt to try?

Offer 1/3 of asking price ?

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