When a house sits on Zillow for 178 days...

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When a house sits on Zillow for 178 days...

Ashley Wolfe
Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes

There's a 3/3.5, 2,250 sf 1959 SFH that I found on Zillow today that is priced at $67K. Its been on Zillow for nearly 6 months. Its in a decent part of town. I would no be opposed to living there myself. The description says its got an updated HVAC and roof. Driving by, the roof looks good. Siding needs to be 100% replaced. The house doesn't have a garage or carport, just a concrete pad in the back. Small but cute yard. Indoor pics show the need for extensive updating. Its next door to a church and within walking distance to the local elementary school and town library. The school district has a good reputation.

In driving the neighborhood there are all different sized houses, some old, some new. Looking at the comps on Zillow (please note: I don't have knowledge of any other market research tools and I don't currently have personal access to the MLS), this house has great potential. There's a 3/2 2,700 sf house priced at $140K on the same street and several others nearby in an adjacent neighborhood that are in the $110-$150K range.

I called the listing agent and left a message.  I want to know why this property has been on the market for so long.  And, why else do properties like this sit for so long?  Would a low-ball offer of $25K be passed up if we had it in cash tomorrow?  I feel like I'd like to get it under contract and start some due diligence.  I would have thought that a seasoned investor in my area would have snatched this one up long ago!

With a house this big, would it be silly to think of doing a rental rehab and trying to rent it out?  On rentometer.com it came up as around $1400/month potential rent rate.

Doing the math on this one is tricky to me because the asking price is already so low.  

$65,000*.65=$42,250

minus repairs of $10000 (only a preliminary estimate) to get it rent ready - $32,250

So, our MAO for renting it out would be half of what they're asking. Does that seem crazy to you?

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Nnabuenyi Anigbogu
Chicago, IL · Member since 2015 · 298 posts · 261 votes
10y
Originally posted by @Ashley Wolfe:
Originally posted by @Scott Carder:

Its probably worth the full 65k, but everyone thinks they can get a deal.

 Let's pretend we paid the full $65K for it, put in $30,000 worth of work and sold it for $110,000.  That would still be a nice little profit of $15K.

So if everyone thinks they can get a deal, how do you structure your deals or what's your approach?  

 You would actually have a lot less than 15K profit. Keep in mind when you sell you pay 5-6% in commissions to both the seller and buyers agents. on 110K that is 5500-6600 dollars. So your profit is now down to about 9K. Once you factor in closing costs (title, attorney fees, transfer stamps, etc) you could be down to 5K in profit. That is probably not worth it. Also all this is assuming you have no money costs.

I point this out because a lot of newer investors make this mistake and end up losing money on their first deal.

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  • Mary B.
    Real Estate Investor · Lansdowne, PA · Member since 2013 · 1k+ posts · 656 votes
    10y

    Just a few pointers:

    -Find out what the average # of days on market are for that section of town. The agent can help you there.

    -Secure at least 2 more comps of similar styled houses (colonial, split-leveled brick etc that matches the subject property) SFH with or closest to ''3/3.5, 2,250 sf'' that sold within the last 3 to 4 months. More than one comp is needed for SFRs. Another thing the realtor can help you with.

    -Do a walk-thru with a licensed contractor in tow to get a better feel of the rehab costs. 

    -Would a lease/purchase be out of the picture? If not, work the numbers in for a L/O tactic. If so scratch that. :-)

    -Check the tools bar above for house flipping / rental calculator(s) to give yourself a little more details on expenses. 

    -If the listing agent doesn't respond, don't give up, use your own agent (find buyer's agent). 

    Kudos,

    Mary

    1Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    FIRST find out of it is even available. Zillow has horrible data, and you shouldn't base any investment decisions with it. Zillow is just a lead generation company for real estate agents.

    5Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Mary B.:

    Just a few pointers:

    -Would a lease/purchase be out of the picture? If not, work the numbers in for a L/O tactic. If so scratch that. :-)

    LO is Lease Option correct? I forget about that as an approach to REI. Thanks for looking over the "deal" and letting me know your thoughts.

    0Reply
  • Mary B.
    Real Estate Investor · Lansdowne, PA · Member since 2013 · 1k+ posts · 656 votes
    10y
    Originally posted by @Ashley Wolfe:
    Originally posted by @Mary B.:

    Just a few pointers:

    -Would a lease/purchase be out of the picture? If not, work the numbers in for a L/O tactic. If so scratch that. :-)

    LO is Lease Option correct? I forget about that as an approach to REI. Thanks for looking over the "deal" and letting me know your thoughts.

    Yes. Glad I can help.

    Kudos,

    Mary

    0Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Ashley Wolfe MAO is 65% (in my case 70-75%) ARV minus repairs. ARV is after repair value. If that is up to $110k then MAO would be $81.5k - $10k = $71.5k.

    This isn't to suggest that this is just right or too much or too little. I'm just trying to correct your understanding of what most investors think of MAO.

    $25k is unlikely to be accepted, but that is okay because most investor offers are unlikely to be accepted. Though you should be aiming for what would be a successful deal, not the most incredible deal, otherwise you will rarely actually get a deal.

    Why hasn't the house sold?  It could be any number of reasons. Maybe it needs more work than you think. $10k is quite low if it needs siding and major updating. Maybe they had it priced too high for too long before lowering the price and people started thinking like you, "If this is a good deal why hasn't anyone else bought it yet?"

    I do think $25k is almost absurdly low, and it is likely a much higher offer would still give you a good deal, but do your homework and make the offer that would work for you. If it is $25k, then that is what it is. 

    1Reply
  • Scott Carder
    Investor · Owasso, OK · Member since 2013 · 166 posts · 90 votes
    10y

    Its probably worth the full 65k, but everyone thinks they can get a deal.

    0Reply
  • Mary B.
    Real Estate Investor · Lansdowne, PA · Member since 2013 · 1k+ posts · 656 votes
    10y

    Oh yea thanks @Matt M.  for bring it up. I'd meant to mention the part about not relying on the 'zestimate' figures on any property on zillow. 

    Kudos,

    Mary

    0Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Larry Turowski:

    @Ashley Wolfe MAO is 65% (in my case 70-75%) ARV minus repairs. ARV is after repair value. If that is up to $110k then MAO would be $81.5k - $10k = $71.5k.

    I KNEW I had something off... Let me try again.

    ARV of $110,000*.65=$71,500 minus $30,000 in repairs = $41,000 That's still $24K less than their current listing price. I need to walk through with a contractor as suggested above by @MaryB and really see what's going on.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y
    Originally posted by @Matt M.:

    FIRST find out of it is even available. Zillow has horrible data, and you shouldn't base any investment decisions with it. Zillow is just a lead generation company for real estate agents.

    Exactly. I see houses on Zillow all the time in my area that I know for a fact are either sold, under contract, or have been pulled from the market. I also know of houses on the MLS that never show up on Zillow. I only use Zillow for historical data on houses anymore; outside of that, Realtor.com is far superior if you want to see homes actually on the MLS. Zillow does carry FSBO, auction homes, estate sales and some other unique situations so it can be good for that if you are purposely trying to avoid working with a realtor.

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Scott Carder:

    Its probably worth the full 65k, but everyone thinks they can get a deal.

     Let's pretend we paid the full $65K for it, put in $30,000 worth of work and sold it for $110,000.  That would still be a nice little profit of $15K.

    So if everyone thinks they can get a deal, how do you structure your deals or what's your approach?  

    0Reply
  • Scott Carder
    Investor · Owasso, OK · Member since 2013 · 166 posts · 90 votes
    10y

    I would prefer the 1400 a month rent.

    1Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @JD Martin:
    Originally posted by @Matt M.:

    FIRST find out of it is even available. Zillow has horrible data, and you shouldn't base any investment decisions with it. Zillow is just a lead generation company for real estate agents.

    , Realtor.com is far superior if you want to see homes actually on the MLS. Zillow

    PSA- realtor.com is the same as Zillow. It isn't even owned by NAR. Rupert Murdoch owns it. It still doesn't have all the listings. Your best bet is to go to the public face or your local mls or hire a re agent.

    0Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @JD Martin:

    , Realtor.com is far superior if you want to see homes actually on the MLS.

    I just looked on Realtor.com and next to House for Sale it has a red square that says "Pending."  I assume this means sale is pending?  Damn.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y
    Originally posted by @Matt M.:
    Originally posted by @JD Martin:
    Originally posted by @Matt M.:

    FIRST find out of it is even available. Zillow has horrible data, and you shouldn't base any investment decisions with it. Zillow is just a lead generation company for real estate agents.

    , Realtor.com is far superior if you want to see homes actually on the MLS. Zillow

    PSA- realtor.com is the same as Zillow. It isn't even owned by NAR. Rupert Murdoch owns it. It still doesn't have all the listings. Your best bet is to go to the public face or your local mls or hire a re agent.

    I have access to my local MLS and routinely compare Realtor.com with the MLS and never find a discrepancy. Maybe this varies in other markets. In fact I notice houses come up on Realtor.com minutes after being activated on the MLS. I am a little turned off now, however, knowing it is a Murdoch enterprise :D

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  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    I would bet it is a short sale call the listing agent to confirm status 

    0Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Account Closed:

    I would bet it is a short sale call the listing agent to confirm status 

     In the event of a short sale, could I make a higher offer and dissuade them from going forward with the short sale?  (I'm really asking this in theory but will call the agent again tomorrow because I'm pretty interested in this one.)

    0Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    In the intial stages of  a short sale the agent submits an offer to the bank,but it might take months and m8nths for the bank to respond.when the bank responds they have do a appraisal of the property[bpo] then give an indication of the offer they will accept.if the first buyer refuses then muliple offers will be solicted.you can always submit offers at any stage but it is when the bank starts to evaluate the property then your bids will be meaningful

    0Reply
  • Jimmy Cantave
    Investor · Miami, FL · Member since 2014 · 82 posts · 19 votes
    10y

    @Ashley Wolfeno think you should the agent to to see if it's a short sale..if not go ahead and a make a offer 12%from its asking price!!! That works all the time!!!👍

    0Reply
  • Nnabuenyi Anigbogu
    Chicago, IL · Member since 2015 · 298 posts · 261 votes
    10y
    Originally posted by @Ashley Wolfe:
    Originally posted by @Scott Carder:

    Its probably worth the full 65k, but everyone thinks they can get a deal.

     Let's pretend we paid the full $65K for it, put in $30,000 worth of work and sold it for $110,000.  That would still be a nice little profit of $15K.

    So if everyone thinks they can get a deal, how do you structure your deals or what's your approach?  

     You would actually have a lot less than 15K profit. Keep in mind when you sell you pay 5-6% in commissions to both the seller and buyers agents. on 110K that is 5500-6600 dollars. So your profit is now down to about 9K. Once you factor in closing costs (title, attorney fees, transfer stamps, etc) you could be down to 5K in profit. That is probably not worth it. Also all this is assuming you have no money costs.

    I point this out because a lot of newer investors make this mistake and end up losing money on their first deal.

    6Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Nnabuenyi Anigbogu:

    Thank you, that makes sense.  I will write that down so it will be a normal part of my formula when analyzing a deal.

    0Reply
  • Michael Hayworth
    Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
    10y

    Looks like you've already discovered that listings on Zillow can be misleading. I've called on a number of them only to find there was nothing of value.

    @Ashley Wolfe, you're in one of the toughest markets around to try to make money on flips. Too many investors chasing dubious deals makes prices on homes needing reno very close to those homes' ARV. It's very hard to find good deals for flips on MLS. There are still good deals for rentals on there. I've generally shifted my strategy to buying properties I can hold as a rental for a couple of years, then sell if the market has gone up enough to give me equity in the property.

    If you really, really wanna do a flip, a couple of ideas:

    • If you have plenty of cash, the courthouse steps auction is Tuesday, and you can find some good deals. But you have to educate yourself first or you can easily lose money.
    • There are a few good wholesalers in the market who work their asses off to find really good deals where both they and their buyers can make money. (And then there's  a lot of wholesalers pushing inflated ARVs and underestimated repair costs.)
    • A smallish home in an area with high value/sq. ft. Doing a room addition can be profitable in those areas, but only in areas with high value/sq. ft.

    Good luck. It's pretty tough in our market.

    0Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Michael Hayworth:

    Looks like you've already discovered that listings on Zillow can be misleading. I've called on a number of them only to find there was nothing of value.

    @Ashley Wolfe, 

    • If you have plenty of cash, the courthouse steps auction is Tuesday, and you can find some good deals. But you have to educate yourself first or you can easily lose money.

    Have you purchased homes for rehab this way?

    • There are a few good wholesalers in the market who work their asses off to find really good deals where both they and their buyers can make money. (And then there's  a lot of wholesalers pushing inflated ARVs and underestimated repair costs.)

    Do you have anyone who you work with regularly that you could refer me to?

    • A smallish home in an area with high value/sq. ft. Doing a room addition can be profitable in those areas, but only in areas with high value/sq. ft.

    And by "high value/sq ft" do you mean a low price per sq ft?

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Larry Turowski,

    I'd add a couple items to your MAO calculation:

    ARV x .7 - (repair costs) - (minus closing costs) - (desired profit) = MAO

    ...if you're planing on selling. The remaining 30% allows you to go for sale below market (FMV) for a quick sale and still leave room to negotiate.

    0Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @David Dachtera:

    @Larry Turowski,

    I'd add a couple items to your MAO calculation:

    ARV x .7 - (repair costs) - (minus closing costs) - (desired profit) = MAO

    ...if you're planing on selling. The remaining 30% allows you to go for sale below market (FMV) for a quick sale and still leave room to negotiate.

     Thanks for the input.  

    0Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    10y

    I really don't give all that much thought to the DOM. There are homes that have been on for over a year. The problem is they are overpriced. They are dreamers. 

    I've sent in dozens of offers on homes not selling and there's a reason they aren't selling. Mortgages that are equal to asking price, not motivated, or stubborn. Not to say that deals aren't out there but I wouldn't be surprised if they have turned down offers like yours already.

    1Reply
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