Discount me the sales price please

[Olga Daisel]

Hey,

I a house under contract that has structural issue, a pretty serious one. The roof rafters are falling due to water damage. The conventional mortgage lender sent an appraiser who realized that there is an issue. The house is under contract for 700k. I might came up with cash, but it has to be discounted. How much would you try to negotiate down on the house if closed all cash?

[Russell Brazil]

I mean it sounds like the lender isn't going to loan on it unless it's repaired.

So the answer here is seller repairs it, or financing is denied.

[Olga Daisel]

@Russell Brazil

The seller will not be able to repair. So I am trying to understand how to negotiate cash closing.

[V.G Jason]

You pay cash and assume risk, you get a HML and fix it and hopefully can not lose your, or conventional denies loan unless seller fixes.

[Joe Villeneuve]

Ask a contractor.  Why would you want to buy a house with structural repairs needed anyway?  I'd be willing to bet the cost of repairs will be a lot higher than just the roof.  There's a domino effect that will impact costs in MANY other areas that you don't see right now, but they'll be there.

[Olga Daisel]

@Joe Villeneuve

I am buying to demo in a year.

[Chris Seveney]

@Olga Daisel

No one can answer this question is no idea how much the repairs are

If you say you want it to tear it down then I would not pay more than land value minus demo cost.

[Don Konipol]

Quote from @Olga Daisel:

Hey,

I a house under contract that has structural issue, a pretty serious one. The roof rafters are falling due to water damage. The conventional mortgage lender sent an appraiser who realized that there is an issue. The house is under contract for 700k. I might came up with cash, but it has to be discounted. How much would you try to negotiate down on the house if closed all cash?

I honestly don’t really understand the question.  Did you intend to rent it out until you were ready to tear it down?  If not the value to you doesn’t really change.  If you were and lose the value of the rental, then subtract the rental amount from the total price to arrive at the reduced value to you.

Are you asking HOW to negotiate a lower price based on this uncovered information concerning the property condition?  If so does your offer contain a contingency clause for contract termination due to property condition or an option period for due diligence.  Without knowing the specific terms of the purchase contract and exactly what point in the contract you’re at there’s no way to answer the question I’m guessing you may be asking. 

[Joe Villeneuve]

Quote from @Olga Daisel:

@Joe Villeneuve

I am buying to demo in a year.

That doesn't change anything other than make it worse.  Now you're saying you are going to tie up a lot of cash, cash that could actually be making you money, for a year, and then go into a very large rehab (time and cost) project hoping to make money on it,...how?

[Theresa Harris]

Talk to a contractor. The seller can get it repaired and pay for it upon closing.  I bought a place that needed a new septic system and the seller didn't have the money.  The contractor came in and replaced it and upon closing whatever the bill was for the septic was taken from my money and given to the contractor and the rest went to the seller.  Most people have invoices due within 30 days, so it shouldn't be a problem...and if they aren't paid, they will put a lien on the house.

[Joehn B.]

Move on, plenty other properties to get.  If you plan to demo/build, then make a cash offer for the land value minus the demo.   it should offend him, and so be it.

As @joe said this property with a long history of neglect, water intrusion has done far more than bend some rafters.   Only way to mitigate the unknown is to assume a rebuild cost.

[Mike Dymski]

The cost of the repair plus a margin (maybe $30k) to compensate you for the added work and risk.

[Joehn B.]

Quote from @Mike Dymski:

The cost of the repair plus a margin (maybe $30k) to compensate you for the added work and risk.

The problem with this, is you don't know the extent of the damage concealed behind the walls.  you might have to basically take the entire interior down to the studs, perform mold remediation, reinsulate, new drywall, new wiring etc.  30k might not cover it.

[Mike Dymski]

Quote from @Joehn B.:

Quote from @Mike Dymski:

The cost of the repair plus a margin (maybe $30k) to compensate you for the added work and risk.

The problem with this, is you don't know the extent of the damage concealed behind the walls.  you might have to basically take the entire interior down to the studs, perform mold remediation, reinsulate, new drywall, new wiring etc.  30k might not cover it.

My contractors would determine to the cost to repair (including concealed damage) and I would add $30k profit to compensate for the added work of repairing it (although, having an entire entire new interior would be compensation enough).  If you are unable to determine the cost to repair, I recommend leaving it to someone else who can.

[Ryan Dunn]

I would get a contractor involved and get some bids. Then you will also know and have them ready the day you close. And then you can refi your cash back out for another deal.