What price would you be willing to pay?

Question

Tell me what would be your highest price based on this:

Home is a 3 bed 1.5 bath built in 1967.  Has a partial finished basement, 1155 sq feet, recent comps, 124,000 with finished basement, 2000 sq feet, 91,000 and 101,000 with no finished basement.  This is a purchase at the court house and we cannot see the inside, so going in blind.

From the outside things we can see, foundation and roof look good, needs new HVAC, new windows, no idea about inside???

What would your highest price be??

Steve Babiak · Answer

What year was the house built? (Sorry, I see 1967 - so major systems might be old and near end of life.)  Can you access MLS history to see if it was previously listed (mainly for description of conditions and improvements)?

If it wasn't MLS listed, do a google search for the address to see if it was on zillow or similar; sometimes it's described there, sometimes you get pictures.

Do you know how much debt was owed on it, to see if they will let it go cheap enough?

BTW - check the doors and windows - people leaving in a hurry don't always remember to lock them all.  You just might be able to see inside after all ...

J Scott · Answer

Sounds like the ARV is somewhere around $95K in fixed-up condition (assuming your comps were in fixed-up condition), and it sounds like you need anywhere from $10K to $40K for improvements, depending on how the inside looks.

Based on that I would say a conservative purchase price would be around $25K if you wanted to get $15K in profit out of it.  A more aggressive and risky purchase price would be somewhere around $45-50K, but of course, if the inside needs to be gutted, you're likely in trouble.

Aaron McGinnis · Answer

You say you can't see the inside, huh?

Bull-caca. Go find an open door and get up in that house! ... or expect a rehab bill up to about $75k, 'cuz that's how much you can end up spending to gut and rebuild a house like that.

Matt Kearney · Answer

Its tough to buy site unseen like this. You almost have to budget for worse case scenario.

Can you peek inside the windows/ look through some doors to get a general idea of what the inside looks like?

How is the exterior condition of the home (siding, roof, landscaping)? Is it well maintained or is it really neglected? I've found that if the exterior is pretty well maintained usually the interior is too.... if the exterior is really run down with a lot of deferred maintenance, usually the interior is too  :D

That being said, I'm with J Scott, $25k to $30k is where I would put my max offer.

J Scott · Answer

If you're assuming the worst, $30K isn't going to be enough.  That might be enough for an interior gut given the property size, but the OP mentioned that the property would need all new windows (another $3-4K most likely) and if there is any exterior work needed, that can increase the cost.

So, I'd add $10K to that $30K estimate, which puts you at $40K worst-case (assuming you're pretty good at rehabbing).  And that puts your max purchasing price at around $25-30K, which I think is about right.

And given that Matt agrees with those numbers, it's probably about right...he knows these things very well...   :D

Joel Owens · Answer

I think the mistake here is looking only at the improvement and not the land (whole picture).

You might have a house that is a tear down but the land is incredibly valuable.

So look at the land.How big is it??What shape is the parcel??Any road frontage??Is it a corner parcel??Are utilities and sewer at the street??

Stop sign or traffic light installed??

I often find older houses with estate sales or foreclosures sitting on land.The house will either rent out while I wait for commercial development to get there or if the house is a tear down you can use the corner for a car lot or other things to generate revenue.

Land development is big money.Usually developers try to lock it up cheap and then make a mint selling to a corporation.

A CVS or Walgreens will sometimes pay 600,000 and up for an acre in the right location.Banks,restaurants,gas stations also like the corners or being close to one.

I am eyeing a property right now. 29,000 1 acre corner parcel with an old house on it.Easily will go commercial down the road in a few years.Buy for 20,000 sell for 250,000 to 300,000.

If you know what you are doing land is where it's at.

Adam B. · Answer

Someone please correct me if this is wrong (I am far from an expert) but...

ARV: $95k

So, $95,000 * 70% = $66,500

$66,500 - rehab costs.

I would assume the worst, and since this house appears to not be "high end" with an ARV around $95k you can do a lot with $30k

So... $66,500 - $30,000 = $36,500 max offer.

Account Closed · Answer

Some great ideas Steve.  It is amazing what you can find on the internet.  I wouldn't be surprised if the former owner didn't try to sell it before the foreclosure.  Many listing have pictures and other useful information.  As a broker you have access to a lot information on expired MLS listings.

Mitch Kronowit · Answer

It's depends... where is it?

(edited) Never mind. The basement is a dead giveaway it's nowhere near my market.

What price would you be willing to pay?

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