How to proceed with a possible off market single family house

Question

Hi, This is my first post here and this would be our first real estate investment purchase, if we go through with it. I have found a house that the owner seems to want to get off her hands. She has already moved out. She is not listed with an agent. My market research shows an after repair value of at least $300,000 but I think $350,000 is realistic. I am basing my calculations on the lower number to be conservative. We have walked the property on the outside, but have not been able to see the interior. It's a 3 bed/ 2 bath about 1,500 square feet.

The outside of the home looks solid, but the roof may need replaced. The main issue that would scare away buyers is that there is a lot of debris (couches, household contents, ect.) that have been basically thrown in a pile in the front of the house. When I asked if we could go look at the house she warned me about the stuff outside, saying she had to leave "in a hurry" and she threw a lot of stuff outside when she left.

From my research on the county's website, it doesn't appear to have a mortgage on it currently. She paid $115,000 about 7 years ago, and lived there up until a few months ago. I asked her what she hoping to get out of it in it's current condition and she did not give a price.

My only contact with her has been through private message on Facebook. I am trying to build a rapport with her, but it's difficult to do in this way. I have a feeling she never wants to go back to the house. She wants to sell as-is.

In her last messege to me she asked me what I would offer for it. So far, all I have said in response is that we would love to make an offer but that I wanted our offer to reflect the true condition of the home and that was difficult to know since we have only seen the exterior.

I would like ideas on how we could proceed. My feeling is that she is embarrassed and overwhemed with the condition of thte home and just wants someone to step in and deal with it without her having to confront it. Should I just give her a price based the worst case scenario, a total gut job remodel, since we have to assume the worst if she doesn't want us to see it? Any offer we make will have an inspection period clause in it for sure, so we will definitely see the inside before closing. If we go through with this, our plan is to flip it and sell.

Adam Davis · Answer

Any progress?You should work with an agent to get the paperwork square and make sure you don’t miss any important deadlines, but you can definitely make an offer prior to the prelim and walkthrough, and leave during the inspection period without risk if you see anything you don’t like.If I were you, I’d offer 60% ARV, which is likely close to FMV in as-is condition ($180k). Then, you’ll pay the agent (say 3% for the sake of argument, $5,400, since they’ll be doing a lot of work for you on this - I’d order that prelim/TRIO with my escrow company, and help you find lien records if any, plus provide all the contractual guidance to make sure you don’t lose your earnest money). That’ll leave you with $114,600 to break even. It’ll be tight, if the home is as crazy as it sounds. You could try to lowball at like $150k, but it sounds like she might be looking forward to a windfall now.

Angela Crockett · Answer

Mahalo! I appreciate your insights.

Joel Bongco · Answer

If you are serious about making an offer, I would run a Prelim. IMHO, whats important is to walk the property, otherwise, you are taking a vegas gamble with not being able to see the inside. Things could be fine, or it could be Pandora's box. The other thing to do is to check with the permitting department to see if an building permits were issued. HTHS!

Angela Crockett · Answer

Hi Joel, Thanks for the input. I will definitely proceed with caution and will not be acting alone. For sure, there will be title report, etc. I am pretty good at investigating and I know some further details that I won't be posting here as to why the owner might have wanted to leave suddenly. I have also confirmed with the county that she is the legal owner of the property. However, do you feel it's necessary to have a preliminary title report prior to making an offer? I was thinking of this as part of the due diligence process prior to closing. In any case, I am planning to have a real estate attorney look over any purchase agreements before we proceed with anything.

Joel Bongco · Answer

@Angela Crockett - Hi Angela, this situation seems a little fishy to me -- be careful. There are some non negotiables that I live by. 1. I need to walk the property - both inside and out 2. I need to have a conversation with the homeowner in person (preferable) or over the phone. 3. Don't make an offer, unless you have all the details (ARV, Rehab, Prelim Title Report, etc.). If any of the above are not available, I would pass. If you are new to real estate investing, I would seek some help instead of doing it alone, there are too many things that can go wrong. HTHS.