Buying A House in Few Days With Water Damage Need Advise
Summerville, SC · Member since 2012 · 26 posts · 0 votes
We want to buy this house as our first with an FHA loan that allows repairs, fix it live in it for two years and sell. What is the best way to asses the ARV quickly? There have already been offers made and our Realtor said we need to come in above asking. So in the event we do win we are supposed to have a 7 day period to get out if it looks too costly. Any advise would be greatly appreciated or questions I don't know to ask. I feel this would be a great opportunity for me to learn about RI along the way.
Numbers:
90k asking price (what # is good to come at them with?)
(its a foreclosure)
comps in the area are around 150-165
Roof has been leaking so obvious water damage and updating
Thanks
When/if you do get estimates, don't forget to consider cost for mold remediation. I'm sure this varies from state to state, and maybe you can find someone to do it for real cheap (without a license - but that's a whole other set of risk) depending on how bad mold is.
the fact that you have water leaking from the roof down can mean water coulda gone anywhere along the house. also, depending how long this damage has been around for exposure to water, the mold could be really bad. hopefully you can find a contractor with experience who can give you an accurate quote of assessing water damage and what will need to be repaired.
cost for termites may be another concern depending on how old the house is, how badly the roof is damaged - termites see open spaces for their meal to get started for their homes and food could spell trouble. even tho the house was tented 2yrs ago w/a 5yr warranty, you can have infestation much sooner than estimated if your roof says eat me in a termite climate. not sure if termites are an issue there - some places are more prone to termites than others (climate, etc.)
definitely consider assessing repair of water/mold/termite damage... THEN, get an estimate for updating the property. after all is said and done, it might not be worth all the trouble and expenses to go through when you can get a house with less extensive unknowns for damage. water can go just about anywhere.
again, i don't know if your area makes a big deal about mold - cali certainly does (at least when it comes to insurance not covering it) :)
10-20k could just be for repairs
another 10-15k for upgrades (depending how fancy you go)... while i'm not a construction guy nor have extensive years of experience in rehab, no experienced rehabber or construction guy can give you an accurate estimate online without knowing what they're looking at. even if you ballpark it w/the above #s, you're looking at 20k-45k AFTER you purchase the property... how long will it take to be able to move in (and at what cost)? how much will it cost in all the extra hassle depending on how extensive the damage will be to your primary home? that's unknown .. perhaps until you're in the middle of it might you get a decent estimate.
wonder of Will Barnard and @j scott and other experienced investors might know better.
good luck!
Lane it doesn't really matter what they're asking, what matters is what the value is and since you'll live there that is definitely going to be different than a typical rehabber would pay.
Here's where I'd start;
1) What would a freshly rehabbed house in the neighborhood cost (you say about 150-165 let's say 155)
2) How much are the repairs going to cost(at least ball park this one for now) we'll say 25K(8K roof+12K interior updating and repair+5K landscape and exterior)
3) What kind of a discount do you want for doing the repairs instead of just buying a rehabbed house(15K not enough for a rehabber, but you're not trying to make a living at this just get a better deal on your personal residence)
So 155-25-15=115K would be my maximum I would offer based on my hypothetical repairs ect.
I would assume for the discount to be that much below the ARV you've stated that either the repairs are substantially more than 30K or they're trying to get a bidding war going to drive the price up or your ARV may be off. Either way not saying that is what you should offer but that is how I would determine my offer for my personal residence NOT a strict rehab purchase.
matt great advice and thank you for breaking it down so I can somehow quantify what the numbers should be. I've been lurking on BP for a while and I thought instead of thinking like a home buyer why not try and do what flippers do but for my personal residence.
I just got a "comps report" from my realtor and I was off by about 4k, the average is 146k. Which oddly enough puts me at 106 max purchase price which is what the realtor said we should offer.
One more question if I could, whats the best way to go about getting a contractor that won't completely kill me since I obviously won't have my own team? Or a substantial amount of work to have them give me any kind of discount.
Thanks again
I do ARV as. To 10k below lowest equivalent comp
10% transaction pad
10% profit min hholding
repairs
3%ARV pad
max offer
v
When/if you do get estimates, don't forget to consider cost for mold remediation. I'm sure this varies from state to state, and maybe you can find someone to do it for real cheap (without a license - but that's a whole other set of risk) depending on how bad mold is.
the fact that you have water leaking from the roof down can mean water coulda gone anywhere along the house. also, depending how long this damage has been around for exposure to water, the mold could be really bad. hopefully you can find a contractor with experience who can give you an accurate quote of assessing water damage and what will need to be repaired.
cost for termites may be another concern depending on how old the house is, how badly the roof is damaged - termites see open spaces for their meal to get started for their homes and food could spell trouble. even tho the house was tented 2yrs ago w/a 5yr warranty, you can have infestation much sooner than estimated if your roof says eat me in a termite climate. not sure if termites are an issue there - some places are more prone to termites than others (climate, etc.)
definitely consider assessing repair of water/mold/termite damage... THEN, get an estimate for updating the property. after all is said and done, it might not be worth all the trouble and expenses to go through when you can get a house with less extensive unknowns for damage. water can go just about anywhere.
again, i don't know if your area makes a big deal about mold - cali certainly does (at least when it comes to insurance not covering it) :)
10-20k could just be for repairs
another 10-15k for upgrades (depending how fancy you go)... while i'm not a construction guy nor have extensive years of experience in rehab, no experienced rehabber or construction guy can give you an accurate estimate online without knowing what they're looking at. even if you ballpark it w/the above #s, you're looking at 20k-45k AFTER you purchase the property... how long will it take to be able to move in (and at what cost)? how much will it cost in all the extra hassle depending on how extensive the damage will be to your primary home? that's unknown .. perhaps until you're in the middle of it might you get a decent estimate.
wonder of Will Barnard and @j scott and other experienced investors might know better.
good luck!
Thanks guys! Looked at the property this morning and it has at least 3 holes in the roof and there were some cracks in the brick. Not to mention single pane windows, mold remediation (you could smell it strong) Over all it looked in the 35-40+ range. So it would eat any equity. Plus right down the street there building brand new at 160k. So moving on to the next property.
Thank you guys for your insight!!