NEWBIE WITH POSSIBLE NEW SENARIO!!!

[Namon Thorn]

Hello Bigger Pockects Family,

I hope everyones 2012 is going as great as 2011 went. website. I have both enjoyed and learned a tremendous amount from reading the posts and blogs from this site. I use the postcard method as one of the ways I use to find sellers I find that the postcard method is very effective. I sent a test sample of 25 postcards out. I got 4 responses. Two of which I went and viewed the properties. I got an agreement signed on 1 but the title had a cloud on it. I informed the owner of the property that he would need to seek the advice of a real estate attorney to help him sort out the title issues and that until then we cant proceed forward. Next, I got a call from another owner of a property. This gentleman has a very nice house on the north side of town (Houston TX). It is a bread & butter neighborhood. The average houses have sold for anywhere form $49k to $100K. However, regarding this house, it is only a 'shell' unfinished inside only studs. The owner of the house noted that it is a 3/2, but it can be changed into a 5/2. I asked him what he wanted price wise bottom line. He said that he wanted $40K. Now I took that into consideration. However from checking the comparables, I found that at least two houses in the same area have sold w/in the last 6 months both for $48K and $49K respectively. The subject property is 1627 sf. The two that have sold are 1239sf each. I have determined that the ARV is $66,217.67 (ARV x 70% - repairs) in this case using $6.14/sf.
Repairs would about $13,061.00. The is MAO $36,865.38. The seller said the he owns the property and that the title is clear. I will have a ownership and lien report done before proceeding forward.

Now the negotiating of the price to the seller is somewhat tricky to me. Here is what I mean. In order to get $3K-$5K assignment fee (or more) I have considered offering the seller $31,125.00 -$32,325.00 - $33,125.38 minimum to maximum. But for openers I want to throw $27,525.37 then if he doesn't bite go up to $29,325.37. Basically, I want to move gradually on my offers to him, see what he will actually take. What do yall think?

Next, I would like to ask a question with regard to dealing with the end buyer. The rehabber. Now when negotiating a price with him, regarding the MAO $36,865.38. Can I say my asking price is $39,997.99? (Just an example). Thereby, negotiating down to a price that we are both comfortable with making it a win,win,win for all parties involved. What do you guys and gals think??? Your quick response will truly valued and appreciated.

Newbie Namon,

[Eric M.]

Newbie Namon,
Forget the pennies and dollars in your calculations so you don't look like such a newbie when you make an offer. Round to the nearest $100 at least. This is real estate not the grocery store.
Jason is right, if your description is correct, your $13K is wildly low. Depending on what mechanicals are there multiply that by at least 4.