Estimating home's value when wholesaling

[Yenisel Avila]

Hi and happy Easter to all,

I have a personal situation that I need some advice on. My parents' home is worth approx. $429K on Zillow. However, my mother has completely devalued the home due to incomplete "DIY" construction projects all over the house that are shoddy and not to code. She also built an efficiency in the garage, a half "bathroom" in what used to be a closet and whole mess of other things. Should they cut their losses and sell it for cash through a wholesaler or try to fix it through a professional contractor? I feel as though the house has upwards of $80k in repairs, but I want to know what the cash offer would be in order to make an informed decision. What criteria do wholesalers consider when making an offer? How do I calculate the ARV? Keep in mind that I am interested in wholesaling and I want to help my parents out while possibly making my first wholesale deal as well. Thank you for your input.

[Barry Pekin]

@Yenisel Avila,

First and foremost, consider your parents' situation.  If they're in no rush to do anything, then don't rush.  If they are, then provide them with the best options for their situation.  In any wholesaling transaction, you want to put the seller's needs to the front.  And especially with it being your parents, you might want to go the extra mile - or two.

As for getting a good ARV, I like to start with averaging various online sources.  I use PropStream, Zillow, Redfin, Realtor.com.  But again, that's just a starting position to give you an idea.  You can get realtors or other professionals to give you an estimate of the value of the house as well.  If you're going that far, I would also take the opportunity and time to make your own estimate.  You need to look at recent sales of houses in the area that have the most common features - not just for the house, but for where they are.  Another house being only a few blocks away might be a good comp, but it might not be in the neighborhood is completely different or near things that can raise or lower their value (schools, train tracks, airports, parks, shopping, etc.)  When you have a few good selections that are very similar, you can start there to estimate the value of your parents' house.  Take the time to read up on how to do this.  Remember, the ARV is the After Repair Value - what it is worth once it's been all fixed up.  This can also vary based on what a rehabber might want to do to the house.  For example, they might even want to add a room or something.

As for what it will cost to fix up, you might want to get a contractor in there to give you an estimate.  Have ideas of what you think should be done, and then listen to their ideas as well.  Think also about things like the roof, HVAC, etc.  To go on the market, buyers are going to want those to be relatively new and definitely in good shape.

Once you're armed with good information, and taking into consideration your parents' situation, you can then help them to make an informed decision.  Take the time to work with them and explore the alternatives.

Good luck!