I made an offer on a listed bank owned property. This is my first offer on a house with the intent to flip it. I have not been to the house. A friend found it when looking for a primary residence and told me about it. He said the AC unit is stolen (and it may have had two), it needs a roof (he thinks), and it has a pool that is in bad shape.

I estimated the value at $100,000 and the asking price is $44,900. I offered $23,500 with these terms:

  • All Cash
  • I will close in 2 weeks
  • I will waive the inspection period.
  • I will provide 10% earnest money when an offer is accepted.

I don’t expect this offer to be accepted but I hope to get a counter. I don’t want to be in this house more than $65k total. If I get a counter I will go to the house and make a more accurate repair estimate.

To get the value I asked an agent to pull the last 6 months of sales in the area. She found 4 sales as follows:

DOM CLOSING DATE SQ/Ft BEDS BATHS ACTUAL PRICE
AFTER CONCESSION
PER SQ/FT
1 30 Jul-11 3,732 5 3 $148,410 $39.77
2 93 Aug-11 2,304 4 2.5 $95,900 $41.62
3 21 Sep-11 2,404 4 3 $92,322 $38.40
4 199 Oct-11 3,403 4 3 $33,600 $9.87

I ignored sale number 4 because the price was VERY low, the days on market high, and the MLS comments mentioned a FannieMae renovation loan. I assume this means it needed major rehab work.

Using the lowest value per SQ/FT I get a value of $117,822 for the subject house. I dropped to $100,000 because the subject house only has 3 Bedrooms and this is just a few thousand over what the smaller 4 bedrooms actually sold for. I would probably list if for $125,000 to start, but drop fast if there is no interest. (I think $110k is a good value but I am being conservative because I this is my first offer with the intent to flip).

The days on market look good. If rehabbed properly, I expect this house to sell in less than 4 months.

Feel free to comment on my approach. You can critique my method or ask questions.

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  2 Responses to “Made an Offer”

  1. Haven’t gone through the rest of your blog, so maybe this is answered later, but did you include an estimate of how long it will take to repair the property? Do you know people who can do the work? (Given you have 13 rentals, I’m guessing you do.)

    • I think there is enough margin here for the repair time. I expect it to take about 6 weeks – based on the rentals I have done. Once I get into the house I will post a detailed estimate and pictures.

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