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
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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