I am looking at an older home to purchase. It is a foreclosure home that needs work.?
Question:They are asking 279,900. In considering an offer, I am wondering how low is too low. I would like to make updates in the bathrooms, it needs painting (the painter's estimate was $22,000 for exterior painting alone) and the roof needs replacing. Could an offer of $190,000 be way too low and am I wasting my time?
Thanks for your help.
Answers:
I have twice purchased a fix me upper and have made a good bundle of cash on them. However, you cant get away too cheap or someone else will grab it. This is what you must consider
What do comparable houses in good shape in the neighborhood go for?. That is your starting point. You can go to zillow .com to get an idea of what the neighborhood prices are. Then consider what needs to be done in the house. Is it superficial stuff you can do yourself? Or are you talking about major contractual obligations. Roofing, New heating system, new plumbing, new electric, flooding or structural issues. These are expensive and its best to have them taken care of by a pro. Painting, sheetrocking, minor electrical/plumbing, landscaping, cleaning ,windows can be done by yourself fairly cheaply.
So take the comparables average and subtract the asking cost. This is your margin. Then figure out what it would cost you to bring it up to snuff. How much professional expenses plus how much cash out of pocket for the DIY stuff. This is what eats up your margin. Afterfactoring that in How much margin do you have left? This is your profit or your bonus for buying a fixer upper. If its little or none, lower your offer until it is where you can make it worth your while. If you are making good coin on it as is, you might wriggle around a little, but someone could very well outbid you and you miss a great opportunity.
In the US, Profit of $250K ($500k if married) is tax exempt on your primary residence if you have lived there for 2 years or more.
Good Luck!
The great Swami is having a hard time . He does not know where you are or how big the house is. Or the lot size. What are property values in that area for a comparable house? Most of us have no idea of what your house would need or what it could be worth. So yes, you are wasting time. Ours and yours. Sorry
If the house needs a lot of work besides upgrading it (i mean the roof and exterior paint) you should try to shave those off the offer price. Upgrades are not so important when trying to close a deal. Also remember that the owner needs to get enough in his pocket after closing costs to pay off his loan, so if you go too low he will probably baulk at your offer. Keep it reasonable. have a professional home inspector walk through the house and give you a list of what needs to be repaired and what is wrong with the house. That makes it more legit.
Good luck
there are a lot of homes in that price range just sitting and they are thou Realtors. this being a forecloser your chances are good.
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