What would you offer?

[simser]

I'm thinking of buying a house to turn into a rental. I just got notice that an aquaintance is moving out of state in 11 days. I asked if they would be willing to sell without a realtor, they said yes and I'm going to prepare an offer.

What would you offer? I'm fairly confident in what the comps are (let's call it: 350k) and that it would be fairly turn key (ive been in the unit, I have a similar unit the same age in the same complex). I'm thinking of offering 314 which is 15k less than what they would get as a comp, but they don't have to show it, fix it, get a warranty, wait, etc. I do know they paid 120k for it in 2010. I can come up with that kind of cash quickly and then refinance my house to pay back the cash. My house is paid for.

Thanks for your advice!!

[NastyWoman]

If you and the acquintance do this without  realtor involvement you could both come out ahead of the game.

[Deleted]

If the comps are 350k, why is 15k less equal to 314k?  They will still have closing costs, etc.

They might go for it, but your math is a little fuzzy.

[simser]

May 13, 2019 18:54:30 GMT -5 @bamafan1954 said:

If the comps are 350k, why is 15k less equal to 314k?  They will still have closing costs, etc.

They might go for it, but your math is a little fuzzy.

350 - realtor fees- 15k got me 314ish. There should be minimal closing costs at this point, but I was going to offer to pay them too.

I can't go much higher than 320 without putting a squeeze on my financial reserves. I was thinking to wait until I heard about this. If they don't take it, that would be fine by me as well.

[Deleted]

May 13, 2019 19:35:00 GMT -5 simser said:

May 13, 2019 18:54:30 GMT -5 @bamafan1954 said:

If the comps are 350k, why is 15k less equal to 314k?  They will still have closing costs, etc.

They might go for it, but your math is a little fuzzy.

350 - realtor fees- 15k got me 314ish. There should be minimal closing costs at this point, but I was going to offer to pay them too.

I can't go much higher than 320 without putting a squeeze on my financial reserves. I was thinking to wait until I heard about this. If they don't take it, that would be fine by me as well.

Ok, but your math makes no sense to me.  

[Knee Deep in Water Chloe]

May 13, 2019 20:30:23 GMT -5 @bamafan1954 said:

May 13, 2019 19:35:00 GMT -5 simser said:

350 - realtor fees- 15k got me 314ish. There should be minimal closing costs at this point, but I was going to offer to pay them too.

I can't go much higher than 320 without putting a squeeze on my financial reserves. I was thinking to wait until I heard about this. If they don't take it, that would be fine by me as well.

Ok, but your math makes no sense to me.  

On the west coast, realtor fees are generally 6%
350,000
-21,000
————-
329,000
-15,000
————
314,000

[Knee Deep in Water Chloe]

Are you going to require an inspection and a offer clause that lets you out if something untoward is found?

[CCL]

Have you calculated what sort of profit you will make on the place?

[schildi]

It looks to me like you would be bagging all the benefits of not using a realtor yourself instead of sharing to make both of you come out ahead.
Not sure what the chances are that they would take that offer, but if they do, it sounds like you would get a great deal!

[justme]

I agree, it seems like your getting all the benefit. A warranty is only a few hundred, if house only cost 120k their mortgage is likely around 1000. So unless there's a lot of fixing to do that you won't ask for or they really want to sell fast I'm not sure what their upside is taking 10% less than it would sell for and 4% off their net. Assuming 350k is what it would likely go for.

Unless one of the other things you mentioned is worth a lot to them, they could wait 12 months and still come out ahead of this deal. Are houses selling fast there?

[Deleted]

May 13, 2019 20:46:56 GMT -5 Knee Deep in Water Chloe said:

May 13, 2019 20:30:23 GMT -5 @bamafan1954 said:

Ok, but your math makes no sense to me.  

On the west coast, realtor fees are generally 6%
350,000
-21,000
————-
329,000
-15,000
————
314,000

Ok. I was taking the $15,000 to be the realtor's fee.  I didn't realize that it was a discount after the realtor's fee.

Probably sloppy reading comprehension skills on my part. 

[hoops902]

Maybe it's just me, but if I had these same assumptions as the seller, I wouldn't do it.  Maybe they have different assumptions which will make it worth it for them, but here's how I'd look at it as the seller:

If I really think the comp is $350k, and my realtor fees are 21k leaving me 329.  

You say this:

" I'm thinking of offering 314 which is 15k less than what they would get as a comp, but they don't have to show it, fix it, get a warranty, wait, etc."

I don't care about showing it if I'm leaving the state in 11 days, it's no inconvenience on my life to show a house I don't live in.  I don't have to fix anything anyways, I just need to hire someone else to come fix it (I don't see anything in your initial post about taking it without any contingencies like inspection, so I'll assume I have to fix the same things for you anyways).  It really comes down to a question of the "waiting".  The other things you list seem fairly irrelevant, and I wouldn't pass up $15k for a simple thing I can do.  If homes are typically on the market for months in your area...I might consider it to avoid the wait.  If homes sell quickly, then I'd ask myself why I'm lighting $15k on fire like that.  

All that said, what you should offer is the lowest amount of money you think they might take, assuming that it makes sense from a business standpoint as a rental.  So your offer sounds ok, I'm just saying I don't see a good reason for them to take it if they have the same assumptions (but isn't that what makes a GOOD deal in the first place...both sides working from different assumptions?)

[simser]

Just talked to them. They said that the realtor said that they could sell in 5 days for 380, leaving them 360, and i just can't match that. So i told them to go get as much money as possible.

Ultimately it benefits me too, because their house is a comp to mine, so it increases my comparables.

[justme]

Let us know what it goes for in 5 days! Lol

[NastyWoman]

May 14, 2019 5:23:52 GMT -5 @bamafan1954 said:

May 13, 2019 20:46:56 GMT -5 Knee Deep in Water Chloe said:

On the west coast, realtor fees are generally 6%
350,000
-21,000
————-
329,000
-15,000
————
314,000

Ok. I was taking the $15,000 to be the realtor's fee.  I didn't realize that it was a discount after the realtor's fee.

Probably sloppy reading comprehension skills on my part. 

That is what I did. The whole setup makes no sense to me from a seller's POV! She would take the entire realtor savings plus another $15k on top...

[Tiny]

May 14, 2019 13:15:36 GMT -5 NastyWoman said:

May 14, 2019 5:23:52 GMT -5 @bamafan1954 said:

Ok. I was taking the $15,000 to be the realtor's fee.  I didn't realize that it was a discount after the realtor's fee.

Probably sloppy reading comprehension skills on my part. 

That is what I did. The whole setup makes no sense to me from a seller's POV! She would take the entire realtor savings plus another $15k on top...

My best guess is that the seller wouldn't have to spend $15,000 to get the house "market ready"  because Simser is gonna take the house as is.     If the seller goes with a realtor they may not get much return on the $15K  - even though they will sort of  "get the $15K back" when they sell the house.       I'd also guess that Simser is going to have to spend some $$ to get the house ready for renting (if it needs 15K to be market ready - I'd guess Simser would be spending 10K or so... unless they are going to do all the fix ups/decorating themselves). 

I can see the seller being OK with the $21K discount for Simser.   I guess the other 15K would depend on how much $$ the seller thinks they would have to spend to sell the house thru a realtor (and how much inconvenience/time suck/stressful) that would be.    The seller also might not have the $15K for the "fix ups and decoratorating" to get it market ready - there's stress and costs invovled with that too. 
 
It may not be to the sellers advantage to take Simser's deal.    

[Nazgul Girl]

   Simser, just a thought.   If the effects of the trade war take off, the economy might soften a fair amount, and you might get a rental unit that would cost quite a bit less than you are contemplating right now.   Also, have you compared the return on the cash you have invested right now to what it would bring after you purchase a rental unit ?    

[simser]

May 14, 2019 13:42:56 GMT -5 Tiny said:

May 14, 2019 13:15:36 GMT -5 NastyWoman said:

That is what I did. The whole setup makes no sense to me from a seller's POV! She would take the entire realtor savings plus another $15k on top...

My best guess is that the seller wouldn't have to spend $15,000 to get the house "market ready"  because Simser is gonna take the house as is.     If the seller goes with a realtor they may not get much return on the $15K  - even though they will sort of  "get the $15K back" when they sell the house.       I'd also guess that Simser is going to have to spend some $$ to get the house ready for renting (if it needs 15K to be market ready - I'd guess Simser would be spending 10K or so... unless they are going to do all the fix ups/decorating themselves). 

I can see the seller being OK with the $21K discount for Simser.   I guess the other 15K would depend on how much $$ the seller thinks they would have to spend to sell the house thru a realtor (and how much inconvenience/time suck/stressful) that would be.    The seller also might not have the $15K for the "fix ups and decoratorating" to get it market ready - there's stress and costs invovled with that too. 
 
It may not be to the sellers advantage to take Simser's deal.    

Thats what I was thinking- it certainly would have been what my parents would have done when they sold their house last year. They spent 5 weeks trying to improve the house to "modern" standards, and it didn't help them at all! I know that the repairs for this house would be new carpet, new paint, and soon a new AC unit. I also would have let them take whatever appliances (normally around here appliances are sold with the house) so that would be another 2k most likely. The house age is right around the point where plumbing and electrical fixtures will need to be replaced too. I estimated to put 5-10k (with ac) into the place. I was mostly trying to figure out what would be the lowest I could offer that they could take.

But, I asked what they were looking for, they gave an answer, I couldn't match it, and now they're going for it with a relator. I think thats the right decision and it didn't delay them more than 15 minutes, and it doesn't make me feel uneasy over money (which was a large part of the lowball, I just don't have enough funds right now without raiding some accounts I don't want to raid). No one is upset here I'll find a deal later when I'm in a better position and I hope hope hope that they get what they want. I went back and looked at comps though and I think the 350 is more realistic- the 370 the realtor said is for the units with one more bedroom.

[TheHaitian]

Check back with them in one week and maybe go up to ~320k with you:
- covering all closing costs.

[Bonny]

May 14, 2019 15:49:47 GMT -5 simser said:

May 14, 2019 13:42:56 GMT -5 Tiny said:

My best guess is that the seller wouldn't have to spend $15,000 to get the house "market ready"  because Simser is gonna take the house as is.     If the seller goes with a realtor they may not get much return on the $15K  - even though they will sort of  "get the $15K back" when they sell the house.       I'd also guess that Simser is going to have to spend some $$ to get the house ready for renting (if it needs 15K to be market ready - I'd guess Simser would be spending 10K or so... unless they are going to do all the fix ups/decorating themselves). 

I can see the seller being OK with the $21K discount for Simser.   I guess the other 15K would depend on how much $$ the seller thinks they would have to spend to sell the house thru a realtor (and how much inconvenience/time suck/stressful) that would be.    The seller also might not have the $15K for the "fix ups and decoratorating" to get it market ready - there's stress and costs invovled with that too. 
 
It may not be to the sellers advantage to take Simser's deal.    

Thats what I was thinking- it certainly would have been what my parents would have done when they sold their house last year. They spent 5 weeks trying to improve the house to "modern" standards, and it didn't help them at all! I know that the repairs for this house would be new carpet, new paint, and soon a new AC unit. I also would have let them take whatever appliances (normally around here appliances are sold with the house) so that would be another 2k most likely. The house age is right around the point where plumbing and electrical fixtures will need to be replaced too. I estimated to put 5-10k (with ac) into the place. I was mostly trying to figure out what would be the lowest I could offer that they could take.

But, I asked what they were looking for, they gave an answer, I couldn't match it, and now they're going for it with a relator. I think thats the right decision and it didn't delay them more than 15 minutes, and it doesn't make me feel uneasy over money (which was a large part of the lowball, I just don't have enough funds right now without raiding some accounts I don't want to raid). No one is upset here [img src="http://syonidv.hodginsmedia.com/vsmileys/smile.gif" alt="" class="smile" src="//storage.proboards.com/forum/images/smiley/smiley.png"] I'll find a deal later when I'm in a better position and I hope hope hope that they get what they want. I went back and looked at comps though and I think the 350 is more realistic- the 370 the realtor said is for the units with one more bedroom.

You can also ask that you be an excluded party in the listing agreement which would mean if they sold it to you they wouldn't have to pay a commission. That way if the real estate agent has been too optimistic with the price and your net price is better for them they won't be on the hook to pay the commission. Agents don't like it but it can be done.