Offer for Motivated Seller

Buying & Selling Real Estate
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Offer for Motivated Seller

Bill K.
Lender · Jupiter, FL · Member since 2011 · 14 posts · 1 vote

I could really use some good advice from the field of experience on this forum regarding how to continue with my offer(s) on hopefully my first official deal, since 1998.

I am in initial negotiations with the owner of an SFR who would like to sell it as he has recently had to relocate out of state for work. He does not want the burden of trying to continue with the upkeep of the property or having to hope he can find a decent renter.

The most recent comps for the neighborhood are at $140K. According to the seller, the only rehab related issues would be the need to paint (interior & exterior) and some landscaping. All of the appliances are new(er), the roof is a few years old, the kitchen is 'gorgeous', etc. He has no negatives and I can only go by what he says for the time being, as I will not be able to see the interior until next week when he gets back in town.

The numbers:
- Asking $100k
- During first phone call, he said he would "like" to get $95K
- Again, comps are $140K
- P/I = $502/mo
- Taxes = $3,000/yr
- HOA = $100/mo
- Rent averages between $1300 - 1600
- The home is a little over 2,000 sqft; 3/2/2; CBS

He also said that he missed 3 payments and is taking care of that next week...in order to avoid probate...?? He also claims to have approx $42K in equity. I have asked him to send me the payoff amount for the mortgage so I can confirm this.

Now, I have not made him an offer as of yet. I would like to at least be able to inspect the property first. My concern, if the property is as nice as he claims, is what would be the best offer(s) to make? Does this seem like a good deal for a Sub 2? Or minimal rehab and retail? Or...?

Also, being that I am still a newbie, I may try to assign the deal to someone else. I would just like to have the original deal be worth something to another investor.

Thank you for any suggestions or comments.

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  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    15y

    Some quick observations before I leave for lunch... if he says he has $42k in equity, then it sounds like he is just trying to get his pay off amount since he says he want the $95K.

    Its not a horrible deal at $95K, especially if it only needs the minimal fix up he is speaking of, but sellers are usually not 100% accurate on needed repairs (especially if he is a long distance owner). No necessarily because he is lying, but they most of the time just don't what is wrong. As stated, if it only needs to minimal repairs, sounds like a good deal to market to a turn-key/landlord buyer whether it be for cash or a Sub-2 deal.

    But the thing that confuses me is the "going to probate..." ???????

    Based upon your $140K ARV, I'd personally just make a phone offer starting at $70K (50 cents on the dollar) and go from there. You can also re negotiate once you inspect the property if you find anything wrong. Lock it up as soon as you can.

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  • Bill K.
    OP
    Lender · Jupiter, FL · Member since 2011 · 14 posts · 1 vote
    15y

    Thanks Chris...I think the probate comment came up because he originally got the property after his fiance passed away in 2009. It had been hers.

    He is the sole owner at this point, but I guess next week he has to make up the three missed payments and for some reason he brought up doing this in order to avoid an issue with probate. I'm not sure if that's truly what he meant or if he was confused by the issue as well.

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  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    15y
    Originally posted by Bill K.:
    Thanks Chris...I think the probate comment came up because he originally got the property after his fiance passed away in 2009. It had been hers.

    He is the sole owner at this point, but I guess next week he has to make up the three missed payments and for some reason he brought up doing this in order to avoid an issue with probate. I'm not sure if that's truly what he meant or if he was confused by the issue as well.

    Ya, he may be correct, or may not. I don't know enough about how probate works to know for certain.

    As I stated earlier, just make an offer and lock up the property so he doesn't go else where. I would make the offer contingent upon him catching up on the payments and also have an inspection clause in there to cover your butt in case you need to back out.

    When you're talking to him, don't say the word contracts, but call it paperwork. And before you call him again, read through this blog post about negotiations. And finally, don't make it about the house. Your trying to help him as a person. Help him solve his situation, and the house and profit will follow.

    http://www.biggerpockets.com/renewsblog/2010/03/24/7-tips-for-better-real-estate-negotiation/

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  • Bill K.
    OP
    Lender · Jupiter, FL · Member since 2011 · 14 posts · 1 vote
    15y

    Thanks again Chris...I'll do just that and update you with how it pans out.

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  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    15y
    Originally posted by Bill K.:
    Thanks again Chris...I'll do just that and update you with how it pans out.

    Bill,

    What happened with this deal?

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  • Bill K.
    OP
    Lender · Jupiter, FL · Member since 2011 · 14 posts · 1 vote
    15y

    Chris, I had some decent negotiations with the owner...all of which were over the phone as he was still out of state. After a couple days of back and forth he agreed to 83K, which I felt confident I could work with.

    That being said, the very next day a comp came in that a home in the same development had just sold for 85K. Out of the other three comps I had to go with, two of them were outside of six months ago and the third one, which was at 138K, was in 12/2010. So I basically ended up with only two usable comps and one of them was way too low to make this a good retail deal, IMO.

    So, I went back into negotiations with the seller laying out the sub 2 offer some more or even a l/o, but he insists on getting his total 40K equity back now. Ultimately he feels he could just rent the house himself while he keeps it up for sale until the market "rebounds".

    I told him to keep me in mind if things don't work out...and I will be checking back in on him in a month.

    Basically, this deal seemed to go from a decent rehab/flip or wholesale deal, to what could be a good buy and hold, if the seller becomes a bit more motivated.

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  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    15y
    Originally posted by Bill K.:
    Chris, I had some decent negotiations with the owner...all of which were over the phone as he was still out of state. After a couple days of back and forth he agreed to 83K, which I felt confident I could work with.

    That being said, the very next day a comp came in that a home in the same development had just sold for 85K. Out of the other three comps I had to go with, two of them were outside of six months ago and the third one, which was at 138K, was in 12/2010. So I basically ended up with only two usable comps and one of them was way too low to make this a good retail deal, IMO.

    So, I went back into negotiations with the seller laying out the sub 2 offer some more or even a l/o, but he insists on getting his total 40K equity back now. Ultimately he feels he could just rent the house himself while he keeps it up for sale until the market "rebounds".

    I told him to keep me in mind if things don't work out...and I will be checking back in on him in a month.

    Basically, this deal seemed to go from a decent rehab/flip or wholesale deal, to what could be a good buy and hold, if the seller becomes a bit more motivated.

    Make sure you call him in a month (or even 2-3 weeks from now). I'm sure he'll be even more motivated than he is now. Good luck!

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  • Bill K.
    OP
    Lender · Jupiter, FL · Member since 2011 · 14 posts · 1 vote
    15y

    Thanks alot...I certainly plan on doing just that!

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    With a tired landlord it comes down to their financial abilities to get out of a property and how much hit they are willing to take.

    You thought the value was X and a new comp showed Y.Now that your seller sees a lower value he will just hold the property.

    I see this all the time.Some can hold for the market to return and others cannot.Some sellers might bring 30k to closing to get out of it or if it is 50k just hold onto it.

    It's a relation of how much loss will I payout versus the headache I will endure for keeping the property.

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