HELP Needed!! Is this a deal?

Question

I'm not sure how to handle this.  This is a small house (761 Sqft) that needs major repairs.  The seller also owns the land next door that he wants to sell as well (5000 sqft).  Bewteen the house and the land the owner owes $7,700 in taxes and there is a $ 6000 lien on the land. The house isn't located in the best of neighborhoods so it's not worth a whole lot.
I pulled the comps for the area and there was a house in good condition that sold for 35K.  And another in not so good condition that sold for 19K.  Investors are buying in the area.

I was thinking my best bet would be make an offer on both the house and land together and market it to buyers that way as well...

Any help would be appreciated...I'm kinda new to the game.

Jeff Warner · Answer

Right now all you have is speculation. You need to spend the money and figure out what the TRUE cost of repairs are as well as get another list of COMPS. Like I said, you should have at least 3, you listed 2. Another thing is, like I said before your MLS comps are showing just that, sales from the MLS. Did you verify the COMPS? You can read a post on the Wholesale forum that I put up titled: VERIFY your comps! The reason for this is because those comps you have may be REO's. Also, if that home that sold for 19k is in need of MAJOR renovation I would use that as a guideline but certainly not to gauge the ARV of your deal...seeing as it needs repair.

Also, for all you know there could have been 10 FSBO sales in the area that the MLS will never show. Walking away from a deal without double checking is like throwing money down the drain. Contact your local title company and get a list of sales for the last 90 days within 1 mile of the property. Don't let them sort the data for you, look at ALL sales and spend the 10min to find the comps on your own.

I can say it enough....DON'T SPECULATE, VERIFY! Speculation will not put money in your pocket and it will not make you a reputable wholesaler.

Jeff

Marcus Ware · Answer

First off, you have comps of 27k in a bad area and property is in need of major renovation . Even if you discount the 6k lien by 50% you are still into the property 20,700 ( repairs 10k ,lien 3k and taxes 7,700). There has to be an easier way to make a buck in Texas.

Winniferd B. · Answer

Marcus, yes there is a better way.  I just didn't want to pass up a potential deal ....was thinking maybe there was something I could have been missing.  Guess Not.

Winniferd B. · Answer

Thanks Jeff.

I think the thing that makes this a deal is the available land next door.

Winniferd B. · Answer

Well, the seller told me he wasn't expecting to get much and told me to make my offer.

I haven't seen the inside yet, but from the outside it looks like it may need about 10k worth of work.

And I got my comps from MLS.

Thanks for any and all advice..

Jeff Warner · Answer

Well, run the numbers and make your offer. Just make sure it's subject to inspection in case the repairs end up being more then your estimate.

You need to know what your buyers are willing to pay. Make your offer like this:

ARV x .70 - repairs - assignment fee.

Based on the comps you have, the value is 27k, with 10k in repairs there is not much room left in this deal. The thing is, it may be more valuable to a builder or a section 8 landlord then it is to a fix and flip investor.

If it was me I would get a second opinion on the comps, there are FSBO's that the MLS won't show you. Try talking with a title company and asking for ALL sales within a mile of the property in the last 90 days. Once you have ALL sales you can sort through them to get your comps.

You may have a better deal on your hands then you think. Good luck.

Jeff

Jeff Warner · Answer

I just noticed this statement above. I would ask a contractor to come out and give you a written estimate. I pay $50.00 for a written estimate but that $ saves me from getting into deals that are NOT deals. I just had a contractor look at a property for me that I thought was a GREAT deal, come to find out the home has NO foundation. His $50 fee saved my @ss and was worth every penny.

Jeff

Stephen McKee · Answer

I would make an offer on both and keep the dirt next door as long as it is big enough to build another unit. If you sell the house the lot can sit there for years with nothing to pay but the taxes. Later you can build for profit when the market is hot.

Jeff Warner · Answer

A couple problems I see with this post are:

1 - What is the asking price?
2 - How much repairs are needed?

You need to answer those questions to be able to analyze the deal. Make your decision based on the numbers, not on speculation. I would also try to get a better number for comps, you need at least 3. Where did you get your comps?

Jeff