What Are The Odds Offering on a Highly Overpriced Property?

Question

Hey everyone, just hoping for some quick input.

There is a 4 plex, technically 4 townhouses, near where I live, that I'm looking into. It's something I'm considering as an owner-occupied, using my VA loan(max limit of $417,000, for those not familiar). While I haven't officially run comps, it seems to be way overpriced. They are asking about $625,000. I've looked at about 4 multifamily properties sold in the last six months, 3 were duplexes and 1 was a quad, and they all had GRM's around 10. The quad was actually around 9. At 10, the property would be around $460,000, at 9, it would be around $415,000.

In addition, the single family homes in the area that were similar in size were selling at around $120,000. While I'm no expert, I would bet my car that, in general, a townhouse with no yard is worth less than a similar single family home with a 2 car garage and a small yard.

Some additional information: The property is listed by a company called The Management Group, Inc, under the name of the President of the company. The company seems to be primarily property management, claiming to manage over 14,000 units over Oregon and Washington.

If I'm right in my preliminary estimates, that the property is overpriced by about $200,000, what are my odds of actually being successful offering such a low amount compared to the asking price? It has only been on the market about 30 days, should I wait?

Shawn Torsitano · Answer

@William Baumann How often do people accept an offer that is low compared to their asking price but much more accurate?

William Baumann · Answer

@Shawn Torsitano Always remember one thing. People can price anything for any amount of money, and often for no other reason other than they can. You as an investor could care less what they are asking for (to an extent) you only care about what numbers work for you, nothing else. They can list it for 12M, doesn't matter, if I am only willing to offer $300K because that is the amount that works for my numbers, my offer is going to be $300K. They can reject, great, I will offer them the $300K again in 6 months.

With that said, make sure you are not making the same mistake in your reason to buy. Do your due diligence, estimate your rents, costs, fees, etc and your ROI.

Shawn Torsitano · Answer

@Carl Carlson Okay, thank you. If my numbers from the post above are correct, would that be sufficient evidence to bring to the table? Obviously it would be much more elaborate and formal than just a couple sentences, but should I be trying to use any additional standard?

Carl C. · Answer

You don't know until you ask right? If you have done the research and can make a strong argument then its worth a try. Good advice that I have heard here recently is that you need to make an offer where the numbers will make sense for you. If they say no, then so be it.

What Are The Odds Offering on a Highly Overpriced Property?

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