I thought I would share an experience I had yesterday in hopes of helping others out.
Yesterday I'm browsing the local MLS scouting for deals (Why not, right?). I stumble across this house that looks really great from the outside. Maybe the shutters need painting and a little bit of railing work but nothing much. It was only built in 2005. Roof, windows and siding look great. The neighborhood ranges $245-280k. Why is it listed for $209k? Listing says "Cosmetic repairs only" so I'm thinking, "Carpet, paint, maybe a drywall patch here and there?" No inside pics. Hmm.. So I call my realtor friend to go check it out. Was it a full gut? Did someone run a puppy pound in there? No. It was something else. The ENTIRE downstairs was tiled like this (see photo). Kitchen, foyer, bath, bedroom, family.... EVERYTHING. There's nothing wrong with tile, its actually nice tile. Just the install job ruined the house! The tile wasn't even flat, or evenly spaced. No quarter round on exterior walls either. The house is 2400 sq. ft. How much to demolish? 1,200 sq. ft.? on a 3/4" particle board subfloor? Then even it out and put something respectable down? Probably $8-10k alone. There was also an illegal amateur screen porch built around the deck. Knowing the building codes, it would have to be demolished. The 2 car garage was also full of the previous owners junk. So the lesson, if there's a price too good to be true and no interior photos, there is a reason for it! I hope this helps someone else.
If the value is $250 and it only needs $10,000 worth of work, wouldn't $210 be a good purchase price?
The listing price doesn't really matter. What matters is the price that works for you. Would this be a smoking deal if you could pick it up for $180,000 or $190,000? Figure out what works for you and make an offer based on that. You never know what the seller may accept.
I just helped a buyer purchase a property with foundation issues. Dozens of people looked at it but nobody would even make an offer. They were asking $200,000 and the ARV is $250,000 but the numbers didn't make sense because of the work needed. They dropped the price to $150,000. I knew the foundation could be fixed for under $20,000 and there property needs about another $20,000 in landscaping, roof, and cosmetic updates. My investor crunched the numbers and made an offer based on what he considered a "good deal". He bought it for $125,000 which is 50% off market. He can fix it up and instantly gain $75,000 or more in equity. The best part? He can rent it right now, as is, and get a 1% return which is very difficult to do in our market.
Property is only worth what it is worth to you and your goals.
Thanks for the reply and you make some great points.
The tile was just the elephant in the room. If that were the ONLY issue, then yes, the numbers would have worked fine. The kitchen and baths needed some upgrades, there was a water stain on the wall where the washer was, the same floor installer took the bull noses off each step going upstairs, the illegal screen porch would need to be demolished. we would need a few dumpsters for all the junk. By my estimates, it would take $25-30k to bring it up to a value of $266,000. The median for that floor plan in the area.
My realtor suggested bidding at $180k which would make the numbers work again. But as the listing agent was touting "Multiple offers", they wouldn't take it. I wonder how many of those who put offers in saw the inside?