How much more should I offer?

6 Replies

so I found this great foreclosure for my first rehab. It's a 3/2 built in 81' 1780sf on 3.5 acres just on the edge of town. Here's the things to rehab:

  • Engineering report says 22 piers. 
  • Kitchen and both bathrooms gutted. 
  • Floors throughout. 
  • Painting inside and out. 
  • Some drywall patchwork. (Popcorn ceilings removed). 
  • Landscaping, tree trimming. (Lots of trees on this). 
  • New Hvac. 

I've roughly figured on $40k for the rehab cost. 

Comps pulled myself range from $125k-$140k up to 2 acres. No comps for a 3.5 acre. I offered $55k over the weekend. Realtor said they received another offer over the weekend as well and wants me to counter offer. 

Opinions on the property and how much to offer?  I'm self contracting. Remember first rehab, so learning curve will be applied. Thanks for the input!

The general rule of thumb is that you start at 75% of ARV and then subtract your estimated repair costs. Many will argue it should be closer to 65% to 70% of ARV.

So using the 75% of ARV rule, if your expected ARV is $140,000, the most you should offer is $65,000. If you wanted to use 65% of ARV, well you've already blown that out of the water with your $55K offer.

Personally I don't like to deal with foreclosures when there's a bidding/auction thing going on. I've gotten roped into a few of those things and there's always some idiot who is willing to pay way more than any sane person would pay.

Originally posted by @Jerod Smith :

@Fred Heller thanks for the input. How much should I worry about the piering?

Well, this is just my opinion, but foundation issues would pretty much be a deal breaker for me. I have a listing right now that has a crack in the garage wall. We had a foundation guy look at it and he said it was very minor and would only require 7 piers. The estimate to fix it was $3500: $2800 for the actual piers and another $700 for the engineering certificate and plumbing inspection.

So if we extrapolate that estimate to your situation, at $400 a pier, you would be looking at a minimum of $8800 in foundation repair cost.

In my experience a light but notable foundation problem might work to a rehaber's advantage to get a great bargain. A costly one might be more of a deal breaker for me. See if the seller has any quote disclosure from any foundation guys and account for it in your plan.

If your numbers are dialed in, I would be willing to pay up to $70K. But I have no idea how you intend to fund, the reliability of your contractor, your estimated hold time, how you propose to sell, or what profit margin you expect. 

Lots of unknowns so take any answer you get as nothing more than a lite suggestion because you left way too many holes in this deal for anyone to give you any solid advice on how to proceed.