Off Market Buyer offering to Out-of-Touch Seller
Howdy! My wife and I are looking to offer on our first investment SFH in the same neighborhood we currently live in. We heard about these folks looking to sell their property. Today, I had an inspection, appraisal and a contractor give me some estimates on repairs. The house is trashed out and needs a lot of work. A little over 1000 square feet, Pier and beam foundation that needs some further examination, old cast iron plumbing will likely need replacement and water damage near/under bathroom tile, substantial rodent damage (2-4" holes eaten through in multiple spots), and a whole lot more including potential roof replacement and an HVAC from 2007.
The sellers have $300,000 in their minds because 6-8 months ago, this was common in this neighborhood, but given the money that will need to be poured into the renovation, there’s no way I can come close to that number if i want to be right side up. How do I approach this conversation without being insulting or help them understand that the market has shifted? Again this is our first investment. Not afraid of the project, but my offer is going to be much lower than what I think they have in mind unfortunately.
#5 Multi-Family and Apartment Investing Contributor
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- Shelton, WA
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#5 Multi-Family and Apartment Investing Contributor
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- Shelton, WA
@Wynn Williams you don't approach this............I'd forget about it and just move on. There is no point in spending another minute there, instead spend it looking for deals that can get done. The only thing that is within your control is where do you want to spend your time. All the best!
#1 All Forums Contributor
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- Virginia
@Wynn Williams
Make the offer explaining why. Then do nothing. You are wasting time trying to convince someone of something you cannot convince them on. Reach back out in 3 months as a hey what’s going on.
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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- Austin, TX
The same way you approached this post, be honest, tell the the house is a dump and you are going to put a lot of money into it.
They accepted our offer and we are closing at the end of the month. Any recommendations on insurance companies? It is our first investment property.
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
Insurance is easy. start with your current agent. Feel free to get back up offers from 1-2 other big companies.
Wait for the appraisal to come back to see if you got a good deal or it appraises for even less if it’s truly in bad shape.
Get an inspector and or contractor in there to give you an idea of the costs involved and if there’s any foundation/structural/serious problems. Maybe a roofing company and hvac people. The number of days for inspection contingency should be in the contract.
Get your contract and EMD to a title company or lawyer depending on your state. If the seller mentions the deal to another buyer who offers more and get to title first they have a deal instead of you.
@Wynn Williams You will most likely need builder risk or vacant property insurance. Given it will be a rental, I doubt you will find a dwelling policy that will cover it during the renovation with it being vacant.
Quote from @Bill Brandt:We offered $265,000 and the appraisal is at $300,000 (surprisingly) and we are currently under contract. We close on March 30. We will need to put about $30,000 into the rehab with some big ticket items being plumbing, roofing and electrical and I've already got my contractor lined up for this. Obtaining insurance and setting up utilities are my next steps, so I will be doing that this week. Thank you for the information!
Insurance is easy. start with your current agent. Feel free to get back up offers from 1-2 other big companies.
Wait for the appraisal to come back to see if you got a good deal or it appraises for even less if it’s truly in bad shape.
Get an inspector and or contractor in there to give you an idea of the costs involved and if there’s any foundation/structural/serious problems. Maybe a roofing company and hvac people. The number of days for inspection contingency should be in the contract.
Get your contract and EMD to a title company or lawyer depending on your state. If the seller mentions the deal to another buyer who offers more and get to title first they have a deal instead of you.
@Mike Wood I'll look into it further. Thanks!
Good luck on your investment! Hope all goes well for you!