Offer strategy when major repairs are needed.

[Craig Rouse]

I'm looking to purchase my first investment property. It probably about a $93k property. However the walls in the basement are bowed and previous offers fell through because it would pass inspection for financing. I'm confident repairs can be made ( structural engineer to review tomorrow). The home is part of an estate an heirs realize cash offer will be necessary. My question when making offer would I simply deduct repair bid from fair value or factor in additional hassle. Don't want to insult owner but wonder what is fair and customary for such situations. Thanks!

[Ned Carey]

A common formula is offer 70% of the after repair value minus the repairs needed.  So for simplicity's sake lets say this is a $100K house and 20K in repairs. My offer would be 70K- 20K in repairs.  

The 30% margin is to cover cost to acquire, holding costs and resale costs and your profit. This is for a flip if you are keeping it you can pay a little more. However this is typical of what your competition will pay for a fixer upper. 

Of course your specific market conditions and your goals and needs always to into the equation.

Under no condition would I offer the full price simply minus the repairs. I should be rewarded for the risk, cost and hassle of repairing the property.  With a problem as you described i would be making quite a low-ball offer.