Equity/Spread: $139,000
After Repaired Value: $495,000
Cost of Repairs: $0
Asking Price: $356,000
Seller is willing to give back $85k and pay 1% towards the title policy. Seller states that closing cost won't be any more than $6k with his title company. Seller will send appraisal upon request.
Now why would the seller give back $85k? What is wrong with this deal? Or is this normal? Need some of the experience here to explain and advise. Thanks!
Investor · Elkhart, IN · Member since 2008 · 24 posts · 0 votes
19y
People are motivated by different emotions. I heard that Michael Vick sold his place to a cash buyer for a $400k loss. He was highly motivated not to be associated with that property.
As for your situation, I suggest that you do your due dilligence. Hire an inspector, get some comparables from realtors, and most importantly, have an exit strategy for the property.
If the circumstance driving the seller to sell below market is personal, you have a great deal. If not, the small cost of your due dilligence will save you thousands.
Sincerely,
I guy who has lost and made thousands on similar deals.
Real Estate Lender · Member since 2008 · 642 posts · 13 votes
19y
As the other poster indicated, why could be motivated by many reasons---divorce, relocation, changes of income/health tend to be the leading motivators most of the time...
As there are no renovations needed, ARV is the wrong term to use (after repair value pertains to properties that are in need of repair)---CMV or current market value might be a more appropriate term to use.
You could use this formula to determine what price you should use to counteroffer (if necessary):
BPO = CMV - BHS Fees - Profit
BPO = Best Possible Offer
BHS Fees: Buy/Hold/Sell Fees
Profit = How much you want to make...
To determine CMV, seek out comparable sales data from the previous 6 months for similar properties within a 1/2 to 1 mile radius of the subject property.