Made my first offer this weekend
My wife and I went out estate sale shopping (for houses) and missed the one occurring at this address because of all the other ones we had been to that day. So I looked up the address on the county assessor's website and sent the name on the title a letter asking if they were interested in selling. I got a call from the owner's brother who lived at that address and he promised to pass on my information to her so that she could decide what to do. Got a call on Friday from the owner and she stated that her current contract with the highest bidder was expiring that day and wanted to know if I was interested in seeing the property. My wife and I headed out and were given a tour of the property - it was beautiful from the outside, but needed tons of updating from the inside (1950s gold trim everything, severely outdated appliances, pet odor and she was really proud of the new linoleum floors in the kitchen). She told us the previous contract was for $315,000 to buy her 3 bedroom / 2 bath home on a little over an acre of land, but she was willing to take $300,000 as the bare minimum. So I ran the numbers with the 70% rule and it was no where close to where she wanted (based on a $315,000 ARV). I felt charitable since she had recently fell and was going blind from the accident (I know, I need to learn to be compassionate without letting it effect my numbers) and offered her $240,000 for the deal. Here was my fuzzy reasoning:
$315,000 ARV
-$34,650 (Misc Expense = 11%)
-$20,000 (Estimated Repairs - very rough)
-$25,000 (Profit Margin)
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$235,350 ~ Offer
She immediately said that the offer was too low and promptly showed us to the door where I gave her our card. Came to me senses after leaving and contacted a couple realtor friends to get a CMA on the property. One said don't mess with it the appraisal came in way lower then they are asking but the seller remains firm on the price. The other actually did a CMA with 3 properties for $297,000 - which means I was way off. Need to remember that I have to get these things financed with hard money at this point which means 65-70% of ARV only. If she calls back I will have to offer $200,000 instead just to get the thing financed and I am nervous about what the appraisal has to say. Any thoughts?