I could really use some advice on a deal I have in the works. This guy wants to sell his house for 200000, but when I ran the comps and got the assessment value I saw that it is only worth about $142000. He paid $115000 for it back in 2002, put a good amount of upgrades into it back in 2009. How should I proceed? His house has already been on the market for 2 months.
If you ran the comps correctly, there's no really reason to get into this deal since the house is overvalued. Assuming the house is worth 140K without updates and he he invested 60K on upgrades, it doesn't mean the house is worth 200K. Depending on the type of neighborhood, it's even possible he "over-rehabbed" the house. When you run your comps, it's important that siding, square footage, numbers of BD/BA, materials etc are similar to the subject property.
Okay thanks, and the homes close to his property type only sold for about $100000.
Yeah, I wouldn't touch this. People tend to over-value their own house - doesn't seem that even the improvement could give you a margin.
If there is an argument(close by comp) for his house being worth asking price, I think the likelihood of a deal is very low.
BTW since the upgrades were done 6 years ago - they only are worth about 75%(or less) of the original value from a depreciation point of view. Some upgrades like carpet would be fully depreciated at this point. Also a lot don't have a 100% cost to value return. So a 20K improvement with a 50% return would only have a value of 5 or 6K. It isn't an exact science, but there definitely should be a discount on work done 6 years ago.
Yes, second everyone else. It seems like the house is either over valued, or it is a FSBO by someone who doesnt know how to price thier home. Unless there's a huge price drop, or you like the home to live in yourself, I would avoid.
@Anastasia WardOnce sellers start getting the idea that you can AFFORD $200k, they will hound you (charmingly and sweetly), until they relieve you of all that cash that's burning a hole in your pocket!
Your job is to not let them get away with that! From what you have told us, there is NOTHING to be gained for you in trying to put this property "in the works", because it is not even close to any sort of deal. Hopefully you will already have realized that now, especially now you know that the comps are HALF his asking price! (And remember, the point of "deals" is to buy for LESS than the comps)!
So, moving right along. NEXT! Cheers...
Thanks Everyone! I have moved on to the next. He was very disappointed but we could not come to an agreement over the price.
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