Does this price make sense?

Question

Hi all!  I am new to real estate investing and am analyzing deals to get an idea of my local marketplace.  I came across this deal in Durham NC that I was interested in and had some questions about the pricing.  The house was advertised at $49k, and looks like it needs a lot of work, it may even have had fire damage.  The seller bought the house 5 months ago for $10,500 and as far as I can tell hasn't done anything to it.  So I know that wholesalers add a fee for their service, which is more than fair, but does this mark-up sound a little hefty?  All the comps on the street are in the $75K-$85k range.  What do you think a reasonable as-is asking price would be for a property like this considering the previous purchase price?  Thanks!

Jill Rossi · Answer

thanks for the input Jeff, I can use all the feedback I can get!

Jeff Cooley · Answer

Hello Jill

The seller is going to get as much value as they can.. that's just business and you cannot be caught up on what they paid for it.The real question, what is it worth to you? Price is always negotiable. I would make sure that repairs and selling price would still be 20 to 30 % minimum below market value after completion that way you could still have equity as a long-term hold or a a fair return on a flip. Keep in mind that a fire sale is called "fire sale" for a reason. They can be very expensive repairs.  Just be extra careful with repair costs. Best of luck and msg me if you need any help

Jill Rossi · Answer

Thanks Patrick, the 25-30 range seemed to be what made sense to me, I'm glad to hear I'm not too far off he mark.  I'm honestly not sure how long it's been on the market.  I saw it on Craig's List and found it on a couple other sites but didn't think to look for that.  Thanks for the advice!

Jill Rossi · Answer

Thanks, that's really helpful information, especially from someone who's familiar with the area and the house.  I have just a vague understanding of Durham and definitely need to keep watching the area to learn more.  I appreciate you taking the time to give me some feedback.

Best,

Jill

Randy E. · Answer

Hi @Jill Rossi

I saw that offer, too.  I know exactly the house you're talking about.  It's in an area in which I am active and know well.  I've "followed" it for a long time but never got serious enough about it to make an offer.

While the old sold price is probably too low, I think the new price is too high given the comps and the condition of the house itself.  That's just my personal opinion.  If you're buying it to flip, make sure you do you due diligence with comps.  If you're buying it to rent, make sure it will end up meeting your expected ROI.

Good luck.

Patrick Liska · Answer

Has this house been on the market for a while ? you can always negotiate the price, i just bought one listed for 42 and got it for 28 because the seller had holding, and selling costs, plus he needed to make a profit ( i figured he made about 10 on it ). H e is just trying to make what he can, if it hasn't been on the market long, i would put in a much lower offer, you will have to look at it and determine how much in repairs you will need, plus figure what you could sell it for ( make sure you include your closing costs in your expenses) and come up with an offer. If it wasn't on the market long i figure you could probably offer about 25-30 for it and they will still make money.