$25g in equity at purchase but on a busy street...

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$25g in equity at purchase but on a busy street...

Nick Dillaha
Real Estate Investor · Fort Myers, FL · Member since 2014 · 50 posts · 4 votes

Hey guys!

Looking to buy a single family home as a primary residence while renting my current home... The house we love is in an amazing, thriving neighborhood, but is the first house in on a semi-busy road. The home has already dropped $25k in price and the realtor is confident they'll take another $25g off after being on the market for 83 days and are motivated to move. This would be a buy and hold for us as a place to raise a family, close to shops, A+ schools, its 2000sq ft under air, and only really needs a roof within the next 5 years. Its big, well kept, granite counters, large lot, room for a pool...

Just aren't sure if it's a smart buy even with the instant equity because it has been difficult to sell and IS on a fairly busy street. It was appraised at $250k which is their current asking price, but again, the realtor is confident it will sell for $225-$230k.

Please help!! 

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  • Allen Fletcher
    Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
    10y

    @Nick Dillaha

    The thing to remember is that no matter what an appraiser says the value of a home is, if the home does not sell for the appraised value (+ or - 5%) than the property is not worth what the appraiser said it was worth. Real estate valuations are subjective by nature and thus can be valued too high or low depending on the appraiser. I would be careful with this property, on the surface it seems like a deal, but the fact that the sellers are having trouble means that they are too high and you may be purchasing too high if you offer $225k.

    In your situation I would offer as low as possible and have them counter you and negotiate from there. If you have run the numbers and the numbers are good at a price of $225k then offer below that and make that your max. Otherwise, walk away and look for something else.

    Regards,

    Allen Fletcher

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  • Nick Dillaha
    OP
    Real Estate Investor · Fort Myers, FL · Member since 2014 · 50 posts · 4 votes
    10y

    Thanks @Allen Fletcher There is a house around the corner from this (7 houses down) with less charm, but same sq ft, build date, yard size, etc. that doesn't have the traffic that this house does. And its pending at @249k. The community is amazing, we were thinking if we did buy, of maybe trying to add signs, speed bumps, etc. but there will always be a higher traffic volume. 

    We did offer $235k back when the house was listed for $259k, and we were turned down. Due to the increased time on the market the realtor is confident in a $230k offer. Based on the feedback, its looking like this may be a property just to walk away from... Thank you for you help. 

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  • Marci Stein
    Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
    10y

    the busy street lowers the value. i agree it's best to offer very low price (25% less)and walk if not accepted.

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    @Nick Dillaha, Make sure you use comps located on the same busy street only. The next street over, which isn't busy, is NOT an accurate comp. 

    Personally, I'd walk. Homes on busy streets take forever to sell, and always sell low. Read Pet Sematary by Stephen King. That's why families don't buy houses on busy streets. Renters also don't like busy streets, even if they don't have kids, getting out of the driveway in the morning can be very difficult. If you lived there a while, then turned it into a rental, I think you would have more turnover than a house the next street over.

    If the home was worth $259, it would have sold at $259. 

    If you had to sell it fast, being on a busy street would make that almost impossible. 

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