I met with a seller that wants to get rid of her property but from the sound of it she wants close to market price because couple wholesalers tried to give her a price and did not budge. The condition of the house is pretty bad, ceilings are really low (i am 5'10), floor seems uneven, entire house needs new flooring, new bathroom, kitchen, patio deck is warped. The only thing good about that house is the view. I checked the comps around the area and it should sell about 480-495k arv. Repairs look about 40-50k I would like to offer 340k but I have a feeling she will not accept it. I am not sure how to really approach the price to her without insulting her.
These are the specs
1464 SQF 4 Bdr 3 baths Located in Los Angeles, CA
Frankly, I'd move on. She is not motivated and you may not have the skills to educate her otherwise, even if you do, sounds like she's impressed with what she has, not a good situation to spend time with. Keep an eye on it, but she needs to come to reality.
Otherwise, show the repairs needed to bring the property up in standards with comparable properties, then the costs to do so. Show the after repair value. You can't work for noting, deduct a fair profit for the work needed. Deduct your holding and sale costs if any. That is the offer and the why she gets that offer.
Uneven floors, ceiling issues, I suggest you get a professional bid on repairs.
Then if she balks at the offer, tell her to make the repairs and you'll be happy to pay more! Her property isn't marketable in it's current condition. :)
I agree Phillip, the margins are slim if you are looking to sell the home to someone looking to flip. When it comes to offending the owner with a low ball offer, I wouldn't stress over it too much. Often I compare being a listing agent here in Orlando, Fl to owning a pawn shop. People have inflated perceptions of what their property is worth and it is your job as the listing agent to give them a dose of reality. Much like how an owner of a pawn shop has to tell folks that their stuff isn't worth as much as they think.
Sometimes being the third low ball offer on the property is better than being the first. The other offers that came in before have softened the blow for you and actually may have the seller considering that their property is over priced. I would write the offer. Should the seller reject your offer, call them back a few days later to see if they would reconsider. I have picked up many properties, days, weeks and sometimes months after my initial offer just by following up.
Another thing to consider is marketing to different investors. There is a market for homes with a decent equity position but not enough margins for a flip. Some of my investors like to buy homes for as much as 80% or 90% ARV. They will rent them out for 2 to 3 years as the equity grows and sell for a much higher profit.
At the end of the day, don't get too attached to any deal in particular. Increase your volume of offers, broaden your buyer list, and you will be in a much more comfortable position.
There is no money on it, actual expenses say you only have 20% margin to it. By the time the flipper analyze the deal, you are right on market value, and with what you described as repair, it might be more than that, check foundation issues if the whole house is not uneven. If floor is uneven, and patio is warped, it could be the foundation, rarely, but it happens.
I appreciate for the insights and advice. After reviewing the post I'm starting to think my offer might be a little too high. I'm going to give her a lower offer and see what the outcomes are. If anything I will continue to follow up with her in a week
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