Making the Offer on your Rehab Home
You have worked a few days (or even weeks if you are lucky enough to have that much time) on figuring out the costs to get this home Updated (rehabbed) and you think it will take $35,000 to do what you want to make it better. Well, you might as well add $5000 to that number as you just never know what you will find when you start your project.
Now you can let your Realtor® know what you came up with and then get your Offer Number figured out. Let’s say the seller is asking $290,000 and your Realtor® says other homes have sold in the area with similar features/size for $300,000 or so. You can see that the seller knows this house is Not as nice as the others, so they put it on the market just below what the others were going for. In my mind, I would think the seller will go lower as long as you present your findings right.
As stated in earlier posts, you need to work with your Realtor® about the facts on the Rehab/Renovation like, New Kitchen (other homes had them, but this one didn’t), new/updated flooring, new light fixtures/ceiling fans, open up family room into kitchen and make a bar area so the kitchen is part of the living space and not hidden. Doing all this work, you came to your number above and so simply subtract out that cost from what the other homes are going for. If a home is Nicely updated with similar items as you are suggesting, then take $300,000 and subtract the rehab/renovation costs of $35,000-$40,000. So will the seller accept an offer of $260,000 - $265,000….? Well, it depends. Has the home been on the market a long time (if yes, then you may be in luck)? If the home is on the market for month, then probably not. So what to do…? If the latter, then think about what the seller would be thinking. The seller would not think they would have to come down on their price based on your renovations. The house is livable now. The seller would not want to pay for 100% of Your Renovations, so you have to consider the market as well. Can you still get into the home after your renovations and get some Appreciation/Equity in the coming 1-3 yrs.? If so, then you have some room to negotiate. If not, then maybe this is Not the right home for you.
Let’s offer $275,000 as in this case we think there is room for Appreciation over the coming years. Make sure your Realtor® gives the full details of why you came to this number to the Selling Agent. This will help in the negotiations. Nobody wants to take a low ball offer without having any idea why this offer came in so low, and normally it would be rejected pretty quickly.
The key is to get this under contract and Off the Market as quickly as you can. If you really want it, then get it off the market. Next week we will go through the negotiation process and get it under Due Diligence (10-15 days).
Gary Buchanan/Realtor® w/AgentOwned Realty - firstname.lastname@example.org 843-647-7743