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Rehab Is Understood, so Make the Offer

Posted By: Gary Buchanan In: West Ashley Homes for Sale
Date: Wed, Jul 6th 2016 8:03 am

First and foremost, I hope everyone had a wonderful July 4th weekend.  It is our Independence Day. 

Continuing on with our Rehab Process, you have just gone over all the things necessary to Rehab a home you may want to buy.  You reviewed these Fixes with your general contractor and now you “think” you have a good idea of what should take place to get this home into shape.  Remember this could be a Rehab to Flip or a Rehab that you plan to stay in for a long time (different fixes/costs apply).

The next Step is to simply make the Offer.  Discuss with your Realtor® what you are thinking and how you got to your Price you want to offer.  Your Realtor®, should be able to help you understand what the houses in the area are worth and confirm (or not) your price as to being a good offer.  Either way, your Realtor® is required to Present All Offers for you.

So here is an example of the basics on how to get a number that works for you.  Let’s say the seller wants $275,000 for their home.  Your Realtor®, shows you Sold properties in the area that are similar in price and size and gets you a basic Price/SqFt number.  Let’s say the house is 1500 SqFt (roughly $183.33/sqft).  The other homes have updates done though (so you may want to offer $160-$175/sqft).  You get your Fixes/Updates on a list and got some numbers from your contractor, and that shows around $35,000 to get things fixed up.  If you put that into the home then you would have $310,000 into this home.

You now have to ask yourself (and your Realtor®) if this home would ever be worth that amount.?  Is the neighborhood in a hot area or is it basically flat (showing little to no appreciation)..?  Your options are to:

  1. Offer Lower than Listing Price - $275,000-$20,000+ or so, noting you hope the seller will understand why you offered so low. Your Realtor® should be able to present this to the listing agent and get the offer accepted, countered or just refused.
  2. Take it as is and Hope the Appreciation will catch up in the coming years. Note that in my previous post, I stated we have seen Yearly Appreciation increases (according to CTAR on median sales price) by 4+% to 7+% for the past 5 years. Will it continue…..it is anybody’s guess?
  3. Walk away is always an option

The bottom line is you need to Stick to Your Plan.  If you said you were not going to spend more than $X and/or you were only going to buy if you could rehab for $X where you can see instant equity, then do it.  Don’t let your emotions take over.  I know that is easier said than done.!

Ok….next week let’s continue on with some Offers and see if this place is Bought.