Posted by SCook85 on June 21, 2001 at 19:41:30:
If you are going to ask that question you should just ask why would ANYONE sell a home that has an ARV of $150k for $78k. You know the answer to that one. Because they are motivated.
You know just as well as I do, that most of the time our offers are going to get turned down. If a home has been on the market for 6 months or 6 hours, if we offer half of what the seller is asking they are going to say no almost every time (notice I said “almost”). The bottom line is this, I and others who come to this site have done it. Some take the shotgun approach and just offer on every single home (50% of list price) and they get some. I believe Scott Britton wrote and article once about offering 50% + $1 on a hundred homes, and buying 4 of the homes that he made offers on.
I personally have offered well below list price (30-50%) more times then I can remember and have bought dozens of homes as a result of it.
I don’t know the circumstances of all the sellers, I don’t know there motivation levels- low offers help me to determine who is motivated and who isn’t.
Reply to an email that I received… - Posted by SCook85
Posted by SCook85 on June 21, 2001 at 07:46:30:
Email to me:
Thanks again for responing to my email. You had some great suggestions. Unfortunately, the suggestions have created more questions.
1)You say you don’t actively search the MLS for “vacant” properties. What happens if you find a nice home that fits into your formula and it has a long term tenant living their. I know if you were buying as rental income this would be ideal but what about if you intend to flip it. What do you do? What if you get it under contract and the investor/buyer wants it vacant?
2)I mentioned before that their are 600 vacants for sale in my county. The exact # is 582. lol. The frustrating thing about this and the thing that scares me is that 99% of them are at or near FMV. (Fair Market Value) The average is in the range 120-140K and for the areas they are in, they are in the top of the price range. With your formula, I would start at *[(FMVx70%=$98000)-repairs] and i would try to offer, say 10K under that amount if possible. That would be about 88K-repairs. I don’t mean to sound negative, but I don’t see it happening. What should I do? There are houses in the “war zones” in the 80K range - yes houses boarded up and in terrible areas command those prices - but should I start there? Do I have the wrong mindset all together? What would you suggest for someone living in an area where the median house in the “bread-and-butter” area is 155K. I’m afraid to pay that much and get stuck with someone that investors won’t buy.
The problem with occupied properties is that the owners typically are not motivated sellers. There homes are in good enough shape for someone to live in so they can rent it or sell to homeowners without discounting. You want fixer uppers that everyone else does not want.
As for making offers on the homes. Would you buy those $155k bread and butter homes for $78k? Do you think you would have a problem selling them if you bought them for $78k? Would you mind holding them for a little while if you could buy them for $78k? Out of 582 you will get some of thos $155k homes for $78k. I can’t tell you which ones and you won’t get any if you don’t make offers. But you need to make offers on as many of them as you can to find out which ones can be had for that price. You will never buy a $155k home for $78k if you don’t offer $78k. Does this make sense?
I’m told all the time that you can’t buy homes for $1000. My response is “have you ever offered $1000 for a home”? The response is usually “no”. If you don’t offer $1000 you will never buy for $1000. I didn’t believe that I could buy homes for $1000 2 years ago, I didn’t believe it one year ago, but for the last 6 months I have probably bought a dozen of them. That is because I offer $1000 all the time now. There are people who just don’t want there houses. They aren’t asking $1000. Many of them are asking $15-20k and accept my $1000 offers. You may not be able to get homes for $1000, but the point that I’m trying to make is you can buy homes for ridiculous prices only if you make ridiculous offers. Most of them will be turned down, but here and there you will get one.
I hope this helps some of you.
A question - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on June 21, 2001 at 14:28:20:
How long have the houses you referred to stayed on the market?
I don’t see how anyone listing (through the Realtor) the house for $150K could accept $78K, unless it’s been sitting their empty forever.
How could someone with a recent listing take an offer for 1/2 of price, assuming $150K is a market price, and not some inflated figure from the air?
Re: Reply to an email that I received… - Posted by Carey_PA
Posted by Carey_PA on June 21, 2001 at 08:59:57:
Great Post Steve!
I was just about to offer $5k for a property listed for 20K, hmmmm maybe I’ll offer $1k now lol
Oh yeah and another point to make is that your realtor is going to tell you “they’ll never accept that” or “now that this house was dropped $10k it’s not gonna last” but as it turns out, THEY DO ACCEPT YOUR OFFER AND THE HOUSE DOESN’T SELL BECAUSE IT WAS DROPPED $10K, sooooo MAKE YOUR OFFER!
My realtor just told me yesterday after looking at a property “yeah at this price, this house is gonna go” Do you think I listen to him? Do you think I’m gonna offer what they’re asking?
Heck if I listenedd to my realtor when buying my first home I wouldn’t have bought it for 50% of it’s value