Question about buying a flipped house?

Question

The seller bought the house in april 07 for 91,000.00
They maybe put 10,000 into fixing it up and now want to sell for 134,900. Is this justified? Can I lowball and get a much better price?

Houses in the area sell for about 20,000 less, and in response to the person who said that they thought this price was low and should have asked for more, you are an asshole, and do not know what you're talking about

It turns out that the owner of the house owns 100 rental properties across the city. The average price of a house sold in the area is 120,000. It has been listed since April 07, and the seller originally posted it for 169,000 but changed it after only 1 week.

Answer 1

Hi,

If comps are $20k less than the $134,900 that they are asking, you can counter with a lower offer, but the flipper is into the house for at least $101,000 before you calculate in his closing costs on both sides of the deal and holding costs for a couple of months. So based on market values, No, the price isnt justified. Even if they have done a gorgeous rehab job, the neighborhood is not going to support the price.

If the true value of the property is $114,900 and they are into it for $101,000, they (the flippers) have screwed up because they are going to have a hard time selling it at the price they need to get to make the deal worthwhile.

As an investor, I would go find another deal. If I was an end user and really liked the house, I would offer $105,000 and see what they counter with. But I wouldnt spend a lot of time on it -- the flippers need to get more than market value on the house. They are better off holding if they can make it cashflow as a rental or they may be able to get close to the price they need if they offer owner financing on it.

If you are not in love with the house and they dont accept the $105,000 offer, look for a better deal. They are out there.

Best of luck to you,

Barbara
www.therealestatebirddog.com

Answer 2

In fact, you are 100% correct. It sounds like the current market in your area, with houses selling for 20k less, do not warrant that price of $134,900, nor will it appraise for the $134,900 he is asking. Maybe this could have been a realized "flip" last year or the year before, but hard to do now. In any event, it is a good idea to be sure that whatever contract you enter into has a "appraisal contingency" whereas you would not obligated to continue with the purchase if the value of the appraisal comes in below the purchase price. Hope this helps

Answer 3

The best way to put it is this: If you find a diamond ring at a yard sale and you pay $100 for it, you polish it up and clean the stone and have it appraised which costs you $10- if it appraises for $10000- does that mean you should sell it for $115? No. You would sell that thing for every penny you could get! Understand s/he has done just that. You can probably get a decent deal w/ this being a buyers market, skim a few K off the top- but that would be about it.

Answer 4

Well. it just sounds like the people who were trying to fix it up really didnt know what they were doing. Houses built in that era were usually built very solid and I would say its most likely a steal. But the electrical really is a drag. Perhaps you know someone handy to fix it? If not then look around for a good hanyman locally that does that work all the time on the side. I would say buy it if the roof is good, if there is no water damage in the house, and if the foundation is solid. Heck you can find NICE furniture almost/ if not bran new at the thrift store! So take some of your funds and fix the place up. Sounds like it just needs some loving care :) Good luck with your new sanctuary :)

Answer 5

The house is worth whatever you're willing to pay for it. In this market you may attempt to lowball, however, too low and they will ignore your offer. Obviously they have enough money to handle some risk. But if it appraises for the asking price, you may not get very far.

Answer 6

Yes this is justified. He actually is not making much money at all, this is a flip gone bad. His purchase price, had no correlation to your purchase price. If he was able to negotiate a good deal, and then sell it for a profit good for him. Its the American free market system. I have bought homes and not put a dime into them and mad 45k-50k. Its all about being a smart buyer, and obviously he was. If you are not comfortable with this look at another home.

Answer 7

This is justified. Just because he bought a deal does not make it not justified. If you are looking for a cheap house than go buy a fixer. Investors buy houses the average person will not even think of buying because of the risk of problems. If you are looking for a nice house and the price of 134K is reasonable for that market, than put in a reasonable offer based on the condition and market prices, not on what he purchased it for.
www.1-real-estate-agent.com/blog/

Answer 8

The question you need to ask is how much are similar houses in the area selling for? Would you pay $135k for another house down the street? How much the seller paid and how much they put in really doesn't make a difference. It's how much anyone is willing to pay.

Answer 9

what he paid for the property and put into it is immaterial.

it'll only sell for what the market will pay. your best indicator of this is comparable properties and their actual sales prices.

if this guy is a professional flipper, you may safely bet that he knows more about the market than you do and won't take much less than his asking price -- he knows he'll get it and probably within the month.

if you're having an emotional reaction to how much money he might make instead of looking at how much comparable houses are actually selling for ... get off it. Passing this deal by because you're envious of his profit won't get you a better price on the next property you see -- that seller is probably less of a realist than this guy.

GL

Answer 10

You can try. All depends on how much similar houses are selling for in the neighborhood, how desperate they are to sell, how long they can float the note, etc.

If that price matches the comps in the neighborhood, I'd think they would hold out until they get it.