Profile picture for Jane 4

How much to offer on a foreclosure?

I am looking at a property listed at 54,900, it's a foreclosure home that has been for sale for three years. It also would not perc for a conventional septic system or sand mound and needs a pump system valued at 20-30,000. It's in nice condition but needs some work on the deck and a lot of cosmetic work as well as all appliances since it was a foreclosure and they were taken. It is a 1 bedroom, 2 bathroom and it's estimate value for the house and area is 78,000. Three years ago it was listed for 88,000 but I don't think they were aware of the septic issue at that time. What's a good jumping point to offer? Should I add the cost of the septic system into the loan?
  • November 10 2013 - US
  • 0Yes

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Answers (1)

Profile picture for tammygrogan
STEP 1: I would advise you to take the market value of 2-3 comparable homes, ideally within a mile or less of the subject property, that have sold in the past 6-12 months. In today's market, the more recent the sale, the more accurate the estimate of value will be.

STEP 2: Get at least two written estimates from a specialized contractor for the pump and any other repair exceeding $300. Make a ledger of the small repairs (ie. paint, spackle, etc) and the reasonable cost for each repair, including supplies. Put together a packet consisting of the all estimates, the ledger and the documentation for the comparable SOLD properties. 

STEP 3: Take an average of the estimates for the large jobs (ie. 2 estimates for pump - $15,000 and 20,000, add together and divide by 2 for an average). Then average the sold prices of the comparable properties the same way. Add the average of the large repairs, to the amount of the smaller repairs from your ledger and subtract the total from the average sales price of the comparable listings.

STEP 4: In my area, the seller loses an average of 4-5% during negotiations. If you have made a solid case for the asking price, and have included all your supporting data (ie. research and estimates) with your offer, you can now begin negotiating from the price you determined to be the average market value, based on facts and figures. If you determine your average market value to be, for example, $80,000, you may want to start 8-10% lower, making your first offer $72,000-$73,600, with hopes of ending up around $76,000. If the property has been on the market for 3 years, as you stated, you can probably afford to be a little more aggressive.

Hope this helps.

Tammy
  • November 12 2013
  • 0Yes

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