I called a stranger and asked to buy his house. He said yes, now what?!

[onemorebike]

I've been thinking about getting back into real estate investment (I owned a rental in the past but sold it) and noticed a house on our block, in a great neighborhood,  that had sat vacant and unkempt for several months. Decided to set up pre-approval for a mortgage and see if the owner was interested in selling. Ran down their information and gave them a call, he was interested in selling!

My realtor offered to do the paperwork but keep the sale off the official books, saving some money for the seller but leaving me with fewer lifelines in terms of advisors.

I've bought and sold three houses but this feels different. I'm meeting with the owner on Sunday to take a closer look at the property, decide if I'm still interested, see what issues need to be addressed (new roof is a hell yes, the rest I'm unsure of) and zero in on an acceptable price. My main goal is to turn it into a rental, but if the numbers are right, I may attempt to flip it.

Any general or specific tips from those of you who have done this?

Thanks in advance!

[waltworks]

Um, did you actually propose some sort of ballpark price? Lots of people are "interested in selling", but they often have very unrealistic ideas about what their home is worth. Hence all the crazy overprices FSBO listings all the time.

I mean, my advice is make sure you can buy the place for a price where you'll make good money. Same as buying a place any other way, really.

-W

[psinguine]

Um, did you actually propose some sort of ballpark price? Lots of people are "interested in selling", but they often have very unrealistic ideas about what their home is worth.

This is very important when it comes to not wasting your time. Last year I met with a "motivated seller" because I was interested in the property. I didn't care about the building (complete teardown), I was just after the land. Similar lots, with similar buildings, had sold on the same or nearby streets for around $5,000 a piece. It adjoined a property I already owned so it made sense to me.

I was willing to go sight unseen but he refused to talk price until I saw the interior. I had a feeling I was wasting my time but agreed. He came out. We walked around. It was just as much of a disaster as I expected. Flooded basement (flooded for 5 years), caving in roof, but I didn't want the building.

Finally he was willing to talk price. So I told him, finally, what the comps were. And that I had a major cleanup operation if I was going to try it. He looked insulted. Like I'd attacked his mother's integrity. He said that property was worth $100,000 at least! I explained that for $20,000 more than that I could buy a 20 year old house down the street. Comps are comps.

Poor guy revealed he had a $100,000 30-year mortgage on that lump of junk, and he was only 5 years into it.

Massive massive waste of time.

[KarefulKactus15]

I dont have much to contribute.  Looks like you may be your lifeline?   

If you want go to "http://www.homefixers.com/flipthebook.php"   Then go to downloads and download the "Must do" check sheet.

Maybe will help you adjust your offer pricing.    Hope this helps in some way.


I called a guy once (very first cold call).  When he answered and wanted to sell I didnt know what to say.... . So the guy prolly thinks im a retard...    But im much better at cold calling owners of properties now.

[Ben Hogan]

hahahaha Thanks for sharing that. So i been trying to get Ara-Bol-sbi(Arebelspy) to give me some advise on home eval. and I did the same thing as you, walked the nieghborhood and found a few that has mailboxes stuffed to the rim, grass as high as the fence, but free of riff raff. I called and 2 of them called me back and gave me prices that are 10% below market, which is pretty much foreclosure costs here. Which can be had all day and most are in 100% better conditions.

[BAMxi]

We were in a similar situation a while back, but the owner of a house we were interested in had recently purchased it from a tax auction as a flip. We were willing to offer him a little profit if he sold to us so that we could rehab and live in it, netting everyone a positive outcome. Seller agreed, we walked the property and it needed a lot of work. Though I'm a property manager and know 99% of what to look for, we had the contract written up to include an out clause for a professional inspection, so we could still pass if something we didn't notice popped up. Upon the inspection, we learned that the septic tank was 30-40 years old and leaking into a nearby creek. The lot size is too small to fix or put a compliant system on, and even if you could, it was within the city limits so you'd never get a permit. The only solution was to hook the house up to the city sewer system. Had an engineer submit a bid and costs were over $30,000. This basically killed the deal and would have had us spending more money than a comparable move in ready house nearby, so we passed. So, long story short, unless you know absolutely everything about your local code and things to look for, have your realtor write the contract so you can get out after an inspection and hire a really good inspector. We were out $500 for the inspection but it saved us thousands in buying a house that is now likely to just be demolished.

[Mola]

hahahaha Thanks for sharing that. So i been trying to get Ara-Bol-sbi(Arebelspy) to give me some advise on home eval. and I did the same thing as you, walked the nieghborhood and found a few that has mailboxes stuffed to the rim, grass as high as the fence, but free of riff raff. I called and 2 of them called me back and gave me prices that are 10% below market, which is pretty much foreclosure costs here. Which can be had all day and most are in 100% better conditions.

You shouldn't trust that guy since he is very clear about being A Rebel Spy. He probably has been talking to the Russians like everyone else.

[powskier]

I once did a deal like this. This is how it went:
Ok I am interested at x price, he countered, I countered with reasons why, we agreed. Shook hands.
I pulled out a  contract I had gotten for free from title agency, I had pre filled as many things as possible, we filled it out, signed it, went to ups store made a copy so we each had one.
Then went to title company, they set everything up, they waited directly to hear from bank on mortgage application status. Sent up closing date , done deal.

If you are not knowledgeable in construction/etc bring someone who is with you when you go look at place. Go in with comps printed out and a solid idea of value to you.
Many people who hang on to uncared for/empty properties seem to have really inflated ideas of what it is worth, just a heads up...
Good luck.

[onemorebike]

Tons of great advice in here, thanks for the input. I did a walk through with him a few weeks back, but he has some employment issues going on and was thinking he's either sell it or move back into it. The place definitely needs around  20k of work, but I think the bones were pretty good and I could fix it up into rentable condition inside of a month or so. My guess, based on the condition, is he will eventually sell later this month rather than move in. He did mention a number during the walk through that felt low to me and I would pay in a minute, but it was more of a passing "someone told me this is worth" versus an informed decision from talking to a realtor and looking at comps. One of the draws of​ this sale for him was that my realtor friend was willing to do the paperwork if we nailed down most of the deal with out the costs involved with a realtor. Saving cash there and likely on the seller end since he won't need to list, etc. I'm a little at a loss on how to decide a reasonable offer number without a realtors opinion. My friend sent me comps but they have a 80k range - so not as useful as I'd hoped. Any suggestions for how to settle on an offer price - I'd love to get close the first time. (And I'm waiting until next week to call him back and see what he thinks)

[pbkmaine]

Tell him you will pay the price he mentioned. See what happens.

[KarefulKactus15]

How are they "comps" with an 80k range?  Unless your looking at 600k+ houses?    I just found that odd.

If you feel like the number he said is good, start there.   But I'm concerned that some of your value judgement is based on comps with such a large variation.   

I'm a total amateur though....   So maybe I don't understand other markets.

[Cwadda]

I'm in the process of purchasing a house. I went into the rent section of craigslist and sent about 20 emails saying "I would like to buy your house." I ended up coming to an agreement with someone who was moving out of town. There was no negotiation on the price. She just said, we would sell it if we get back what we have invested. It was a yes or no deal. Price seems fine to me. Everyone's happy, no realtors involved, saved about $30k between us.

[onemorebike]

How are they "comps" with an 80k range?  Unless your looking at 600k+ houses?    I just found that odd.

If you feel like the number he said is good, start there.   But I'm concerned that some of your value judgement is based on comps with such a large variation.   

I'm a total amateur though....   So maybe I don't understand other markets.

Valid question. I don't know the answer I just know that the comps listing my realtor pulled for the hood on similar sized homes in the area had that range. I'm going to start low and see what happens but it seems like either way the value of the home will come up ehrn the bank does it's appraisal.

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