Did you see an ad on Craigslist or Backpage about getting a Fair Offer? So now you are asking just what does a fair offer mean?
There are a lot of factors that go into us making you a fair offer.
The first two numbers we look at are it’s after repair value, meaning if we were to fix everything up like the Realtors and the buyers want, what would the house sell for then. The other number is what do we think it would sell for today, as it sits, in as in condition, with no repairs, clean up, nothing, you hand us the keys and go.
If you home is in pretty decent shape and we think it would sell as is, that is the number we work with. But if we think it will need repairs, updates, clean up, any work, then we start with the after repair value and we start backing out numbers.
So the next big number we back out is how much is it going to cost to fix everything. Most people realize when they need a new furnace or ac or roof, but other items may need repaired, replaced or updated, but because they have lived with it so long or spent so much money to put it in that they don’t realize we need to spend money on it. Here are some things to consider.
Furnace and Air – if they are under 10 years old we would probably service them only, but if they are over 15 years old, we usually replace them. Cost $3,000 to $5,000 per pair.
Windows – if they are over 20 years old or if they have storm windows, they usually need to be replaced. Cost $150 to $300 a window)
Roof – the average life of the average roof is about 20 years. So unless you have had your roof replaced in the last 15 years or the house is younger than that, you probably need a new roof. (Cost $5,000 to $10,000 or more for larger houses or houses with shake / wood shingle roofs)
Hot Water Heater – these last on average about 10 years, cost to replace about $800 to $1000.
Kitchens. This is where we spend money that many homeowners don’t even realize that money needs to be spent. If the Kitchen is under 10 years old, it may be a simple clean, new counters and new appliances. However if the kitchen is over 10 years old it may need a bit more in updates and then again it may need to be completely removed and redone. Cost $3,000 to $10,000 or more .
Bathrooms. Similar to the kitchen scenario. If it is newer, we can work with it, older or with weird colors and we often have to start over. Cost $1,000 to $6,000 – per bathroom.
Flooring: We almost always have to refinish hardwoods, replace carpets. If you have vinyl flooring anywhere, that usually will need to come out and be replaced with Tile. Costs for flooring $3,000 to $8,000 per house.
Exterior: sometimes we can power wash nice vinyl siding, other times we replace siding. Steel or wood exteriors usually will allow us to paint to update the color. Costs from $4,000 to $20,000.
Interior Paint: This is almost always required and does not cost too much unless we see a lot of nicotine stains or have a lot of wall paper to remove. Costs $3,000 to $8,000.
Fixtures: Take a look at light fixtures – are they too dirty to clean or are they brass or plastic that has yellowed, they probably need replaced – cost $1500 to $5,000 per house.
Yard – if there is not a nice green lawn, with minimal beds of flowers, bushes that are very well manicured we probably need to do work in the yard, trimming and cutting down trees and for those that are really overgrown so much that you can’t see the house, rip out and start over. This can be minimal at $500 for the entire yard and we have spent about $8,000 for a really overgrown landscape and dead grass.
There you have it, most of the repair costs, we are going to add up all of them and back them out of the after repaired value. There are a few other repair costs for things like outlets, electrical updates if needed, switch plates, drywall repair, foundation repairs if needed, vent covers, chimney and fireplace repair and these can add up to tens of thousands as well.
And there are more costs to figure in here.
Holding Costs; While we are spending time repairing the home and then marketing it for sale we will have holding costs on the money we have tied up in the house, real estate taxes each month, vacant house insurance policy, utilities, etc. Before real estate taxes, we can figure about $800 to $1000 a month and we figure in at least 6 months for the entire project from the day we buy it to the day we sell it.
Real Estate Expenses: then we have to pay real estate agents to sell the house at 6% of the after repair value, we have to pay closing costs at about 1% of the after repair value. And quite often we end up paying another 3% of the sale price towards the buyer’s closing costs as well. So in real estate expenses we basically reduce the after repair value by 10%.
Profit: We have talked about all the costs to us, and we have yet to make any money. We don’t buy and fix up houses to sell for fun, we do it so we can earn a living and keep a roof over our heads and food in the pantry. So we have to back that off.
Now you can compare that to your costs to sell the house right now . . . you might have all the same repair costs, only probably higher costs as you don’t have contractors that do work for you on a regular basis so you will be going to Angies List or the Yellow Pages and the contractors that tend to work with home owners cost 25 to 50% more than what we pay (really). You are going to have the same realtor fees and title company fees and buyer closing costs.
So you can compare a fair cash offer from us closing in a week or two to spending all your time and money getting the home ready to sell, holding it until you do get it sold and then paying the Realtor to sell it and you will quite often find these to be very comparable.