Have your Realtor run the comps. Determine what the property would be worth in good, fixed-up condition. Then determine the amount of repairs and upgrades needed. Add to that what your time and efforts would be worth to manage the upgrades and fix-ups. Then offer something less.

Here's an example. It's a modified version of the process real estate investors use.

Let's assume that in good, fixed-up condition (what investors call ARV, or "after repair value") that the property would sell for/be worth $300,000.

Then figure out the costs to upgrade and repair. Let's say $30,000. (Kitchen=$15,000, Two baths @$5,000=$10,000, Paint, etc.=$5,000. These are very crude numbers; you need to pin the numbers down precisely.)

An investor would take a percentage of the $300,000, then subtract the repair costs. As a retail buyer, you can just take the repair costs and add maybe 50% to them to cover cost overruns and your time and effort. Adjust that percentage, but allow a minimum of 25% just for cost overruns. So now the repair costs plus a safety margin and your time all come to $45,000. Subtract that from $300,000. That means you should pay no more than $255,000 for it. And probably less.

Now you can take a look at what the listing price of the property is. If it's $200,000, then it's a good buy as is. But if it's been on the market for two years, it's probably priced higher.

If it's priced at $250,000, re-check your numbers--both the CMA and repair costs. It's a fair value as-is. You'd probably offer a bit less--say $235,000.

If it's priced at $300,000, remember you're paying no more than $255,000. And there are a couple of strategies at this point. Maybe come in at $250,000 or so, and let the seller know that this is your one offer. Period. Or come in a bit lower, say around $220,000, and be prepared to negotiate, but again no higher than $255,000.

Your Realtor can advise you on the best strategies to use.

And consider getting a 203(k) loan. That's a loan that includes both the purchase price and the rehab costs. Check with your Realtor or a good mortgage broker for more information.

Hope that helps.

Hi Dee.....I say make a really low offer and see what happens! It can't hurt to throw something out there and see what comes back! You have to be careful with lender requirements though on a fixer upper! I could explain this further to you! But it is important that you work with a licensed Realtor!

Dee
Making an offer on the right home is not a problem, making an acceptable offer on a home at the lowest possible price needs preparation. You need to find an agent that works well with you and can explain the value of this home in todays real estate market.
i see you live in alabama, are you relocating to pennsylvania? you may also need a relocation package to help you determine which area suits your needs best.
Let me know how i can be of help.

Dennis Strange CDPE
Certified Distressed Property Expert
RE/MAX Premier
dennis@DennisStrange.com

Dee, is the property listed in the MLS? If so, then my recommendation would be to get a Realtor to represent you, especially because you won't pay their fee - the Seller will. Basically, an agent will write up the actual offer, protect your interest with contingencies (inspection, mortgage, etc), and guide you through the process to settlement.

I love fixer-uppers. There is something about every room being something that YOU'VE picked out (paint, tile, carpet, etc) that appeals to me.

One thing to keep in mind is that financing on truly distressed properties can be a little problematic. Here is a blog I've written on the financing aspect of the deal. If this home is just dated, as opposed to distressed, you probably won't be impacted by financing issues...