Home Buying in Philadelphia>Question Details

cdd, Home Buyer in Philadelphia, PA

I am seriously considering buying a duplex in west philly 19139. It is right out side of UCITY and they are

Asked by cdd, Philadelphia, PA Wed Mar 25, 2009

asking 219K. It's a newly rehabbed duplex which is an all electric home. I have heard that all electric is harder to sell when the time comes and the utilities are not separate so I would have to estimate that into rent. Also there is nothing within a 4 block radius that has sold for higher than 205K (most are actually much lower than that). My question is how low would be unreasonable as an offer. The home that sold for 205 was on a nicer block...but this is a complete rehab and I don't want to insult the seller but I also don't want to significantly overpay given it's a neighborhood in transition

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Let's assume that the comps you have are correct and they say that nothing has sold higher than 205K in the surrounding 4 blocks. That info tells you that there may be an appraisal issue if you purchase it for much over 205K.

The seller may have over-improved the property creating the scenario of the best property on the not so best block (no insult to the seller intended of course). The value of this duplex is hinged on 1) how low you can get the home for and 2) how long you intend to keep it. If you are in it for the long haul, the neighborhood may catch up to the higher price in a hand full of years. You have found the thorn on the rose so to speak when you mentioned that other comparable properties have sold fo much lower than the 205K. As a realtor, when we see that most comps ar significantly lower, this indicates that it may be a few years for you to gain any equity value in that property. Make sure the rental amount will carry you thorugh a few years with cash flow for repairs and upgrades (ex. electric).

If the utilities are not seperated for each unit, you need to calculate that into the equasion as you mentioned. The home will be worth more if the utilities are seperate. If you add the cost to you for upgrading the electric on top of your offer price, you will want that number to be in the range of other comparable properties.

We have had sellers say to us that they are motivated and will consider all offers, but often times when a low offer comes in, the seller's emotions get the best of them. But you know what? As a buyer and an investor, you need to look out for your best interest and emotions really need to be set aside so you can make strong business decisions. It is better to insult the seller with an offer price that you believe is fair then to wrap up a deal that is a terrible value to you.

Long story short:

1) Determine the average price for similar duplex properties and try to get 3 similar comps.
2) Determine the "differential" or the % that the homes have sold for compared to their list price (I assume it will be close to 90% of the list price)
3) Calculate in the cost of upgrading the electric and shave a few bucks off for that.

Start there to determine what you feel good offering as an opening bid. Hope for the seller to meet you in the middle of your bid and his asking price but plan on a possible counter that will challenge that. Stay cool and be mentally ok with walking away fro the property if the numbers do not make sense to you.

We have a few blog posts that may help you. I'd ba happy to forward them to you. No strings attached. Just let me know. Hope this helps. These decisions take a lot of thought and projection.
1 vote Thank Flag Link Wed Mar 25, 2009
Hi Crystal,

I own a 3 unit and 4 unit in Ucity, so I'm always keeping an eye out on the values of properties around there.

1. The 4 unit I bought last year; and it's all electric and I love it!!! All the investors I work with hate PGW including me. lol So all electric will not hurt your value, but the utilities not being separated will. If possible you should try to negotiate that issue in the price or have the seller separate it before you purchase. It doesn't hurt to ask.

2. 219k is pretty pricy in my opinion for a duplex without separate utilities. I'm in the process of listing a triplex in ucity for around that same price and all the utilities are separated.

3. When doing your research for multifamily properties look at 2 to 4 unit properties that sold to get a feel for all around values. The banks view 1-4 units as residential properties, so therefore it shouldn’t change your mortgage term much, if any; if you decided to buy a 3 or 4 unit, plus that will be more income coming in.

I hope this helps. Feel free to contact me if you have any other questions or if you just want to pick my brain.

Jamal Pitts
Keller William Realty
Office: 610-994-1796
Cell: 267-496-5972
1 vote Thank Flag Link Wed Mar 25, 2009
one more thing.. in the listing they say "bring all offers and sellers assist available" but does that really mean ALL OFFERS?? lol
0 votes Thank Flag Link Wed Mar 25, 2009
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