Making An Offer

Author: Rayrsa

2008-09-30 Word Count: 596 Category: Real Estate

When investing in real estate, you do so with the intention of making a profit. Most Investors fail by not doing their numbers and research thus getting surprised by the property not selling at the price they had anticipated and the repair costs running too high. Here are some tips on how to always get the profit you want from your real estate investment.
The first most important thing is being able to accurately determine the fair market value of the property you have identified as a possible purchase. You cannot use the assessed value used by the Tax Assessor Office or the last sale price of the home. Also most real estate agents do not know how to accurately generate comps for you and you need to do your own market analysis. The following is needed for calculating an accurate fair market value of the subject property using comparable properties
- Use only properties that have been sold
- Use properties sold in the last 180 days. If they are not enough you can go back to 365 days but no earlier than that
- For every $100,000 go $20,000 up and down from the sold price. For example for a $100,000 property you only get a range of $80K to 120K sold properties
- The square footage of sold properties should be within 200 sq ft of the subject property
- The properties should be all of the same style that is compare split level to split level homes, single story to single story homes,
- The properties should all be of the same type i.e. condos to condos, townhouse to townhouses
- The properties should be within 10-15 yrs of the subject property age
- They should also have the same number of bedrooms
- The properties should have the same number of bathrooms plus minus a half bath
- The properties should have the same number of garages
- The properties should have the same lot size
- The houses should be in the same neighborhood one mile from the subject property
Once you get a list of the comparable properties using the above criteria you calculate the price per square foot and sort them from the highest to lowest priced property. For calculations purposes you leave out the highest and lowest price per square foot and add all the other ones which should be a minimum of three properties. You then take the total and divide by the number of properties you added to come with the average square foot. This average square foot will be multiplied to your subject house square footage to get its fair market value. This fair market value will be price the property can successfully sell at
Most asking and listing prices are inflated because the seller is in love with the house and will only sell it for an unreasonable amount. The real estate agents also will tell the owner they can sell their home at a high price so the owner can agree to list it with them. For you to determine the best offer you need to make you need to consider the following
- Start with the fair market value that you have calculated
- Subtract the profit you want to make when you resell the property (a minimum 10 closing costs, six months of property taxes, insurance and utilities
-Subtract six months cost of money or interest if you are financing it
After subtracting all the four items above from your fair market value you should come to the offer you need to make to make money with the property