Nov
21
Lo and Behold, an Offer
November 21, 2007 |
We’d pretty much resigned ourselves to renting House #1 and had signed the paperwork for our realtor to list it for sale as well as for rent late last week, so when I saw our agent’s number on my cell phone, I assumed he had a potential tenant lined up. Surprise surprise, he was calling with an offer.
We’d originally listed the house for $94,000, left it there for about 60 days, and then bumped it down to $89,500 two or three weeks ago. The offer is for $84,000, but with $2,500 for closing costs, so essentially it’s an offer for $81,500.
According to the other agent, it’s a first time home buyer and she’s “pretty firm” on the offering price. Her main concern and rationale for coming in below the listing price is that the foundation needs leveling (which it does, so no huge surprise there). She also wants a fairly quick closing, December 14th, as well as a $400 home warranty plan.
If we accept the offer as is, I’m looking at a net profit of about $4,000-$5,000 after everyone gets their pound of flesh (agents, tax man, title company, etc.). That’s not really a number that makes me do ecstatic backflips of joy, considering the fact that I invested a lot of personal labor and time in the house, but it’s also not terrible, especially the more I think about it.
Lots of things changed dramatically after we bought the house back in February, most notably the ability for my target demographic (first time home buyers looking for an affordable 3-1 starter house who are willing to overlook some of the “charms” of a 70 year old house) to get loans. Central Texas has been fairly immune from the dizzying past highs of the real estate market as well as avoiding the current precipitous plunge in some areas, but there’s no denying that we’re feeling the same effects other areas are, especially as far as availability of subprime (and adjacent to subprime) loans.
I also have to keep in mind that my plans shifted pretty dramatically after buying House #1, when we decided to sell our house in Austin that we were renting. A smarter person than myself would have been more prepared for that possibility, but I felt like I had to move on buying House #1 or lose it, and while I knew that selling the Austin house was a real possibility, I didn’t cover all the bases as completely as I could, as far as feeling out our tenant (my brother-in-law) as to what his plans were, if he knew we were planning to sell the house in the near future. Turns out his plans were to go ahead and immediately find an apartment to rent, which escalated the decision to sell the Austin house, which meant I had to shift focus to getting that place ready to roll instead of working on House #1.
I think that was the right decision, as we managed to bumble our way into selling the Austin house at pretty much the exact top of the market in June, but it pushed everything back with House #1, reducing any profit due to carrying costs and getting it on the market much later in the year.
It’s also worth noting that House #1 was my first shot at the flipping thing, and I made a lot of rookie mistakes. I spent too much time dinking around myself doing all of the work, especially when I could have hired it out and been working on the Austin house simultaneously. It also was my first attempt at finding local contractors for roofing, furnace replacement, and flooring, so there was a lot of trial and error there, and some screw-ups on my part as far as the timing of getting people in and out. I also wasted an ungodly amount of time driving back and forth to Lowes, not yet adjusting to country life where the nearest Lowes is an hour and a half drive, round trip.
With all that babbling and rambling in mind, walking away with $4,000-$5,000 in my pocket isn’t terrible. There’s a very real chance that I could be leaving money on the table, and that I should rent it for 2-3 years, let it cash flow slightly, then sell it later for a much larger profit. That’s assuming the economy doesn’t tank, of course, and that lending practices at least slightly return to the days of yore, once a lot of the subprime losses by financial institutions gets flushed out of the system and everyone forgets the dangers of freely available credit for all.
I also was never looking at a real windfall here, even in the best scenarios. Yeah, $10,000-$15,000 in profit would have been much nicer, but even that wouldn’t be life-changing, break-out-the-champagne profits. A lot of the motivation with taking on the project was to stop talking about flipping houses and give it a whirl, putting my money where my mouth was, and even a profit of $0 (or hell, even a small loss) would accomplish that, as far as the following through on my ambitions part of the equation.
Long story short, I’m leaning towards taking the money, chalking up lots of experience and learning losses, and booking at least a small profit on the first venture into flipping. It’ll help ease my mind substantially, too, as far as House #2, especially with the inevitable repair costs piling up. I’m thinking that we’ll counter at something like $85,500 or $86,000, and hopefully wring an extra thousand or two out of the deal.
So, in the end, good news. Like anything, it could have been better news, but such is life.
Comments
2 Comments so far
Take the money and smile. Counter a little, but not enough to tick off the potential buyer. Walk away with a fat back pocket. And be thankful that the bottom line is black, not red.
Happy TG!
AWESOME!!!!! Way to go Seth! Backflips, no, big sigh out, yes!
Oh, and about that roof: in Florida (altho we are central Florida) the roofers have us over a barrel. I guess…anyway, you give us all hope!