Posted by Ed Copp (OH) on September 15, 2003 at 18:58:47:
The assessment means absolutely nothing (perhaps less than that).
We have no way to know what costs are where you are because we do not know where you are. Is labor $35 per hour, or $7 per hour. If you do the math you will see that this will make a difference.
What is the house really worth? You did not say, perhaps you do not know. The equation that you present needs to produce a house that can be sold for $85-$100,000. Do you have that?
The sellers estimate is always a poor place to get information on repair costs. For example he says that the septic can be replaced for $5K, how do you know that the cost won’t really be $9K ? How is the leach field? Is there a permit(s) required, if so how much does that cost? Will the inspector find more work that “must” be done?
The asking price of $69,500 indicates to me that the amount is more than the property is worth right now, or it would already be sold. So I would work from there. Figure in the cost of the septic, and figure in the cost of a real estate brokers commission. Everybody wants to “save the commission”. In this case the cost of the commission is already figured in, and the seller wants you to pay it to him, about $4,200 so figure that as a cost. Now figure financing and closing costs, and figure out how long it will take to get the property ready to sell (your holding costs). Always consider that the top 10% of the pricing is “fluff” as a general rule. This means that he would probably come down 10% for a cash offer that would close in a day or two.
Pencil up the things that I have mentioned and you will most likely come to the conclusion that you are about to buy a fixer house that is not ready to sell, for full retail price. A few comps around the neighborhood might show that you are about to pay more than full retail.