Buying Deceased Estate - Offer

[AndrewT]

Hi Everyone,

Been posting a few threads lately but the help has been great! We are back into the market, and have been given the pre-approval from our bank for up to $375,000!

So we have been keeping an eye on the market where we want to buy lately, and have to say we have seen some good buys and alot of stuff overpriced! Today we went and saw a property that we thought was overpriced, but we wanted to see it anyway as it looked like a good carcus for renovation!

After talking to the agent and looking through the property we found out that there has been a few people through, but no one has offered anything. The house needs alot of work and is scaring people off. It's a deceased estate and has only been on the market for 2 weeks, and today they dropped $15,000 off the price because they are keen to sell. It really is a good property to renovate - so many ideas already!

So originally it was listed at $380,000, now reduced to $365,000. I believe the market value of the property is around the $350,000 mark. My gut feeling says to put an offer on the table for $330,000!

I would like to buy under market, to allow us to re-finance again to release funds for the main renovations! In saying that, I do feel this property has great potential! What are peoples thoughts on offering on deceased property - should I be offering less? Waiting at least a couple of days before putting an offer in?

 

[Propertunity]

A key Q to ask is: "How many beneficiaries are there?"

 

[china]

As an investor, always offer substantially less than what you believe is market value. This way, you have sealed in some profit before you do anything. It also gives you more leeway to move in subsequent price negotiations. You have to remember that the final negotiated price has a lot to do with the level of vendor motivation to sell. IF you miss out, there is always another opportunity around the corner.

 

[AndrewT]

A key Q to ask is: "How many beneficiaries are there?"

I can always try and find out? Can you please explain what difference it would make if there was more then one?

As an investor, always offer substantially less than what you believe is market value. This way, you have sealed in some profit before you do anything. It also gives you more leeway to move in subsequent price negotiations. You have to remember that the final negotiated price has a lot to do with the level of vendor motivation to sell. IF you miss out, there is always another opportunity around the corner.

So something more along the lines of $300,000 would be more reasonable?

 

[Propertunity]

]I can always try and find out? Can you please explain what difference it would make if there was more then one?

Think about it. If you offer $10K under market val, and there are 5 beneficiaries, then it's only $2K less a piece and they may still accept your low offer.

It would also be important to find out who are the decision makers amongst the beneficiaries.

So something more along the lines of $300,000 would be more reasonable?

just because the owner has passed on, does not mean the beneficiaries are out of their mind.

 

[pennyk]

Well, having just sold 3 houses as part of a deceased estate, I would say, be kind to them!! Its a very stressful process!!

The number of beneficiaries is probably less important than the number of executors. We had 6 beneficiaries, but only 2 executors. Obviously we have to take into account everyones opinion, but in the end, the executors have to make the decision as to what they believe will be the best option, taking into account both the amount of the sale and the length of time of the sale.

I wouldnt really treat the purchase any different to any other purchase. You think the market value is $350K.How much do you think the reno's would cost? I would get a quote for the renos, and then take that price off the market value, and perhaps a bit more for a buffer.

But keep in mind, if your offer is too low, they will probably hang off selling in the hope of getting a better offer, particularly if it was the family home.. there are lots of emotions in the mix.

 

[Propertunity]

Executor/s was the word I was looking for (instead of decision makers). Good advice Pen. I couldn't kudos you until I spread some more around - or I would have.

 

[AndrewT]

Well, having just sold 3 houses as part of a deceased estate, I would say, be kind to them!! Its a very stressful process!!

The number of beneficiaries is probably less important than the number of executors. We had 6 beneficiaries, but only 2 executors. Obviously we have to take into account everyones opinion, but in the end, the executors have to make the decision as to what they believe will be the best option, taking into account both the amount of the sale and the length of time of the sale.

I wouldnt really treat the purchase any different to any other purchase. You think the market value is $350K.How much do you think the reno's would cost? I would get a quote for the renos, and then take that price off the market value, and perhaps a bit more for a buffer.

But keep in mind, if your offer is too low, they will probably hang off selling in the hope of getting a better offer, particularly if it was the family home.. there are lots of emotions in the mix.

My partner and I are able to complete all of the renovations. In saying that, I believe the renovations would cost:
Kitchen - $15,000
Bathroom - $5,000
Floors - $3,000
Exterior cleanup/fence - $3,000
Render/Paint - $5,000
Misc (lights/aircon etc) - $5,000

So in saying that, around $40,000 would be more then enough to complete the renovation. Above prices are just a rough estimate based on what it cost us to do renovations to our last property. Maybe an offer of $315,000 - $320,000 would be better. Have to also keep in mind, we plan on living in the property for ~1-2years while renovations are carried out and we have our first child :O

Cheers for the help. This place is golden for the inexperienced

 

[china]

I can always try and find out? Can you please explain what difference it would make if there was more then one?



So something more along the lines of $300,000 would be more reasonable?

The more beneficiaries means a greater number point of views. It also means that more are likely want to sell quickly and get paid. For some beneficiaries, it means unexpected cash for nothing. A bird in hand is worth two in the bush. In my experience, the more beneficiaries involved, the more they want a quick sale so as to divvy up the spoils rapidly. You must also remember that the beneficiaries may not necessarily get along with each other and are only together due to this circumstance - they may wish to get away from each other ASAP.

I think that starting negotiations at 300k in a slow market is quite reasonable. The agent knows that it is not your final bid but gives you room to move up slowly in small increments.

 

[AndrewT]

Well I decided to put in an offer of $310,000 which I see as a lowball but reasonable considering the condition. Talked to the agent and told them I am happy to wait around for other property's, I'm interested in this one but I'm not going to pay premium for it.

In my head, the highest I want to pay is ~$330,000 - I see that as enough buffer to refinance for renovations. Anyway, offer got declined which I thought it would and basically offered $320,000 and told the agent that was it. Took her 2 days to get back to me to say they didn't accept, so I told her that was fine. She also said they were thinking they could get at least $330,000 for it, it's been on the market for a bit and things are slow where I am buying. I figure that hopefully with time, they will come back to me wants to do some dealing!

Have I done the right thing? This is the first time I have tried to go through the offering process.

 

[vaughan]

Have I done the right thing?

Is this for a PPOR or an investment?

If it's a PPOR then work out how much you can spend, how much you LOVE the property, and buy it.

If it's an investment, then crunch some numbers and work out what the maximum buy price is to make the deal work. Then bid up to the buy price -- or just offer the buy price straight up front and walk away if it's rejected.

 

[china]

Well I decided to put in an offer of $310,000 which I see as a lowball but reasonable considering the condition. Talked to the agent and told them I am happy to wait around for other property's, I'm interested in this one but I'm not going to pay premium for it.

In my head, the highest I want to pay is ~$330,000 - I see that as enough buffer to refinance for renovations. Anyway, offer got declined which I thought it would and basically offered $320,000 and told the agent that was it. Took her 2 days to get back to me to say they didn't accept, so I told her that was fine. She also said they were thinking they could get at least $330,000 for it, it's been on the market for a bit and things are slow where I am buying. I figure that hopefully with time, they will come back to me wants to do some dealing!

Have I done the right thing? This is the first time I have tried to go through the offering process.

I would not up the offer any more. They will get back to you. If the vendor is serious about selling and the agent is doing her job properly, you are in the buy zone. If they want 330k and you have offered 320k and you really want the property, you could close the deal right now by saying that you can meet in the middle at 325k. However, if you are not that keen, wait for them to come down to you - just make another enquiry in two weeks time.

 

[Aaron_C]

Just bought a deceased estate - real cheap at auction.

 

[AndrewT]

Thanks for the replies.

The property will be a PPOR but not for very long, plan is to move in. Renovate, create more equity, move onto next house and leave that one as IP with tenants. In the current condition and market, the house will rent for about $380 - but with some small renovations (paint, kitchen, polished floors, bathroom) it will be around the $420 mark.

I feel in a good position at the price I am at, but I do like the property - just got to keep telling myself that it's not an emotional buy, purely business!

On the other hand, just found a property in the heart of the town that is resi/commercial zoned - 2 bed 1 bath, needs extension and work. $375,000 - still too much but might look at making an offer on that this week