Two of the most common questions we receive as investors: how much can you pay for my house and how do you calculate that price? Bob The Flipper here to walk you through how Maryland Cash House Buyers determines these answers.
Bob Allwein: Hi, it’s Bob Allwein from Maryland Cash House Buyers. So I’ve spent a lot of time driving in my truck back and forth to properties this week. And I was in Brunswick and then I was in Clear Spring, in Hagerstown, up to Westminster, back down the Ellicott City, back over to Mount Airy, and then over to Essex again. And during these travels, I was on the phone with a couple of potential sellers and a couple of people had the same question. And I’ve been thinking about how to answer that question in the form of a video as I’ve been driving around. So here you go. I wanted to share this question. A lot of people want to know, as soon as we start to talk to them, “How much can you pay for my house? And how do you calculate your offer price for my house?”
So I was thinking about it and it’s very logical that one of the first things that somebody might google into or type into Google when they’re considering selling their house to a cash house buyer is, “How much can I sell my house for to a cash house buyer?” Or, “How does a cash house buyer or an investor calculate the offer price for my house?” And it’s only reasonable because it’s one of the first things I think about whenever I’m going to buy something, this is kind of like a purchase in reverse.
So I wanted to answer that question and we always want to answer that question. And we don’t want to answer that question with, “It depends.” So I wanted to take a few minutes here to explain how we actually calculate our offer price for the purchase of your house. And this doesn’t work for everyone, but it does work for 100% of the people who end up selling us their house. And there’s a lot of folks like you out there that ask that question and we wind up buying their house in it’s as is condition. So the first thing that we do is we evaluate your property based on what we think it will sell for after we do renovations to the property.
So I’m going to use some round numbers to give you an example. So basically if we determined that other properties in your neighborhood that are similar in size and scope, as far as square footage and amenities. After we add new kitchens, new bathrooms, and those sorts of things, if we determine that house is going to be worth $200,000, we will start with that number. And then we will work backwards. So we have some costs that we take care of with regard to the purchase of the property and the sale of the property we call these cost overhead items. So we calculate our overhead items and our profit first.
So when we were looking at the example of a $200,000 after repair value, that’s the term that we use for the condition of your house after we do our renovations. So if we determine that a property is worth $200,000 with an after repair value, we will subtract 25% from the $200,000 before we calculate any repairs. And that 25% includes those overhead items that I mentioned and our profit. So our overhead items cost us anywhere from 12 to 15%. And our profit is anywhere from 10 to 12%. So, just wanted to be upfront with that.
From there, we will calculate the investment into the property that we will make in the form of repairs, or renovations, or upgrades. And those include things like the roof, the siding, the windows, the mechanical systems, new kitchens, new bathrooms, et cetera. And we have a square foot formulas that we use based on the size of the property, we’ll come up with a number and then we will subtract that from the 75% of the after repair value.
So if you’re following along with me, let’s just pretend that we came up with a $25,000 renovation budget. So we would subtract the 25% from the $200,000, which would leave us $150,000. I’m sorry. Yes. And then we will subtract the $25,000 in repairs, and that will leave us with an offer price. So if we’re looking at 150,000 minus 25,000, that leaves us an offer price of $125,000. So again, these are round numbers and these are based on a fictitious repair estimate. But I will tell you, on average, we’ll spend about $33 per square foot to renovate a home, to do a cosmetic renovation of the home.
So if you’re thinking about your house and selling your house and wondering, “What I can sell it for?” Take a look around, look at realtor.com or something like that, and see what houses are selling for in your neighborhood when they’re really nice and fixed up. And then subtract 25% and then subtract about $33 per square foot. And that will give you a range of rough idea of what we will offer you to buy your house in it’s as is condition.
Now, this works for a lot of people and it doesn’t work for a lot of people. So the people that it usually does not work for are folks that are somewhere in between, “Should I list my house with a realtor? Or should I sell it right now, real fast to a cash investor?” And they’re usually going through these scenarios in their own head about, “Hey, my bathrooms they haven’t been updated since the 70s. My kitchen has white appliances from 2001. They still work, there’s nothing wrong with them. My house is in livable condition. There’s nothing really wrong with my house. I love my house, but I need to sell it and I need to relocate.” Or, “The house is costing me money to hang on to.”
There’s a variety of a variety of reasons. You might have a typed into your computer, sell my house fast, or sell my house to a real estate investor. And then you landed here and you’re wondering, “How much can they offer me for my house?” So we just walked through that. And those are some round numbers. We can give you exact numbers based on a site visit to your property and then you’ll be able to make an educated decision. But again, this is typically what folks go through when they’re considering, “Should I do some repairs, myself enlisted on the market with a realtor.” You will sell your house for more money with a real estate agent than you would to a cash investor. And that’s because of the items that we just talked about, the repairs and the investments that a cash investor is going to make into the property in order to bring it up to speed.
So if you’re somewhere in that gray area between, “Should I spend the money myself and sell it for a little bit more? Or should I just part ways with the house and let somebody else fix it up and sell it?” Those are the questions that you might be asking yourself. And if you are asking yourself those questions, feel free to reach out to us, fill out the quick response form on our website, www.mdcashhousebuyers.com, or just give us a phone call. And we’ll be happy to set up a time to talk with you.
The other thing that I will mention is that we do have real estate agents on our team. My son, Michael, is a licensed realtor, as is my wife, Stacy. So if we come out and meet with you, one of the things that we will mention to you is, “Hey, if you’re in that gray area and you would rather try to sell your house for a little bit more money, and you’re willing to put the time and energy and maybe a few dollars into it yourself, we could probably help you with that.” So just some things to think about and things that I’ve been thinking about as I’ve been driving around. I realize this is a long video, so hopefully it was informative for you. And if there’s something we can do to help you, please reach out to us and we’ll talk to you soon. Thank you. Bye-bye.