Framework for pricing non-market-ready properties (estate, divorce, distressed). Establishes repair costs that justify discounted listing price. Part 1: Distressed Property Pricing.
| Path A: Make Ready | Path B: Subtract + Incentive |
|---|---|
| Invest in repairs → sell at full market value | Subtract repair costs from average → discount for investor/flipper |
Reference: 2,000 sqft / 4BR / 2.5BA / 1 HVAC. Scale proportionally for smaller/larger units. 2024 costs.
| Level | Scope | Low | High | Average |
|---|---|---|---|---|
| Cosmetic | Flooring, fixtures, painting | $8,245 | $22,995 | $15,620 |
| Small | Cosmetic + kitchen and/or bath | $28,794 | $87,420 | $58,107 |
| Medium | Small + roof | $34,395 | $99,149 | $66,772 |
| Large | Medium + HVAC | $43,096 | $118,028 | $80,562 |
| Ultra | All systems | $55,225 | $150,395 | $102,810 |
| Item | Details | Low | High | Average |
|---|---|---|---|---|
| Flooring | ~500 sqft coverage | $1,000 | $10,000 | $5,500 |
| Fixtures | 20 knobs, 2 chandeliers, 5 fans | $3,495 | $5,495 | $4,495 |
| Finishes/Painting | Interior with trim | $3,750 | $7,500 | $5,625 |
| Cosmetic Total | $8,245 | $22,995 | $15,620 |
| Category | Item | Low | High | Average | Notes |
|---|---|---|---|---|---|
| Project | Kitchen | $14,549 | $40,425 | $27,487 | |
| Project | Bathroom | $6,000 | $24,000 | $15,000 | |
| System | Roof | $5,601 | $11,729 | $8,665 | |
| System | HVAC | $3,100 | $7,150 | $5,125 | No ductwork |
| System | Foundation | $3,000 | $7,000 | $5,000 | |
| System | Electrical (200A) | $1,700 | $3,200 | $2,450 | |
| System | Plumbing (PEX) | $4,000 | $15,000 | $9,500 | |
| System | Hot Water Heater | $800 | $2,000 | $1,400 | |
| System | Sprinkler | $2,400 | $4,200 | $3,300 | |
| System | Termite | $229 | $967 | $598 | Per linear foot |
Buyer lives in the property. Least likely for distressed/as-is (financing challenges).
| Remodel Level | Remodel Cost | Offer Price | Cash to Close (3.5% FHA) | Cash to Close (10%) | Cash to Close (20%) |
|---|---|---|---|---|---|
| Cosmetic Low | $8,245 | $190,505 | $21,088 | $33,521 | $52,611 |
| Cosmetic Avg | $15,620 | $183,130 | $24,009 | $36,543 | $56,246 |
| Cosmetic High | $22,995 | $175,755 | $29,149 | $40,571 | $58,146 |
| Small Avg | $58,107 | $140,643 | $66,630 | $72,171 | $89,636 |
| Medium Avg | $66,772 | $131,978 | $71,891 | $79,970 | $93,168 |
Cash to Close = Down Payment + Buyer CC (2.5%) + Remodel Cost
Investor buys, repairs, then holds as rental. No flip profit deducted.
| Remodel Level | Remodel | Offer (2% CC) | Offer (3% CC) | Cash to Close (20% DP) | Cash to Close (Cash) |
|---|---|---|---|---|---|
| Cosmetic Low | $8,245 | $186,770 | $184,956 | $50,814 | $199,445 |
| Cosmetic Avg | $15,620 | $179,539 | $177,796 | $51,459 | $197,659 |
| Cosmetic High | $22,995 | $172,309 | $170,636 | $53,853 | $198,926 |
| Small Avg | $58,107 | $137,885 | $136,547 | $89,684 | $199,342 |
Most likely buyer for distressed. Buys below market, repairs, sells at ARV.
| Scenario | Remodel | Holding | Profit | Offer | % of ARV | Cash to Close |
|---|---|---|---|---|---|---|
| 3 mo / 5% profit (Low) | $8,245 | $5,963 | $9,938 | $163,746 | 82.4% | $177,884 |
| 3 mo / 5% profit (Avg) | $15,620 | $5,963 | $9,938 | $156,547 | 78.8% | $176,081 |
| 3 mo / 10% profit (Avg) | $15,620 | $5,963 | $19,875 | $146,856 | 73.9% | $166,147 |
| 6 mo / 5% profit (Avg) | $15,620 | $11,925 | $9,938 | $150,730 | 75.8% | $170,098 |
| 6 mo / 10% profit (Avg) | $15,620 | $11,925 | $19,875 | $141,040 | 71.0% | $160,165 |
| 6 mo / 10% profit (High) | $22,995 | $11,925 | $19,875 | $133,849 | 67.3% | $160,190 |
Cash to Close = Offer + Buyer CC (2.5%) + Remodel. Investors typically pay all-cash (no financing).
Investor-grade distressed properties target ~60% of ARV. This is the floor — accounts for maximum risk, maximum repair, maximum profit margin.
| Buyer Type | Likelihood | Why | Key Factor |
|---|---|---|---|
| Investor-Flip | Most Likely | Buys below market, repairs, sells for profit | Needs 5-10% profit margin |
| Investor-Hold | Less Likely | Buys, repairs, rents long-term | No flip profit, but needs cash flow |
| Owner-Occupant | Rare | Needs financing (lenders can't underwrite as-is) | Highest offer but hardest to close |
| Phase | Scope | Maps To |
|---|---|---|
| Phase 1: 3 Fs | Flooring, Fixtures, Finishes | Cosmetic |
| Phase 2: K+B | Kitchen and/or Bathrooms | Small |
| Phase 3: Systems | Roof, HVAC, Foundation, Plumbing, Electrical | Medium Large Ultra |
BuyerCC = 2-3% of offer | SellerCC = 7% of ARV (agents + title) | Holding = 1%/mo of ARV (1-6 months) | Profit = 5-10% of ARV