FSBO Update

Prelude
Not sure if I mentioned the particulars about the property, but I'll (re)post them here:

List Price: $114,900
Year Built: 1979
Beds/Baths: 3/2
Size: 1,667 SF
Comps: $118k-$122k
Deed: 1989
Current Loan: VA Loan (1989 for $44050)

Friday, February 4th
As promised, I called the seller of the FSBO at 7:00pm. She answered this time. I talked to her a little bit about non-house stuff, and then asked her the good and bad about her property. She said practically everything had been updated in recent years. The only problems she was aware of is the vent in the master bathroom doesn't work, and the carpet may need replaced. Unfortunately (or fortunately?) for me, the seller was a heavy talker. We must have talked for about 45 mins total. We talked about her property, the economy, insurance companies, lawyers, corporations, and so on. It's interesting how some people will just tell a stranger their life story. I asked her that I didn't want to get personal, but why was she deciding to sell the house. She said she had been out of work for three years, and was living off her 401k (motiviation?). Her field of study is accounting, but there are just no jobs in the area for a 62 yr old single woman. She had gotten offers from a town about an hour north of here, and she decided she'd better move now, while the offers are still available (motivation?). I told her if I could meet with her the next day at 1:00pm for a walk-thru of her house. She said it was fine. After talking my ear off, I finally had to end the conversation (politely). Unfortunately (as I found out the next day), I should have told her I was an investor and my intentions.

Saturday, February 5th
I meet the seller at her house. The house itself looks about what I'd expect a 1979-built house to look like. The only eyesore was it needed a little curb appeal. There was no landscaping out front to speak of, and the wood trim was painted a peachy-pink color. Contrary to her saying it was recently painted inside and out, the paint outside looked a little faded. I knocked on the door and she let me in. I introduced myself, and she proceeded to give me a tour of the house. I didn't see any problems with the house, so I would estimate repairs at <$2k. She said ALL the applicances were staying, including the refrigerator and washer&dryer. Even though all the appliances would come with the house, they all looked rather worn, so I may have to figure new ones in the price.

After giving me the tour, I told her that I wouldn't be buying the house for myself, but rather, I would be buying it to rent out. I also told her that if I were going to pay all cash for the property, I would have to pay much less than the listing price. I also said that I could work with her situation, and come up with a plan that could be feasible to both of us. After telling her all these things, she seemed a little taken aback (which made me wish I had mentioned this the night before on the phone). I told her I could probably pay her her asking price (or more), but it would mean she would have to carry back some of the financing, with terms of 10, 15, 20, or more years. She said that she would want ALL the money as soon as possible, and the longest term she would want would be 5 years (at least I got that out of her). I told her that I would run some numbers and get back with her with several options. If she liked any of the options, we could negotiate further. As I said previously, she is a talker (Except when it came to financing the deal). Somehow we got to talking about her family history again, and I spent the next 30 mins listening to her open up. Finally, I just couldn't take anymore, and politely told her I had another appointment to go to (note: this gives her an indication that I may am looking at other properties). I thanked her for her time, and told her I would call or email her with the options I came up with.

Sunday, February 6th
After my meeting with the FSBO yesterday, I started feeling a cold come on in the evening. When I woke up today (Sunday), I had a full blown cold. I figure the seller had a cold (although it didn't look like it), and I caught it when I was at her place. I went to the grocery store in the morning, but spent the rest of the day in bed - in and out of sleep. While in bed, I came up with a couple of options to purchase the FSBO, but it would have to come at a steep discount. Whether buying and flipping retail or buying and L/O'ing, I figure my absolute max price would be $95,000. For flipping retail, this would give me ~$15k profit after buy/sell costs, and probably $1,150/mo. holding costs. L/O'ing would give me ~$150/mo cashflow, and I could sell with an option price of about $123k (one year contract). After buy/sell/hold costs, I would probably have a net gain of about $18k or so. but both of these options were calculated using 5/1 ARM's @4.75%. I am going to call a lender today and see what the going rates are for short-term 103% financed loans - both PI and with interest-only.