Lucky Louie is putting together an offer on a previously owned home he wants to buy. The home has 2,200 square feet of living space and is priced at $225,000. Upon his inspection, the condition of the roof is not good, and the central air system is on its last leg. Louie estimates replacement costs for these two systems to be a minimum of $17,000. Recent comps in the neighborhood show a 2,400 square foot house in good condition having sold for $245,000 just one month ago. What should Louie offer?
A) $225,000
B) $206,000
C) $207,500
D) Stay away from a house needing major system repairs.

Question

Quizplus · Accepted Answer

The comparable home sold for $245,000 and had 200 more square feet than the home Louie is considering. This means that the comparable home sold for $245,000 / 2,400 square feet = $102.08 per square foot. Louie's home has 2,200 square feet, so it should be worth $2,200 square feet x $102.08 per square foot = $224,576. However, the roof and central air system need to be replaced, which will cost $17,000. Therefore, Louie should offer $224,576 - $17,000 = $207,576.

Lucky Louie Is Putting Together an Offer on a Previously