After my initial visit with the tenants, I began the process of determining the property value of the rental property. The process began the day after the initial visit with the tenants. That day, I called my attorney to see if probate law in Massachusetts had rules for determining property values.

On the phone, I asked the attorney, “I want to start working on a sale price for the rental property. Does probate have rules about gathering estimates?”

The attorney replied, “Nothing out of the ordinary. However, you should obtain multiple estimates.”

The answer made sense, but I explained, “Well, here’s the thing: My sister, a beneficiary, referred me to a realtor.  When I met with the realtor, we discussed the sale of the rental property, the tenants, and the formal probate procedure. The realtor agreed to guide me through the sale, including relocating the tenants, but that I would have to manage the probate aspect. So, I agreed to work with the realtor. Do I still need multiple estimates?”

The attorney advised, “Still, get multiple estimates so that the probate court won’t ask questions when it comes time to close the estate.”

After the discussion concluded, I called two realtors. They both agreed to visit the rental property and provide estimates on the property value.

Determining the Property Value

After about a week, the first realtor called me with estimates. The realtor gave me a range of values, which took into account the interior of the home and its deplorable condition. The realtor listed the following problems in the interior of the home:

• The oil tank is so old that it burns oil causing the heating system to work inefficiently.
• The water heater only produces warm water for about five minutes, then becomes cold. The water heater needs replacing.
• Ground water seeps through the foundation and forms puddles on the basement floor after it rains.
• There are broken windows in back of the house and the rest of the windows cause drafts. All the windows need replacing.
• Smoke detectors need installing in the proper places to pass a fire inspection.
• The bedroom doors have holes in them from slamming against a door stop. The bedroom doors need replacing.
• The entire interior needs painting.

In short, the realtor summarized that the house needs a lot of work to pass a home inspection. The realtor gave a range of $220,000.00 – $240,000.00 stating that with a few key renovations, the property value would be at the higher end.

The Second Estimate

Soon after the first estimate, the second realtor mailed me estimates. The analysis report came in with a higher range, which assumed I would make renovations to the interior such as painting, of $240,000.00 – 250,000.00. As I read through both estimates, with a little work, I could get $240,000.00. So, I decided to set the preliminary property value to $240,000.00.

The Offer to the Tenants

Shortly after reviewing the estimates, I asked the tenants if I could visit the property to look it over. They agreed and I visited them on the upcoming weekend. When I arrived, the husband took me around the house to check the flaws mentioned in the estimate from the first realtor. After the walk around, I sat with the tenants and told them, “The first realtor that visited is the realtor that will handle the sale. Moreover, I will give you first crack at buying the home, if you want to buy it. If not, the realtor will help you find a new residence.”

The tenants then asked, “What price will you ask for the house?”

Initially, I told them, “The estimates gave a property value of $240,000.00 with some renovations. However, if you decide to buy the home and need to get financing, find out what amount you can get approved for and we’ll work from there.”

Since I left the final property value flexible, the tenants seemed in better spirits. As the discussion ended, they told me they would think about it and get back to me.

Why the Hesitation?

With that, I drove home feeling a little better about the situation. However, I became curious as to why they needed to think about the offer. Since I left the asking price flexible on the property they loved so much, I thought they would accept the offer.

Could you think of other ways I could have established a reasonable property value? Do you think I did the right thing in leaving the property value flexible? Was this article helpful in any way? Share you comments or questions in the comment area below?