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For you, I'd say look elsewhere. That isn't the only home on the market.

But I also feel empathy for the guy who needs the sell the house. If it needs a lot of renovation it simply isn't going to sell at that appraised price. Then what for him?

Who did the appraisal? I wonder if there is an appeal process in place (for him, not you) to get other opinions of what the property is actually likely to sell for on the open market? If you are dealing with his realtor you might ask about that.

This isn't a price negotiating stand they are taking. It really is a restriction on them.
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Yes, this is true. If the owner is going on Medicaid, that' means they are about to receive taxpayer money to pay for their care. Becasue of this, he/she cannot give away any assets as gifts, including selling items like homes and cars at less than market value. If the person has assets, Medicaid requires them to be used for their care, not given to heirs and expecting taxpayers to pay for their care.

Is this a relative of yours and you are expecting a break in the price because of your relational status? You won't get a price break in this case...as their care needs to be paid for, and their cumulative assets need to be used first, before taxpayers foot the bill. If it's not, and you are just trying to buy a home on the open market, I would first assess how much work the home needs...because you will be stuck with the work in this case. It would probably be better to buy from someone else.

Angel
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Doesn't matter if he isn't already on Medicaid. Medicaid has a 5 year lookback, so any transactions over the previous 5 years from the application date are covered by this lookback. Obviously he is preparing for this by not being willing to cause problems with his Medicaid application.

See, here is the main problem. Could he sell you his house for less than market? Sure he could...but he would be slapped with a penalty period on his Medicaid claim...so for example...
(all numbers are for example purposes - using round numbers for clarity)

Assume there are no cash savings or other assets
Market appraised value $200,000
Monthly cost for nursing home : $5000
House sold for $150,000
Next month he enters a nursing home
Medicaid Application filled out upon nursing home entry
Medicaid will penalize him for $200,000/$5,000 or for 40 months.
Since he only has $150,000 he will only be able to afford 30 months out of pocket...how will he pay for the extra ten months? He won't be able to and will be removed from the nursing home...and his family will somehow have to figure out how to pay.

This is the math his family is struggling with. They cannot afford the 10 months out of pocket...so the house must go for market value.

Angel
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I think Jeanne makes a good suggestion. Appraisals vary by who does the appraising. It may not even be that close to market value, especially if there are many items in need of repair.
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Definitely move along. They will not be able to get around this restriction for fair market value, nor will they have the ability or funds to make the repairs that are needed. Even if an appraiser came to the house and lowered the tax appraisal amount, it would take a lot of time, and paperwork to buy this house for what it's really worth, rather than what the market in the area would expect for the location and size.

Angel
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Please understand that is a VERY simplified example...was just trying to illustrate the penalty period. If he enters a nursing home any time in the next 5 years, the 10 months of missing money will affect him.

Angel
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So SandyHill - does Aging Care win Miss Congeniality award for insight?

I have a new suggestion for you somewhat different from my inspection & appraisal path. The house, is it a real POS? like run down enough that it has code violations or blight notices done by the city? if so, there should be a paper trail down at the courthouse or city's Safety & Permits type of office on the property. I'd bet you can go online and print these out or maybe go in person to city/county and get the violations. The you take some photos on the house to show issues (take a couple of levels to set on windows sills or steps to show settlement foundation problems). If there is mold anywhere be sure to shoot photos of that. Ditto if asbestos flooring. Shoot images of Trees that need removal and within fall line of other properties or lines.

I'm assuming this in not your first rodeo on property investing. So you have vendors to get estimates from and they will be glad to do this for you. Get them to do rough estimates for you on the house. Mold remediation alone will be a lot of $$$. Ditto on asbesto$$ removal. Tree removal by transmission lines can be really expen$ive too....Package the whole thing up with your bid on the property along with your contact info and give to the DPOA to present to medicaid caseworker. Put in that yours is an ALL CASH bid is good for 60 days with a release from Medicaid. There should be a specific form done for this btw.

Also check to see if it's gone up for tax sale or other liens on it. If so, get the amount due and interest on it and the redemption date for tax sale & include this as well.

If DPOA & family will not pay house costs, it will go up for tax sale redemption eventually. Medicaid cannot make family pay on their parents home. Property becomes caught up in tax sale ownership with city / county. Medicaid isn't designed to buy or maintain property so they loose out totally imo.

Your just giving the DPOA something to provide to the caseworker and his superior valid documentation to allow the sale below FMV & get past regulation roadblocks.

For my moms Medicaid application there were glitches with her life insurance and her car. Caseworker has like 10/15 minutes to review stuff so anything that is not easily dealt with is a problem. So whatever you can do to help the solve the problem (with documentation) makes everybody happy. For insurance I got an LA broker who held TX insurance license to do an on letterhead statement with license # that it was aTerm policy. Problem solved. For old old policies they are like 20-30 legal pages long and inital medicaid caseworker can't read each line or evaluate the policy (they are basically clerks with a check off list to verify) so its an issue. For the car, it was sold to worthless nephew for under FMV at almost the edge of end of year 4. So I got moms accident report & old repair checks to show work done and got the mechanic (real licensed biz) to give a resale estimate. Got its transfer value to be within the 2k asset limit. Problem solved. Medicaid just needs something reasonable and valid to document or justify. Comprende?
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Update: I paid for part of appraisal that real estate broker working for the owner hired. We settled on the appraisal price which was almost 1/2 of original asking price and still under what the town had it assessed at - after their third lowering of their assessment. Thank you for the advice.
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Sandy Hill - How wonderful and with a bow on it too! Medicaid should not have any problems as the family can show the documentation as to the appropriateness of the sale. Hope you are able to fix & flip within your time constraints for best profit!
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If you really want this house, perhaps you could hire your own appraiser to determine how accurate the municipal appraisal really is. But if you decide not to buy it, that's money lost.
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