making offers

Does anyone have any advice on how to handle making a low offer on a home? how low would you go on a house if they were asking 230,000 and the comps are around 215,000.
needs about 5,000 in work.

Offer exactly what you think you need to offer to make it a deal for you. For me that would be (.70 x 215,000) - 5000 = $145,500. Since they are $15k over comps and it needs work they aren’t likely to come down to where you need to be. You can make the offer, nothing ventured nothing gained, but I don’t think this is going to be a winner. Go look for desperate sellers that need out of big ugly junkers, not retail sellers on the MLS.

:cool RICH is right there is no hard and fast rule work the # s and if they do not work move on MLS listings are good for when you are selling not when you are buying the seller is not ready to deal as his realtor has said we can get xyz price !!!

BUT the truth is comps are a start point you will only get what some one is willing to pay //// and in the current market it will more likely be less then the comps are saying now as they were more than likely a few months old in most cases /// and right now the market is changing from all most day to day

thanks for the info, haven’t had much luck finding desperate sellers. this particular house was a fsbo. I’ve looking in the paper also. flyers, bandit signs also.

To Tim and Lisa

Are you only working with homes that have equity in them? Is that how you are paying the $5,000 in repairs for that home?

So say I have a $100,000 home and $25,000 in equity in the home. How are you working the numbers when you have those repairs? I have been doing all my other homework and are stuck on this number thing. If you didn’t have equity what do you take the $5,000 repair costs out of? If you could use a number scenario, that would work for me!

ARV = $100K
Repairs = $5K
70% of $100K = $70K
Minus repairs = $65K
Minus your $5K assignment fee or double close profit = $60K
Owner owes $75K on the house
Therefore, this is not a deal.

That is when knowing other methods of creative real estate comes in hand like lease options. You can still make money on a house with the 25% equity scenario or no equity for that matter and still not use any of your money. Good luck.


What would make it a deal then…can you give another scenario…?

Use my same numbers & make the offer price $55K. Then that would be a deal.

Try reading Richard Roops - A quick Formula for Eliminating Non Deals, article.

Its simple and definitely makes your life easier, do the following

Find out how much they owe: (Look up your county appraisal for this amount)
Their asking price: $230,000
Potential Resell Price: $215,000

Insert a minimum profit: $20,000
Repairs: $5,000

MAO (Maximum Allowable Offer) = $190,000
MAO = Resell - Profit - Repairs

Compare your MAO to what they owe and asking price and if all numbers coincide with one another then it is a deal.

Sorry, but I would have to disagree with these numbers. The reason the common formula is: 70% x ARV - repairs - your wholesale profit for a MAO is b/c 30% factors in investor’s profit & the cost to sell a house (real estate agent commssions, closing costs, etc.).

Note: Closing cost including real estate agent commissions are typ 10%, investor’s profit typ 20%.

Therefore: $230K x .7 = $161K - $5K = $156K - $10K (wholesale profit) = $146K.

If that seems too low of a price, remember that if the Seller is truly motivated, this price would not be a big deal.