What is your offer strategy?

Question

LetÂ´s say: 
A house offered on MLS (more than 150 days) for $15,000, need rehab $15,000. ARV is $75,000. 
I know all your rehab calculations, but what would you offer for this house in cash?
I just read JoeinOHÂ´s topic, with a very small offer amount and this was sucessfully. Can in this case a only 50% offer ($7,500) or lower be effective?

What was your lowest offer with an happy end for you? I donÂ´t want numbers, only your % from the asking price.

Thank you in advance.

-Uwe

Joe M. · Answer

For me it depends on a lot of factors, as I'm sure most folks will say.

First thing I do when considering an offer is go to Trulia to see the price history on the house.  Additionally I'll go to my county website and look at sales of the house and its assessed value.

Next I'll chat a bit with my contractor about general costs to rehab (although I'll have a good idea of the rehab costs after looking at the house).

So with those two pieces in place, I can get a good idea of the ARV and what I would offer on the house.  But there are some additional things I consider:

Generally speaking, the longer the house has been on the market the lower I'm willing to go with my offer price.  Two schools of thought on this are:

1.) Nobody has offered on this house and they would be more willing to take ANY offer.

2.) The second school of thought is they've already rejected all the low ball offers so don't waste your time.

Finally when considering an offer I'll trust some amount to instinct.  In the situation I referenced I had a good idea that not very many (if any) folks would be offering on this house.  This house is just two away from one I already own, so I asked my renter to keep an eye out for how many folks were in/out of the house and he didn't see anyone go in/out during the bid period.

It wasn't a make or break deal for me.  If I got the house, great.  If not then move on.

So on this house offer price that was accepted was 40% below asking price.  I offered all cash with no contingencies and close in two weeks.

Again, for me it all depends on how well the house fits into my long term goals whether or not I do a low ball offer or not.

So far I've only purchased 3 homes.  I've not been at this very long so I've a lot to learn.  But of the three homes I've purchased I've paid 10%, 25% and now 40% under asking price.  I kind of like where the trend is going :D

Uwe S. · Answer

Okay I canÂ´t clear if on Zillow false statements and actual Broker listed this house with $18,000 first. But house is real. I will come back here.

Back to topic any other members with good % from the asking price?

-Uwe

Justin S. · Answer

I did not realize this is a real house.  If your numbers are right, its a smoking deal.  Good luck!

Uwe S. · Answer

Yes Vikram, after purchase in Cleveland I have only few funds left. Last owner financing deal backfired, so I will try to get an cheap house in rural areas for a fix and maybe flip not sure actual.
In PA and OH gives many of these properties even for very little money but huge rehab needed.
Its an bank propertie they can absorb the loss ^^.

-Uwe

Vikram C. · Answer

Uwe, there are a couple of ways to approach this business:

1.  If you have limited capital and want to earn the maximum profit per deal, your idea is good.  Offer $7,500 and wait for the counter and try to get the best deal.

2.  On the other hand, if you have a large amount of capital, it can be more profitable to offer a higher price than even the asking price to make sure that you get the deal.  That way, your money always remain invested instead of sitting idle in the bank and you still get a great ROI.

As you can see, it all depends on where you are with respect to investable funds versus investment opportunities.

Uwe S. · Answer

-Uwe

Justin S. · Answer

My offer strategy is independant of the asking price.  If you want the highest rate of success  though, then you should stick with REO's that are priced within 20-25% of your offer amount.  If the house is on market for very long time you can probably get away with 50-60%.

In the example you gave, the accepted offer would most likely be above asking price unless you are the only investor in a 60 miles radius.  Hence Don's example above of paying over asking price.

Uwe S. · Answer

Don,
Each place is a other place. 
In OH, IN and PA you can find very good opportunities actual.

Okay back to topic, what I meant is what price is possible for rehab needed properties. JoeinOH best accepted offer was 60% from asking price, anyone better?

-Uwe

Don Hines · Answer

Howdy
          First time we have ever exchanged info.
          WHERE IS THIS PLACE????
          I would consider selling it at $71250. This is 5% discount off of the ARV. Some people consider a discount of 10%. But, I think 5% is plenty where I am. Here would be my calculations using what you have provided....
          Selling      $71250
          Profit          20000
          Rehab        15000
          Purchase    15000
          Buyer incentive/aid (2%) 1425
          Holding  (6 months) 3000
          Misc           3000
          
          There is still $19819 left over. I guess I will keep that too. Problem is, I have never found a house in a $75000 to $70000 neighborhood that needed only $15000. Not in Little Rock anyway.
          Don
PS
I got carried away with my calculations. If I found this deal, I would offer $20k to $25k for it so I would be sure I was the one that got it. 
But, normally, I consider offering about 75% lower than listing price. If I can't get my estimates to come in at *80% of the listing price, I don't even consider those properties.
Don

Account Closed · Answer

Mine was 75% and it was 3 months later that they came back to me.

What is your offer strategy?

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