Are These ARV MAO Calculations Correct?

[Sean K.]

Please help me to understand my calculations.

This is an example:

Comps on a property = $250,000 (ARV)

Owner originally got a loan for $200,000

Owner has paid $80,000 on loan so far ($80,000 equity)

Owner has an outstanding loan balance (or mortgage) of $120,000 ($200,000-$80,000)

Owner is asking for the loan balance of $120,000 + $15,000, for a total of $135,000 (asking price)

So, if I have an ARV of $250,000, and I subtract the following (to get MAO):

$3,750 > Acquisition costs (1.5% of ARV)

$17,500 > Sales costs (7% of ARV)

$10,000 > Holding costs (4% of ARV)

$20,000   >   Profit (I want to make on flip)

$33,000   >   Repairs (based on $15 per sq ft on a 2,200 sq ft property)

$3,300   >   Hedge (10% of Repairs)

= $162,450 MAO (Maximum Allowable Offer)

Then, do I take this amount and subtract the $120,000 mortgage (loan) = $42,450, and then subtract out the $15,000 that the owner would like to have, leaving an additional $27,450 for profit?

I think I'm doing something wrong, but I can't figure out what it is. Can somebody please let me know if my calculations are incorrect, and if so, how to fix them?

Thank you! :)