Should my offer price be higher or lower?

Question

I found someone with a home for sale. It is a nice 3 bed 1 bath home in great condition. There are hardly any repairs that needs done to the home. I asked the owner how much repair work is needed on the home if any. He did not have an exact amount. I came up with a figure of at least $500 or less in repair work based on what I saw. The owner agreed it may not even need $500 in repair work. I finally got an agent to get me the value on the home, which is worth $65k to $70k. The owner wants $68k, but is willing to negotiate a lesser price. I want $7k assignment fee. I came up with an offer of $47, 530 for a home worth $65-$70. Should I bring my assignment fee lower? Or should I change 70% of FMV to something lower?

James Martin · Answer

Ned, great great advice!  Remember your goal is not to buy properties, your goal is to make money. If the deal is not good for you, do you really want him to accep?  There is nothing else I can add to this!

Jeffrey K. · Answer

It his house is worth 65k and needs no work, where do you come in?  No investor would buy a house at retail.  If you are selling to a retail buying they would use a realtor.  I guess I don't see where the deal is here other than someone wants to sell their house and you know what it should sell for?

Antonio Bodley · Answer

I know. I would not have bothered with this seller if the motivation was not there. The seller sounds like he just wants it out of his name.

Antonio Bodley · Answer

These sellers sound like they were motivated by sense of urgency to accept those low offers you made, which explains a lot. These are the type of sellers I would like to do business with. People who are desperate to get out of a bad situation as quick as this make my job that much easier. It looks like the key is to lower the percentage of ARV way down to get the best deal. If that is the case, I can do that. I have been getting advice by countless other wholesalers who use the traditional ARV X 70%- repair= offer price. If this seller is feeling the pressure to sell very quickly, I am good to go on negotiating. Could I get the best possible deal on a home that has been vacant for years? I mean what seller wouldn't want someone offering to buy a house they thought would have never been sold in years?

Ned Carey · Answer

Antonio Bodley wrote:

Good, the motivation is the key. If a seller said that to me I would immediately ask "Do you want anything for it or do you just want to get it out of your name?"

Alternatively you could ask "If I were to take over the payments for you until I find a buyer or refinance it would that work for you?". This second question is from William Tingle who uses it to screen out potential subject 2 deals.

Rob Gillespie · Answer

Antonio,

I think that the offer is too high. Let me give you an example of a few of my  current deals this month...

My contract price 12k
ARV 75k
Repairs 8k
Assignment fee 7900

my contract price 5k
ARV 79k
Repairs 22k
Assignment fee 15k

My contract price 145k @1100 per month Lease option $1 down
Value 159k
repairs 0
assignment fee 7995

Try using a checklist when putting a deal together.

1. is it likely someone will have the available cash to close this deal?

( if the price is too high such as 8ok and the home is only worth 100k, chances are that a true cash buyer will not bite and private lenders will not have an interest, If your buyer needs to finance the deal, you will need to get your assignment outside of closing. That just makes things too complicated and limits your buyers)

2. Is this a deal that they could not find on their own without a ton of work?

( if you are offering a deal that is similar to one that is on the MLS, you will have a hard time fining a buyer. I create my deals, they are not found. The home I picked up for 5k, they wanted 35k for it! You must be a fantastic negotiator in this business. I like to keep my skills up by negotiating on EVERYTHING, I will go into a Mcdonalds and get them to throw extra food in just by asking. If you are not embarrassed about the amount or terms you are offering, you are offering too much!)

3. Is this a good deal for all that are involved?

( You must leave the table with everyone satisfied about the deal. My sellers that are taking 5k, are very happy to be rid of the property and move on. My buyer is extremely happy to have an opportunity to make some money, I am happy with my assignment fee. If I sold the home to him and the deal sucked and he would not make any money, He would never buy again. If the sellers had other options on the table for more money, I would have advised them to take it or I would have raised my offer.)

I hope this helps a little, good luck!!

Antonio Bodley · Answer

The seller didn't even know how much the house was worth prior to me finding out for him. The seller had no idea in the beginning his asking price was the same as the value of the house.  The seller is motivated. He said he has a mortgage on it and would like to get away from it due to divorce.

Antonio Bodley · Answer

I would never sell a house to an investor at retail price.

Ned Carey · Answer

James  Martin, Thank you for the nice compliment!   -  Ned

Ned Carey · Answer

I am with Jeffrey, I don't see a deal here.  The seller started out asking full retail price. Why do you think this could be a deal? Is the seller motivated? You are not looking for real estate, you are looking for motivated sellers.

You're thinking about it backwards. You shouldn't care how much the seller will accept. You should only care what makes it a good deal for you. You have no control over what the seller will accept but you have total control over what you offer. Offer what makes sense for you, then keep negotiating and get the best price, and /or terms, you can.  In the end, if it is a number you can work with buy, if not walk.

If you start thinking  "what will the seller accept?" it is easy to let the price creep up just to get the deal. Remember your goal is not to buy properties, your goal is to make money.  If the deal is not good for you, do you really want him to accept?

Ned

Should my offer price be higher or lower?

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