It's A Numbers Game!

Last week I submitted an offer on a house I was looking to flip. It’s a neat little project I affectionately dubbed the Renton Dollhouse on account of it being all different shades of pink.

My agent asked me how badly I wanted this property (she was willing to take a cut in her commission to make the numbers work for me!) because it seemed like if I raised my offer by another $5,000 they would likely accept. I told her that I wasn’t willing to budge on the price and that was already my highest and best based on my profit margins, my profit minimum is $50k and this would put me at $45k, so we let the dice roll on this one. Out of sight, out of mind.

The decision makers took about 4 days to respond to my offer. They said yes!

On the flip side, sometimes I wonder when a homeowner responds and accepts my offer too quickly if I left too much on the table, but I always remember that I have to be comfortable paying the number that I committed to. First, because it’s a matter of credibility (backing out of a deal leaves a bad taste in everyone’s mouth). And second, you should never feel like you’re being forced to pay higher than something is worth. If you feel embarrassed to make the offer, you’re on the right track! That’s why…

Lesson #5: Always stick to your numbers!

So what's your thoughts on submitting offers on properties? Do you feel you tend to go too low or too high? Or if you haven't started putting in offers yet, how do you come up with your maximum allowable offer?