Why Making Offers Is The Key to the House Flipping Business

Much of the world has a strong issue with "bargaining." We've become accustomed to one set price for a good, and we either buy it, or don't buy it. When it comes to real estate, the transaction changes. The value of a home is what someone is willing to pay for it. 

It doesn't mean that the price paid is what the material goods and property are actually appraised for. External factors, like proximity to a future job or other personal reasons will dictate the final price. This can often lead to an over-priced listed home.

When a home is overpriced, many would-be flippers will just pass it by looking for another opportunity. As a result, many miss out on what could be an incredible deal if they were just willing to try to get the seller to negotiate. Granted, some may be entirely unwilling to budge (at least for a little while), but here are some tips for making offers on great potential flips.

1. Take A Look at the House (Not Just Online)

As the adage goes "you wouldn't buy a car without taking it for a test drive, would you?" Well, some consumers are today (looking at you, Tesla), but as a potential house flipper, you should take a look at the home yourself. You, and only you, are the one that can assess the value that you may add to this investment, and that cannot be adequately done online.

2. Estimate the repairs.

The thoughtful note taking that you commit to early on in the buying process will allow you to make a solid business plan (whether that be formally written down or in your head). This includes estimating all the repairs necessary to make this house right for the local market. Create a budget for those repairs, and see if the house is worth purchasing. If it isn't, walk away.

3. Do your homework. Take a look at some market comps to see what the house might potentially be worth once it's renovated.

This goes along with #2, but when you do all of your research and homework of the area that you are buying in, you'll know what you could potentially sell the house for. If you can make repairs and sell for a tidy profit, valuing your time in the process, perfect! It helps to buy in an area that you are more comfortable in or, as they say in the stock market, "buy what you know."

4. Be reasonable and respectful.

Don't approach the seller with the attitude that you're trying to lowball, and certainly don't speak negatively about the condition of the home. Explain politely what repairs you feel it would need to be acceptable in the market, the cost you've estimated, and how it compares with other homes on the market. Many times, they'll agree with you. A popular negotiating tactic is not taking a "zero-sum" approach to things. What that means is, there doesn't have to be a clear winner and loser- you both can win by accepting a fair price in the middle of what you both were seeking.

5. Be prepared to walk away.

I never said everyone was reasonable! If the seller won't negotiate, then all is not lost. You've saved yourself from overpaying for a money pit, and there will be other houses. Besides, there's always the chance the seller will give your offer some thought and change his or her mind. By firing off an offer that is too high, you'll risk losing some equity on your side of the equation that will affect your return on investment.

6. Think outside the MLS.

Don't limit your search to only what's listed on the market. If you see a home that appears vacant or in transition, approach the owner to see if they're interested in selling. Everything's for sale if the offer is right. This is a specific instance where it is imperative that you show respect. Never be too pushy in this sort of scenario. You'll offend someone who may not want to be bothered. At first, someone may be averse to selling their home, but if you make a compelling proposition for reasons to sell, they may entertain your offer!

So, do you think making an offer is the key to success in flipping houses? We want to know! Tell us what you think in the comment section