I bid on a property that had 6 offers on it last week. The bank will choose the winning bid tomorrow and I am considering bumping up my offer a bit. The question I am wresting with is this...At asking price, it's an absolutely incredible deal. I bid more than 20% over asking price which is still an incredible deal. If the asking price had been the amount of my current bid, I still would have felt great bidding 10-15% more.
When you're in this position, do you try to make your offer just enough above asking to get a a steal on the property, or do you offer significantly more even though you might not need to in order to ensure you get the deal? In other words, go for the home run and potentially get outbid, or go for the base hit? Thoughts?
In this business, you make most of your money at the time of purchase. If you have done your analysis, you will know the price above which the property will not meet your requirements of return.
You make your offer at, or below, this price and never go above it. You most certainly do not want to bid - particularly against yourself - on a property. In a multiple offer situation it is far better to allow someone else to "get" the property than to overpay for it.
Rory - thanks for the advice. to clarify this is a market where I regularly flip and brrrr Homes so I do know the numbers. If I were to offer 150 percent of asking price I would still make the 2 percent rule. That’s why I’m perhaps over thinking it...I don’t want to end up not acquiring this house because I wanted to save a few thousand dollars at time of purchase. I want to make sure I’m not being penny wise and pound foolish.
To me it sounds like you're overthinking it like you said.
Put in the offer that works for you based on your numbers.
You'll either get the house or you'll move onto the next one!
As always the answer is it depends, do you have a crew you need to keep working or risk losing it to another flipper? Do you have a plethora of deals and this is just next in a long line, do you have 4 deals under contract to sell and your gonna have a huge pile of bank in the cash soon and need to spend some? I have manipulated numbers on offers based on my personal situation. When I have plenty of deals i'm working on i'm not buying anything that I don't think could be a home run. On the other hand when I haven't won a property in 2 months projects are finishing up you better believe my offers change and I accept a double or a base hit lol!
What contingencies do you have built into offer?
Depending on your appetite for risk or how throughly you went through the home during your tour, in a multiple offer scenario, the less (or none) the better.
Shorter window, as far as days, for inspection(s) the better and the sooner the closing date the better.
A lot/most times it isn’t the net price, it’s how likely can offer get to closing table without being tripped up (contingencies).
Best of luck!
Are there a lot of deals like this available to you?
If so I would leave my bid where it is at
You can also change your terms. I am seeing a lot of offers with no inspections or any contingencies for that matter. Plus, cash is always king.
I would bid whatever the highest price that you know that you will still be getting a great deal at. I wouldn't be overly concerned about the asking price. Focus on what the property's actual value is.
I always tell my clients, bid what you have to bid, where you won't lose sleep at night if you don't get it.. Good luck!
Ignore the list price altogether. Bid what the property is worth to you.
Thanks all for the terrific advice! I decided to leave my offer where it was. I think it's competitive as it is an all cash offer with a 3 week close, with no inspections or contingencies. Thanks again.
So we got the houses! The asking price was 36,600 for a 1200 ft 3/1 and an 800 ft 2/1. We offered 45k and they ended up accepting. I think we'll need to put in about 35k of renovations but the two should yield 900 and 600 respectively in rents so I'm stoked! I think it should appraise at around 130 pretty easily after all of the renovations. Thanks for the tips and reassurance.
Sounds like a solid deal congrats!