My offer was WAY less than others! How?

12 Replies

So, I'm pretty new at this wholesaling thing....actually, I've only done research and learning and never quite made an offer.... Well, I decided today that I needed to. I new that the seller wouldn't accept my offer, and I knew it would be much lower than he wanted. But, I did it anyways just to help me get over my fear of making offers. 

So here's how I broke it down: 

$260,000 ARV - 70% - $5000 est. repairs

I told him I could probably go anywhere from $165K-$180K just based off the numbers from my research WITHOUT seeing it. He said that people have offered $235K and he still said that was low but mine was the lowest offer he's received. 

Anyways, I'm wondering how my numbers are so off compared to the other investor numbers? Is the market really that hot that investors are offering 90% of the ARV? Maybe my comparables are off by over $100K?

Is this a property off the MLS or somewhere else? Could they have been owner occupant offers?

And you will get used to having offers rejected, I promise this won't be the last time!

Yes, that has been my experience. I recently found a home nearby that another flipper abandon during mid flip for whatever reason. It needed 100k in repairs and I offered 150k less than the ARV because it cannot be easily financed so I didn't expect too much competition. To my surprise someone paid 50K less than the ARV price.

I found another good deal last week where a house and warehouse were being sold on adjoining lots. It was a good deal, not great but good, but sure enough it was bid up way over asking price.

It seems like a lot of people are relying on price appreciation and willing to take some risks that maybe you and I are not. But I think its worth it to remain patient and stick to the strategy of buy low sell high, not buy high and hope to sell higher!

Originally posted by @Stephanie Goodman :

Is this a property off the MLS or somewhere else? Could they have been owner occupant offers?

And you will get used to having offers rejected, I promise this won't be the last time!

Not off the MLS. He said he had called several other investors that had posted ads on craigslist, and that's where he was getting the offers, so not by owner occupants.

Why would anyone discount a property $80,000 that only needs $5,000 worth of work?

This post has been removed.

Originally posted by @Cagney Moreau :

Yes, that has been my experience. I recently found a home nearby that another flipper abandon during mid flip for whatever reason. It needed 100k in repairs and I offered 150k less than the ARV because it cannot be easily financed so I didn't expect too much competition. To my surprise someone paid 50K less than the ARV price.

I found another good deal last week where a house and warehouse were being sold on adjoining lots. It was a good deal, not great but good, but sure enough it was bid up way over asking price.

It seems like a lot of people are relying on price appreciation and willing to take some risks that maybe you and I are not. But I think its worth it to remain patient and stick to the strategy of buy low sell high, not buy high and hope to sell higher!

 WOW! I'm surprised people are doing that....maybe they're not on Biggerpockets? Haha. 

I agree with the buy low, sell high. I already have a house that I was relying on appreciation when I purchased and it hasn't appreciated as quickly as I thought it would. I've had it for 7 years, and I can't quite sell it yet because the numbers aren't were I want them to be. I should have done the buy low, sell high a long time ago! 

@Alicia Hensley as wholesalers we are looking for homeowners that are,....MOTIVATED!! The keyword is MOTIVATED! Motivated = a distressed situation, which is why a seller is willing to sell at low price points. If a homeowner is taking offers, they aren't motivated,.....NEXT! 

BTW, if you haven't seen the house how did you come up with 5k in repairs? 5k is nothing in repairs. 

Some investors are used to buying off the MLS, or bidding at auctions, @ don't know about or don't know any wholesalers.

Originally posted by @Bob Bowling:

Why would anyone discount a property $80,000 that only needs $5,000 worth of work?

That's a good question. I knew that he wasn't a motivated seller when I called him back with a general offer. And I knew that he was going to say no. But, I was going the formula (ARV - 70% - repairs), and was WAY off of what other people were offering.

Originally posted by @James Green :

@Alicia Hensley as wholesalers we are looking for homeowners that are,....MOTIVATED!! The keyword is MOTIVATED! Motivated = a distressed situation, which is why a seller is willing to sell at low price points. If a homeowner is taking offers, they aren't motivated,.....NEXT! 

BTW, if you haven't seen the house how did you come up with 5k in repairs? 5k is nothing in repairs. 

Some investors are used to buying off the MLS, or bidding at auctions, @ don't know about or don't know any wholesalers.

Good points.

  I  up with the $5k in repairs just based off what he told me needed to be done. He said he had everything, it just needed to be finished. I told him that i could be way off with that basic estimate because i haven't seen it. I figured if he wasn't in my general offer, then we weren't on the same page and it wasn't worth the drive.

@Alicia Hensley use this formula:

ARV * .65 - repairs - your assignment fee = Maximum allowable offer (MAO). This is the highest you would offer to a seller.

Originally posted by @Alicia Hensley :
Originally posted by @Cagney Moreau:

Yes, that has been my experience. I recently found a home nearby that another flipper abandon during mid flip for whatever reason. It needed 100k in repairs and I offered 150k less than the ARV because it cannot be easily financed so I didn't expect too much competition. To my surprise someone paid 50K less than the ARV price.

I found another good deal last week where a house and warehouse were being sold on adjoining lots. It was a good deal, not great but good, but sure enough it was bid up way over asking price.

It seems like a lot of people are relying on price appreciation and willing to take some risks that maybe you and I are not. But I think its worth it to remain patient and stick to the strategy of buy low sell high, not buy high and hope to sell higher!

 WOW! I'm surprised people are doing that....maybe they're not on Biggerpockets? Haha. 

I agree with the buy low, sell high. I already have a house that I was relying on appreciation when I purchased and it hasn't appreciated as quickly as I thought it would. I've had it for 7 years, and I can't quite sell it yet because the numbers aren't were I want them to be. I should have done the buy low, sell high a long time ago! 

 This is California my friend, even 80% won't cut it , real deal starts at 85% here.

Originally posted by @Bob Bowling:

Why would anyone discount a property $80,000 that only needs $5,000 worth of work?

 Why would you not offer it? Your phone bill is the same anyway, and 5-10 min phone call shouldn't cost you anything. You still have costs to consider in behalf of your buyer, if you want to do a transaction for free, then nobody is holding you back.

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