Paying all cash. What's a reasonable offer price?

Question

Steve Vaughan · Answer

$35,000 sounds like a plucked from air, slap in the face. They will probably be too pissed to bother countering and you will be essentially excommunicated.

I tend to offer about 92% of asking cash in a sellers market if the value seems to be there and I don't end in zeroes.    Make it look like you're offering all you can and it came from your calculator.

Kyle J. · Answer

@Jalissa Carter  I would offer $42,597.50.

Obviously I made that number up, because the truth is I have no idea what the home is worth.  Neither does anyone else on here.  What do the comps say it's worth?  Does it need a lot of repairs?  Or is it already completely fixed up?  Is the seller distressed and need to sell immediately?  Or are they in no rush at all and will only sell for full price even if it takes a year?  All those things can affect your offer price, and ultimately the sales price.

You also don't mention where you're located, but where I'm at you wouldn't get a huge discount for paying cash in this case because everybody would be expected to pay cash for a home at that price point.  Simply because you couldn't get a loan for a home that cheap.  However, I understand that in some markets it may be possible to.

Ultimately, if you're new to this, I think the best "expert advice" you can get would be from a LOCAL Realtor who has knowledge/experience in the local market and can pull recent comps and advise you on what a good offer price might be.

Best of luck to you.

Duncan Hayes · Answer

Maybe some advice from someone who wholesales full time would be helpful here?

Our entire business model runs on cash transactions, even though they're generally hard money loans. We specialize in getting properties at a discount, in order to close and flip immediately; or with the primary goal of assigning the contract to an end buyer.

My advice? Treat it like you're trying to wholesale the property. Negotiate the same way we would to get a discount. ARV x .7 = ____.

Take that number and then minus repairs, closing costs, and any other associated costs. The number you get is your Max Offer. Start a little lower. If you come in at $35k, they may counter at $42. then you might be able to get them under $40k. But if you come in around $20k-$25k then they may counter with $35k. Or even $30k. Make sure you emphasize the cash purchase, meaning you can close as soon as title comes back clear, and offer to cover their closing costs.

"Mr. Seller, seeing how I'm offering cash, can close in two weeks or less, and will cover closing costs, what's the best price you can give me on this sale?"

You let them throw a number first, once you do it it'll be harder to move them away from that number.

Joe Villeneuve · Answer

What did you use to compare these other properties to?  You said similar price...that's not what makes up comps.  What makes up comps are similar houses.  Size, # beds, # baths, etc...  What are the sold (not listed) prices of those houses, sold within the last 3 months, within 1 mile of the house you're looking to buy?

Duncan Hayes · Answer

@Dan Maciejewski yes you are correct, there has to be some motivation there. But, they're selling already. OP is not calling a stranger who never thought about selling prior to answering our call. Find their motivation for selling, and build rapport. It doesn't just work from a wholesaling volume stand point. You can apply the same principles to purchasing your own deals. If you know how to approach the deal as a wholesaler, then you don't need a wholesaler right?

My point is go at it from a wholesaler's methods, even though you're planning on keeping it. Build rapport, find their motivation, then offer a solution that helps them achieve whatever they're motivated to achieve through the sale of the property. You don't have to dispo like a wholesaler, but you can definitely approach acquiring the property like one.

Jalissa Carter · Answer

Thank you all for your expertise. I will definitely be taking them to heart. I certainly do not want to offer too low of a offer price. The house has been sitting for about two months now I'll be taking that into considerations and will pull comps.

Jonathan Greene · Answer

What does your realtor say and if you don't have a buyer's agent, why not? You judge your offer price based on recent sales that match your house makeup like @Joe Villeneuve said and you also take into account the speed of the market right now, as well as how much it's worth for you. In my opinion, thinking about a 20k cash discount on a 55k property is silly. Most people can't get mortgages under 100k anyway so it's all cash buyers or modified cash and in these markets all over the country, cash isn't a huge discount source anymore unless the sellers needs to sell quickly and close ASAP.

Dan Maciejewski · Answer

@Duncan Hayes has good advice for a wholesale approach.  That is a great method but does rely on volume and usually distressed sellers.  Those are different from motivated sellers in that they have a problem and selling the house fixes it.  Motivated sellers usually have a goal they need to achieve but not necessarily a problem (although there is usually some pain that makes an owner occupant sell

The true answer depends on how motivated the sellers are and the market.  In my market, the question is, "what are others willing to pay?"  If someone else is willing to pay $75,000 with 60% financing and no appraisal with a 25-30 day close, it doesn't matter what you think a good deal is.  And a 10 day cash close isn't going to be that big a difference to make up for the chance at an extra $40,000.  If the other buyers are only willing to offer $37,000, then there's a lot more room for your offer to shine.

Damaso Bautista · Answer

@Jalissa Carter

I would be asking myself what kind of market is this home in. (most markets are real hot right now and if its a good deal in a strong market on mls it will be sold at or above asking soon)

If it has been sitting for a while you need to really look into why it is sitting.  If after you do your due diligence and its good to go by your metrics, then make whatever offer you want and negotiate because its sitting there not sold anyway.

Figure out what situation and market you are in and then deal accordingly.

Always according to your criteria.

Good luck!

Paying all cash. What's a reasonable offer price?

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