Re: Offers and momentum - Posted by kf_az
Posted by kf_az on December 31, 1999 at 20:40:15:
I tried to locate my copy of LeGrand’s “Fast Cash” book to list the components of the offer. I wasn’t able to locate it, so I’ll wing it based on how I make offers.
1.Start with FMV or ARV(after repaired value)
2.I like to subtract 3 to 5 percent off the top of that to get a SFV(sell fast value). This is optional. It’s a fudge factor of sorts that I like in there to market “below FMV” to move it faster.
3.Then, I subtract a Realtor commission. This is regardless of whether I actually use a Realtor or not. If I don’t use one, then I pocket this component. If I do need to use one, I’ve got it covered.
4.Subtract your fixup costs. Pad this figure by at least 20% for breathing room.
5.Subtract your estimated closing costs.
6.Subtract your estimated holding costs-the cost of your financing. Plan on 3 to 6 months depending on the market activity in that neighborhood for comps.
6.Then, subtract your desired profit. Only you can know what figure you’re comfortable with.
Some people offer lower than end result so that they have room to go up if necessary in the negotiations. Personally, I don’t mess around with it. Whatever the figure comes out to is my offer. If it’s not responded to, move on to the next offer. If they counter, and it’s reasonably close(within a thousand or 2)I’ll re-evaluate and see if I can make it work. It’s more imporant for it to fit your numbers than it is for your offer to fit their numbers. You’ll regret it sooner or later if you lose sight of that. I hope that helps you a bit. Good luck.
P.S. That formulation is assuming you’re retailing it after you purchase it. If you plan on wholesaling it, you’ll need to factor in both your profit(much smaller typically due to risk, cost and time dynamics) and the investors profit.