Delinda HarrelsonThe Flipping Coach
“Investors-Stop Trying to Get a Deal from A Deal! And Then Wonder Why You Can’t Get Deals.”
Whether the market is hot or not there are always investors lowballing than overbidding on the MLS. The auction block is completely different.
It is also different for HomeBuyers looking for a home. Most of them are willing to pay more for a move-in ready home especially if they have lost out to other buyers in a hot market
For those that can estimate costs well, they still want a deal from a deal. They may have already won paying what the seller wants, but the win has to be bigger, to make up for all of the ones they have lost from lowballing.
Take this little house (images below). It came on the market for $39,000. It was a killer deal. I paid $55,000 and I sold it for $167,500. I knew the area. I knew what I could get for it. I was confident. It was in 2010, and the market sucked but I knew it was a deal to me at $55,000. A number of angry investors approached me later complaining that I had overbid and drove up the price. Some of their ridiculous offers were anywhere from $17,000-$25,000 in an area of houses selling between $175,000 to $200,000. At that time the only place you could find houses priced that low, or even at $55,000, were drug and crime ridden dangerous areas, not this area. I felt it was under-priced, not just for the area but the whole market. There was no driving up the price, it was already below market value even for the condition, area, town, etc…
The house was so tiny. I knew I couldn’t get over $200,000 for it but I still got the highest price per sq ft. It was the highest sale for that size. I paid what I felt was a deal regardless of what others thought. Be careful who you listen too. I made a lot of money on that house because I knew the area. I believed in it. I had already had a number of properties in the area. Most importantly, I wasn’t using some MAO formula that didn’t work.
Regardless of the formula used or inexperience, I can’t tell you how many times investors do not want the seller to make a dime. Even when there is no inventory in that price point. The first thing they do is look to see what the seller paid and base their offer on that price even if it was bought years ago in a horrific economic downturn. This is just absurd. It really is a paupers mentality. If you talk to some of the richest people in the world they will tell you they don’t look at what someone paid for something. They look at what they can make on something based on their skills, knowledge, reputation, and history. It would be like someone researching what a farmer sells an apple to a grocery store for and then offering less than what the store paid for that Apple. Just so they can get a deal.
Until investors accept they have to pay more now than they did in the worst economic downturn we have experienced, they’re gonna be sitting on the sidelines trying to get a deal from a deal, while you and I keep making money. It’s funny how the masses don’t understand supply and demand. I am getting more for my houses than most people because not only will people pay for them, appraisers have other ways to make houses appraise than just doing a 1 minute CMA like so many novices.
So remember, a deal to me may not be a deal to you and vise versa, but when you are thinking, “oh man, this is a deal”, don’t play games. Make a full price offer or more. You have won if you are in the game and not sitting on the sidelines watching.