Are Lower Bids better than Higher Bids?
Every investor knows that you need to get a good price on something if you want to make a profit. This is such common knowledge it seems strange that so many investors are afraid of making low offers. In my experience, low offers are always the best. They might not be accepted every time but they are the source of my best deals. I’ll tell you why.
One of the things that I have learned is that the lower the price of the property the lower percentage of list price they will accept. I have gotten offers accepted typically between 25% and 60% with most being in the 30% to 50% range.
Typically, the offers I make that are accepted have been around 30 to 40% of the listing price on lower priced homes and around 40 to 50% on higher priced homes. For example, if a house is listed for $30,000, then it is not unusual for me to get an offer of $10,000 accepted; however, if a house is listed for $100,000, they will probably not take $30,000 for it.
Now they are both around 30% offers, but the higher the price, the less likely they are to take a 30% offer. On that $100,000 they would probably not take less than $50,000 to $60,000, based on my experience. Now don’t think that every $100,000 house you make an offer on they will accept a 50 to 60% offer. It’s not going to happen. Remember that we have to make lots of offers to get one accepted.
Some investors simply make an offer on every home that is available to them for some fixed percentage of market value, like 30 to 50% in my case.
The lower your offer is, the fewer will get accepted, but the more likely it is that when one is accepted it will be a screaming deal (and therefore a safer deal, especially if it is your first one).
We recently got a bid accepted of $28,000 on a house that was listed for $109,000. Now the reason we got this bid accepted was because the property was a two bedroom property; however, the property has almost 2000 square feet. So our thoughts were to simply figure in our repair estimate to add another bedroom within the existing square footage. There was plenty square footage to work with. So we made the offer and got it accepted.
Simply put, lower bids get accepted more often than you think. When they do get accepted you stand to make much more money than with a higher bid. I hope this has helped to open your eyes a bit. You can hear even more about this in my latest book.
Larry Goins is an author, trainer and national speaker. Previously, Larry served as president of the Metrolina Real Estate Investors Association in Charlotte, NC and has written several books on real estate investing that are available wherever books are sold. He is making his latest book HUD Homes Half Off! available for free for a limited time by clicking here.