How Do Home Buyers Determine Offer Price?
If you’re reading this and you’re wondering how we determine how much we pay for houses to flip, keep reading. I’m about to break it down for you. But before I start getting into it, if you want a cash offer for your property, go to flipfoxvalley.com we can provide that for you. Again, flipfoxvalley.com or fill out the form below.
But let’s jump on into this. So, in the video below I am recording myself writing for all of you who are wondering how we determine what price we pay for each individual property. And if you’re wanting an offer on your property, etc., you can kind of break it down from here.
First Step: How We Determine Offer Price
First off, we typically have to view the property in person before we provide any sort of offer. I can give you a verbal estimate but it’s never going to be as accurate as me actually physically walking through the property. Because as you know, every single house is different. They’re structured differently. They’re set up differently. So price points are different. No two houses are alike.
So how we determine price…. We come up with what we call an after-repair value. So this is what the house might be worth once it is completely remodeled. So new flooring, paint, windows, kitchen, bath, everything is brand new. I’m not talking just doing the bare minimum. Everything is brand new and that’s how we do our remodels. So that’s how we determine the, after-repair value.
From the after-repair value, we always take into consideration our expenses. So, when we go to sell a property, we have to pay a real estate agent, we have to pay taxes while we own the property, utilities, etc., all that stuff, which adds up to about 10 to 12%. So, we take the after-repair value, subtract 10 to 12% because like I said, we have all those expenses we face as well. Then we have to subtract repairs. And like I said, we bring it up to 2019 new modern condition. So you can imagine what the houses look like when they’re all said and done. They look absolutely stunning and beautiful. You can look at our website here to see past properties that we have purchased and that we have renovated to get an idea.
Calculating Repairs on Properties We Buy
For repairs, we’re paying a little bit more than what you or another homeowner might pay. Just because we give the contractor so much business, they can only give us so much of a discount. We’re still paying probably 90% of what a retail homeowner would have to pay. So repairs aren’t that much cheaper for us. Our average remodel is 28 to 35,000.
And then, of course, we take into consideration profit. We run a for-profit business, so if the numbers don’t make sense, we will not do the deal. And that’s as simple as it is for us. We have to make a profit and that is how this business keeps going, that’s how we’re able to buy more houses. Whether we buy the house & immediately re-sell it, we flip the house, or we hold it as a rental, we will be profiting in some way.
Now if you’re wondering how much do those we-buy-houses companies pay? Do they pay 90, 80, 70, 60, 50 cents on the dollar? Well, it really depends upon what value you’re comparing it to. And also, it’s dependent upon what sort of condition the house is in. If the house needs 50, 60, $70,000 worth of work, well, we’re not going to give you 60 cents on the dollar and then be underwater on the property.
I hope this is beneficial and like I said before, if you want a cash offer on your property, go to flipfoxvalley.com or fill out the form below. We can provide that for you. I’ll reach out, I’ll have a conversation. I’ll come take a look at the house. but this is how home buyers determine offer price. And I hope you guys have a great day. Again, flipfoxvalley.com. I’ll talk to you later.