Whether you’re a wholesaler or a buyer who wants to flip or hold the property, you need to know how to evaluate a deal in order to make a profit. Never get under contract without having evaluated the deal first. Even if the purchase contract has a contingency clause built in, evaluate the deal before taking any other action.
Ready to make an offer?
If you’ve taken care to evaluate and you find that there’s good profit potential, it’s time to make an offer. When you write your offer, be sure to add contingencies. These are ways for you to walk away from the deal should you decide to do that. For instance, a contingency might be “subject to financing approval”—anything that allows you to bow out should you change your mind for any reason.
If a great deal comes along with a lot of buyers competing for it, the best offers are “all cash” with “no contingencies.” If you decide to move forward with your offer in these instances, make sure you think things through clearly and know exactly what you are doing. You might want to check with an experienced investor who can help advise you.
Always remember, your most critical step is in evaluating properties before you make an offer.
Once you make an offer, it’s time to sit back and wait for the seller to respond. But be proactive. Don’t sit for too long!
At this point, three things can happen.
- The seller can accept your offer.
- The seller can counter your offer
- The seller can reject your offer.
If the seller accepts, you’re on your way to contracting a deal. If he/she counters they will ask for a different amount. Expect it to be higher than your original offer.
How do you respond? You go back and re-evaluate the deal. If the numbers don’t work, don’t accept it. You can always make the same offer again in the future—if the property is still on the market.
If the seller outright rejects your offer with no counter, don’t waste time trying to talk him into the deal. Move on. Again, you can always make an offer in 30 days or more if the home is still on the market.
Always remember, your most critical step is in evaluating properties before you make an offer. This might seem challenging at first but with a little practice, it will get easier.