House #27 taught me a lesson I will never forget. It was listed at $63,000 and in superb condition (more or less ready to be rented). After looking at it, I told my partner I thought it was a waste of time to make an offer as an owner occupant would pay a lot more. I called the listing agent to see if he would represent us and he basically said for a $500 commission it was a waste of his time. We sent in our own offer just above list price and three days later a highest and best request came. We normally don’t go up much, but we decided to offer just over 73,000. Two days later he called and said the bank had accepted our offer. I asked him some questions and he said, you guys were the highest offer by over 10,000. I was thinking “oh crap, what did we miss?.” Apparently, we didn’t miss anything, it appraised as-is for 130,000 and we got a private loan for more then our total cost. Two years later it is still a great rental. There is nothing wrong with getting paid to buy a positive cash-flow rental.
House #79 is another example of not being worried about the list price. This house was a total mess. The bank originally had it listed at 185,000. We sent in an offer at 110,000. The bank lowered the price to 165,000. We sent in an offer at 110,000. The agent started asking us questions (proof we had seen the property, proof that we were capable to make the repairs) and after figuring out all the issues we ended up agreeing to buy the property at 100,000. That is 60% of list price.
As you know your market, you will know the number that will work and not be as concerned about list price.