So, you have a property to flip and you’re about to approach your list of buyers with your latest proposition. For now you’re looking to see if anyone is willing to make you a solid offer. But if you only receive the one bid, you’re wondering what you should do.
Should you immediately take the first offer to come along? Or should you hold out and hope for a better deal from another one of your usual buyers? Real estate flippers find themselves in this conundrum fairly regularly and for many people it’s a difficult set of questions to answer.
On the one hand, by taking the first proposal you’ll be able to immediately make a return on your investment, even if it isn’t as big a return as you initially envisioned. On the other hand, if you hold out long enough you may end up getting an even better offer in the future.
Now, depending on how you look at things, you could go either way. We’ll take a look at both sides of the coin so to speak, and then tell you what we feel is the right thing to do. But in the end, it ultimately comes down to you, your expectations, and what you’re trying to accomplish when flipping a property.
With that said, let’s take a look at detailed answers for the two questions posed above.
Should I Immediately Take the First Offer When Flipping a Property to My Buyers?
This is an interesting situation to be in because it means you’re about to complete your investment and turn a tidy profit. But is your profit big enough? Or do you think you’ll receive more if you were to hold out for a while longer?
There’s an old saying that we’d like you to consider if you were to ever find yourself in this situation. The saying goes, “A bird in the hand is worth two in the bush.”
What does this mean in regards to flipping properties?
Simply put, it means that you’d be much better off taking the offer you have instead of holding out and praying for something better to come along. It means you should take advantage of the bid currently available and immediately take it because there are no guarantees in this life and there is no guarantee that a better deal is going to come your way.
Think about it this way. If you reject the offer and your buyer moves on and he’s suddenly no longer interested in the property, you’re going to end up getting stuck with this flip for God knows how long. You may have to wait for months or even years before another interested buyer comes your way, and this means you’ll have to continue to pay taxes, property upkeep, and every other expense that goes along with owning a home.
Maybe you suddenly want to take the original offer and contact your buyer after leaving him in the lurch for months. He may still be interested in the property, but now that he knows you couldn’t sell it to anybody else he may make a new offer that’s significantly lower than his original price. And you’re completely out of luck because you’re stuck selling this property for less than what you could’ve gotten in the first place.
So, remember that a bird in the hand is worth two in the bush. Remember that it’s always wise to take what you have instead of wishing, hoping, and praying that something better comes along.
Or is it? Let’s look at the other side of the coin.
Should I Hold Out for a Better Offer from One of My Other Buyers?
This is a tough situation to be in because you basically have a valid offer on the table and it’s absolutely worth it to take it. But somewhere in the back of your mind you feel that you may end up getting an even better offer from another one of your buyers.
So, you have to really think about the property in question before making your final decision. Is there anything special about this flip that makes you think it’s much more valuable than the original offer? Is there any possibility that one of your regular buyers hasn’t gotten back to you yet but you believe they will make an offer on this property at some time in the near future?
If you could theoretically tell yourself that there is a specific reason that a better bid hasn’t come along so far then it may be worth it to wait. But if you’ve only come to this conclusion because you hope beyond hope that a better deal’s going to come along but have no legitimate reason to believe it will, then you’d be a fool to turn down the first and only offer. You’ll be leaving real money on the table and an offer just as good may never come your way.
Again, every property tells a story. In this example, the current property you’re flipping may be worth a lot more than the initial offer.And for one reason or another, your other buyers just aren’t prepared to make you a better bid at this time. So if the initial proposal is so undervalued that you’d be leaving real money on the table to take it, then you would probably be better off turning it down and waiting for a better deal to come your way.
No one is saying you should sacrifice a good investment just because one of your regular buyers has offered to purchase it from you. You’re in this business to make money first and foremost, so hold out if it makes sense and you genuinely and legitimately know the property in question is a lot more valuable than the current proposition on the table.
Related Reading: Why real estate deals fall apart.
We strongly believe that in most cases you should definitely accept the initial offer because another one may never come along. But we only feel this way as long as it’s fairly close to the amount you expected to get for the property. If it’s a really undervalued bid, then it probably behooves you to wait a little while longer to see if a better option crosses your path.