How to Make an Offer Below Asking on a Fixer-Upper (With the Numbers)

The offer you make on a fixer-upper does not start from the asking price. It starts from the ARV (after-repair value, what the house should sell for once the work is done), subtracts every cost and your target profit, and solves for the price: that is your maximum offer. On the example house below it is $202,900 with cash and $186,700 with hard money. How much to offer on a fixer upper is then simple: at or below that number, with the reasons attached.

Why the asking price is not an input

The asking price is what the seller or the agent hopes for. It carries no information about what the house will cost you to repair, carry and sell, and none about what it will be worth afterwards. An offer below asking price that is derived from the asking price ("asking minus 15%") is a guess dressed as a negotiation.

Your offer is the output of a calculation whose inputs are the ARV, the rehab, the costs and your target. The asking price enters at the very end, for one comparison: is it above or below your number?

How to work out your maximum offer, every cost counted

The maximum offer is the highest price at which the profit still equals your target once every cost is counted: rehab plus contingency, purchase closing costs, financing, holding and selling. Because closing costs and the purchase loan depend on the price, the formula solves for the price rather than subtracting a fixed list.

Profit = ARV − Price − (Rehab + Contingency) − Purchase costs − Financing − Holding − Selling
Maximum offer = the Price at which Profit = Target profit
Cash purchase: Maximum offer = (ARV − Selling − Holding − Rehab − Contingency − Target) ÷ (1 + purchase cost %)

The example house used across this site: 1,600 sq ft, 3 bed 2 bath, built 1978; ARV $320,000; repairs $48,000. The app's defaults: contingency 10% of repairs, purchase closing costs 2% of price, holding $1,500 a month for 6 months, selling costs 6% of ARV, target profit 10% of ARV. It is an example; costs vary by market and by year.

Check it: at $202,900 the closing costs are $4,058 and the profit is 320,000 − 202,900 − 52,800 − 4,058 − 9,000 − 19,200 = $32,042, right at the target.

With hard money (a short-term loan priced on the property; the app's defaults are 90% of price plus 100% of the rehab line financed, 11% a year, 2 points, 6 months) the points and interest also depend on the price, and the maximum offer drops to $186,700. At that price the loan is $220,830, the points $4,417, the interest $12,146 (counted on the full loan for the whole term, the app's stated simplification), and the profit lands on the $32,000 target. Financing costs the deal about $16,200 of purchase price. The house flip profit calculator shows the same arithmetic forward from a price you choose.

For comparison, the 70% rule (ARV × 70% − repairs) gives $176,000 on this house. It is a screen, not an offer; the full number knows your costs and your target.

How to present an offer below asking

A documented offer reads as a business proposal. An unexplained low number reads as an insult, and sellers respond accordingly. Include:

• The repair estimate by area. Roof, kitchen, baths, electrical, plumbing, HVAC, interior, exterior, as a summary with the big items named. The seller may not know the roof is at the end of its life; the listing agent may. A photo or two of the worst items helps.
• Your timeline. Inspection period (short, since you have already walked it), closing date you can keep, and that you are not waiting on a sale of your own.
• Proof of funds or a hard money lender's letter. A fixer-upper often will not pass a conventional buyer's appraisal or inspection contingency; a buyer who can close is worth money to the seller.
• What you are not asking for. No repairs by the seller, no credits, as-is. The price already reflects the condition.

What you do not include: your ARV, your profit target, your maximum offer. The seller does not need to know that $202,900 is your ceiling, and an offer at the ceiling leaves no room for the counter.

In Flip Investor OS the share link for a contractor carries the scope of work without prices, and the lender package carries the loan request, sources and uses and the ARV evidence for a lender. Neither is a seller's document; the summary for the seller you write yourself, from the same estimate.

What to do when asking is above your maximum

Say the house is listed at $225,000. Against the cash maximum of $202,900 the gap is $22,100; against the financed maximum of $186,700 it is $38,300. Three honest options:

Walk

The most common right answer. The house is a fine house; it is not this deal at this price. Write the maximum offer down, submit it with the documentation, and let the listing age. Sellers of houses that need work often come back after the conventional buyers' inspections fall through.

Change the plan: rent it (BRRRR)

BRRRR (buy, rehab, rent, refinance) is a second way out of the same house. Instead of selling, you refinance into a long-term loan and keep the house with a tenant; the question changes from "what is the profit?" to "how much cash stays in the house, and does the rent carry the payment?". With the app's defaults (refinance at 75% of ARV, 7% a year, 30 years, refinance costs 2% of the new loan) the new loan on the example house is $240,000 and the payment about $1,597 a month. Bought for cash at $225,000, the cash invested is 225,000 + 52,800 + 4,500 closing + 9,000 holding = $291,300; the refinance returns 240,000 − 4,800 = $235,200; the cash left in the deal is $56,100. At $200,000 it would be $30,600. Whether $56,100 is acceptable is your target, and whether the rent covers the payment is the rent; neither answer is in the price. Flip vs BRRRR compares the two readings on one house.

Change the plan: a different scope

A lighter rehab lowers the rehab line but usually lowers the ARV too, and the ARV moves the maximum offer more. On the example house a $36,000 rehab, five months, and an ARV of $300,000 instead of $320,000 gives a cash maximum offer of $200,800, lower than before. A lighter scope only helps when the ARV holds, which comps, not hope, have to show. Work it through before you believe it.

What is not on the list: paying $225,000 because the seller will not move. The $22,100 does not disappear; it comes out of the profit at the sale, where the margin is already thin.

How the app shows the gap and the score

Flip Investor OS keeps the asking price and your maximum offer apart and says plainly which is higher: "Asking is $22,100 above your maximum offer" on the property, with the figure from your latest saved analysis. Two ways out, flip and BRRRR, sit side by side on the same house with each one's maximum offer, so a change of plan is a tap, not a new spreadsheet.

The deal score describes margin of safety and data quality with fixed rules and neutral labels (wide, moderate or thin margin of safety) from five factors: profit margin in the base case, how the deal holds under the stress tests (ARV −5%, rehab +20%, three more months), price against the maximum offer, ARV evidence (how many comps) and inspection coverage (how many zones walked). With fewer than three comps, unpriced estimate lines or incomplete inputs it reads "not enough data" and points at the screen that fixes it. It never says buy or don't buy. You can open the free calculators without a card and run your own house through the maximum offer and the profit arithmetic.

A short procedure for the offer

1. Three to five comps, three ARVs; use the base one for the offer and look at the conservative one before you sign.
2. Walk every zone; price the work by item; unknowns stay unpriced until priced, and the estimate stays Incomplete until then.
3. Contingency, closing, financing, holding, selling, each on its own line; a profit target you would actually accept.
4. Maximum offer, cash and financed.
5. Compare with asking. Offer at or below your number, with the estimate summary, timeline and proof of funds attached.
6. If asking stays above your number: walk, re-plan the exit, or wait. Do not raise the number to meet the seller.

The arithmetic cannot tell you whether the seller will accept. It can tell you what accepting their number would cost you, which is the only part you control.