Once you have developed a great system for keeping a constant pipeline of prospective buyers and have perfected your marketing you will often find that you are dealing with multiple offers on the houses you are flipping. So how do you decide which is best? It certainly isn’t always the one with the highest gross price.
Real estate investing and transactions can be volatile at the best of times, so when flipping houses you not only need to look at the bottom line but how solid an offer and buyer are. Of course you want top dollar for homes you are flipping, but if the deal ends up falling apart in 60 days you are now back to square one and are likely incurring holding costs which are digging into your profits. What if it takes another 60 days or longer to sell then and all of the other interested buyers have evaporated? Smart real estate investing involves knowing where to limit risk. Sometimes it is wiser to get in and out of a deal quickly and onto the next one than to leave yourself open. When it comes to flipping houses this often means going for the cash offer, even if it is lower than the others on the table. There are just too many factors involved when a buyer needs conventional financing that you cannot control. So if you have a cash offer and a buyer that can close quickly, this is normally the best option.
However you must also take into consideration other contract elements like contingencies and if the buyer is asking for credit for closing costs or has an opening to ask for repair credits. One little known tool that many involved in real estate investing are unaware of is the ‘Kick Out Clause’. Using this clause in your contract means that you can accept a low cash offer, but you can continue marketing the property and if you receive a higher offer before the closing you can kick out the buyers contract unless they are willing to match the price. You can even use this in the reverse when you make offers in order to get better deals as well.
