Module 5
Advanced Techniques

Market Condition Adjustments

Learn when to use 65%, 70%, or 75% based on current market conditions and deal specifics.

Understanding Market Types

HOT Market

  • • Multiple offers common
  • • Homes sell over asking
  • • Under 30 days on market
  • • Low inventory
Use 65-68%

BALANCED Market

  • • Selling near asking
  • • 30-60 days on market
  • • Normal inventory levels
  • • Fair negotiations
Use 70%

COLD Market

  • • Homes sit 90+ days
  • • Price reductions common
  • • High inventory
  • • Buyer's market
Use 72-75%

Other Factors That Affect Your %

Light cosmetic rehab only +2-3% (use 72-73%)
Heavy rehab with unknowns -2-3% (use 67-68%)
Foundation or structural concerns -5% (use 65%)
Property already inspected +2% (use 72%)
Strong buyer demand in ZIP +2-3% (use 72-73%)
Limited buyer pool (rural, unique) -3-5% (use 65-67%)

Impact Example

Same property, $200K ARV, $30K repairs - different market conditions:

Hot Market (65%)

$100,000 MAO

Balanced (70%)

$110,000 MAO

Cold Market (75%)

$120,000 MAO

That's a $20,000 difference based on market conditions alone!

Key Takeaway

The 70% rule is a starting point, not gospel. Adjust based on your market, the specific property, and your buyer pool. When uncertain, be more conservative.

Previous: Red Flags Next: Rental Comping
Module 5
Advanced Techniques

Market Condition Adjustments

The 70% rule isn't universal. Learn when to adjust your percentage based on market conditions and buyer demand.

Market Temperature Guide

HOT Market

Use 75%

Multiple offers, properties selling over asking, days on market under 14

Example: Nashville core, Austin suburbs, strong seller's markets

NORMAL Market

Use 70%

Balanced supply/demand, properties selling at or near asking, 30-60 days on market

Example: Most suburban San Antonio, Atlanta OTP areas

COLD Market

Use 65%

High inventory, price reductions common, 90+ days on market

Example: Declining areas, overbuilt subdivisions, economic distress zones

Other Factors That Affect Your %

Go HIGHER (75%)

  • • Desirable school district
  • • Experienced flipper buyer lined up
  • • Light cosmetic rehab only
  • • New construction nearby at premium

Go LOWER (65%)

  • • Major structural/foundation issues
  • • Unknown repair scope
  • • High crime area
  • • Unusual property (hard to comp)

Impact on MAO

See how the percentage affects your offer on a $300K ARV with $40K repairs:

65%

$155,000

Conservative

70%

$170,000

Standard

75%

$185,000

Aggressive

That's a $30,000 swing - understand your market before choosing!

Key Takeaway

The 70% rule is a starting point, not gospel. Know your local market conditions and adjust accordingly. When uncertain, be conservative - you can always come up on your offer, but you can't undo a bad purchase.

Previous: Red Flags Next: Rental Comping