MAO versus list price on a house flip

People search for MAO versus list price on a house flip, and for how far below the asking price a flip offer has to be. On a report, that comparison is one input to the 0 to 10 deal score. The factor is named Price Spread. Its weight is 30 percent. It is not a pass or fail rule, and it is not a second offer formula. A factor score of 1 is still a score. The factor does not reject a deal, and it does not tell you what to write on the contract.

Spread is (MAO minus list price) divided by list price. Written as a percent, that is ((MAO minus list) divided by list) times 100. It answers whether the offer ceiling already clears the asking price. It does not tell the reader to pay the MAO, and it does not tell them to take a fixed percent off the list. The deal score is the weighted total of five factors: Price Spread, ARV confidence, risk level, rehab scope, and exit flexibility. This page publishes only the Price Spread bands. When this factor's value is an integer, its weight is 30 percent. The other four factors are still added. Do not read the integer as the deal score, and do not publish this factor's weighted points as the deal score.

A positive spread and a negative spread

A positive spread means MAO is above the list. That scores higher, because the deal works at the ask. The ceiling already clears the asking price, so the buyer does not have to talk the seller down for the 25/5/3 math to fit. A spread of exactly 0 percent means the ceiling and the ask are the same number. That is inside the scale. It is not a bonus and it is not a failure.

A negative spread means the ask is above the ceiling and the buyer has to negotiate down. The size of that gap picks the band. A small gap under the list scores higher than a wide gap. None of those bands is an instruction to subtract a favorite percent from the asking price, and none of them is an instruction to pay the MAO. When the spread is positive, the ceiling is above the ask. That higher ceiling is not a reason to raise the offer up to the MAO.

The bands, including the exact edges

When the list price is above 0, a larger MAO relative to that list scores higher. The cuts are inclusive on the high side of each band. The edges belong to the higher score. A hair past a cut falls into the next lower band.

• 20 percent or more scores 10. Exactly 20 percent scores 10.
• 10 percent or more, and under 20 percent, scores 9. Exactly 10 percent scores 9.
• 5 percent or more, and under 10 percent, scores 8. Exactly 5 percent scores 8.
• 0 percent or more, and under 5 percent, scores 7. Exactly 0 percent scores 7.
• -5 percent or more, and under 0 percent, scores 6. Exactly -5 percent scores 6.
• -10 percent or more, and under -5 percent, scores 5. Exactly -10 percent scores 5.
• -15 percent or more, and under -10 percent, scores 4. Exactly -15 percent scores 4.
• -20 percent or more, and under -15 percent, scores 3. Exactly -20 percent scores 3.
• -30 percent or more, and under -20 percent, scores 2. Exactly -30 percent scores 2.
• Below -30 percent scores 1. A hair past -30, such as -30.5 percent, scores 1.

A missing list price scores 5. A list price of 0 or below scores 5. That is a neutral, not a pass. The percent is not formed in those cases, so they are not the same row as exactly 0 percent, which scores 7, and they are not the same row as exactly -10 percent, which also scores 5 only after the percent is computed. There is no band that means the deal failed. A score of 1 remains an input with a weight of 30 percent.

An invented $200,000 list

The dollars in this section are invented so the division can be checked by hand. They are not a closed sale, and this page has no city price table. The list price is $200,000 in every row except the last. Only the MAO changes. The score uses MAO and the list price only.

• An MAO of $170,000 is -15 percent. Exactly -15 percent scores 4, so the factor score is 4.
• An MAO of $180,000 is -10 percent. Exactly -10 percent scores 5, so the factor score is 5.
• An MAO of $200,000 is 0 percent. Exactly 0 percent scores 7, so the factor score is 7.
• An MAO of $210,000 is +5 percent. Exactly 5 percent scores 8, so the factor score is 8.
• An MAO of $220,000 is +10 percent. Exactly 10 percent scores 9, so the factor score is 9. The ceiling is above the ask. Do not raise the offer up to $220,000.
• An MAO of $240,000 is +20 percent. Exactly 20 percent scores 10, so the factor score is 10. That row still does not tell the reader to pay the MAO.
• An MAO of $140,000 is -30 percent. Exactly -30 percent scores 2, so the factor score is 2.
• An MAO of $139,000 is -30.5 percent. -30.5 percent scores 1, so the factor score is 1. The edge at exactly -30 percent stayed at 2. A hair past that edge did not.
• A missing list price scores 5. A list price of $0 scores 5. Both are a neutral, not a pass.

Read each line as a factor value, not as the deal score. On the $220,000 row the factor's value is 9 and its weight is 30 percent. ARV confidence, risk level, rehab scope, and exit flexibility still have to be scored before anyone can name the 0 to 10 total. The same warning applies to the factor score of 10, the factor score of 8, the factor score of 7, the factor score of 5, the factor score of 4, the factor score of 2, and the factor score of 1.

What this score does not do

This score does not change ARV. Days on market are not an input. Rehab dollars are not an input either. The score uses MAO and the list price only. It does not read ARV, rehab, or days on market. A high ARV raises this factor only by raising MAO. If the ARV moves and the MAO stays put, this factor stays put. If the rehab budget moves and the MAO stays put, this factor stays put. Recalculating the report can move MAO, and that new MAO is what this factor reads.

The ceiling itself stays the 25/5/3 offer from the MAO calculator: ARV minus repairs, minus 25 percent of ARV for profit, minus 5 percent of ARV for closing, minus 3 percent of ARV for holding, with each of those three reserves rounded before the subtraction. This page does not rebuild that formula. It only compares the ceiling you already have with the list price you already have.

A longer listing is a different worksheet. The days on market offer guide changes the holding line and the purchase price from days on market. Those days do not enter these bands, and this page does not add a days-on-market flag to the risk list. The fix and flip profit guide is the profit worksheet after a purchase price is chosen. Price Spread does not rewrite that worksheet, and it does not replace the purchase price with the MAO. When the ceiling sits above the ask, leave the offer at the ask unless some other term of the deal is what you are changing.

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