Have you ever been approached by someone with a “hot deal” on an investment property? Sure you have at some point. Maybe the inside tip is from someone you know or perhaps it’s just from an owner you’ve never met before.

The pitch goeswhats the worth for investment real estate something like this; “Hey, I’ve got a property that’s worth $250,000 that I can sell to you for $150,000!” Who wouldn’t jump all over that deal, right? Make a quick hundred grand? But hyperbole aside, let’s take a look at such claims.

Why is the seller willing to discount a home by almost half? There could be several answers to that question but the real question is not the discount on the price but why leave $100,000 on the table? Would any sane person give a total stranger $100,000 just for buying a property? It seems doubtful doesn’t it? But really, if the house is worth $250,000, why hasn’t someone paid $250,000 for it?

The market value of any piece of real estate, all things being equal, is the lowest price the seller will accept compared to the highest price the buyer will pay in a non-distressed situation.  If you bought a $250,000 home for $150,000, do you think you could really sell it for $250,000?

You might if there were other factors at play such as the property needing extensive rehabilitation but in the real world, a home should sell for what it’s worth. And what it’s worth is established by the individual seller and the buyer. An appraiser will follow up after the contract is written to identify similar sales in the area to justify the price, but the value of any investment real estate is what both you and the seller agree upon. It’s not what someone thinks it might be.