Why MAO Matters More Than List Price
Most investors anchor on list price — the wrong number. Here's why your Maximum Allowable Offer is the only figure that matters when evaluating a deal.
Most new investors make the same mistake: they look at a listing, see the price, and immediately ask "is this cheap enough?" That's backwards.
The list price tells you what a seller *wants*. Your MAO tells you what a deal is actually *worth* to you — given your rehab scope, holding costs, selling costs, and profit target.
How MAO is calculated
The formula is simple in concept:
MAO = (ARV × 0.93) − Rehab − Holding Costs − Min. Profit
The 0.93 accounts for selling costs: roughly 6% agent commissions + 1% closing costs. Everything else flows from there.
The problem with anchoring on list price
When you anchor on list price, you negotiate against the seller's expectation. When you anchor on MAO, you negotiate from your numbers. Big difference.
A $200K house with a $40K rehab and a $220K ARV has a MAO around $120K. If it's listed at $160K, the seller is living in a different reality — and no amount of "motivated seller" language changes the math.
Use MAO to filter, not just to offer
The real power of MAO is using it at the top of the funnel, not just at the offer table. If your MAO on every house in a neighborhood is 30% below list, that market isn't where you should be spending your time. Move on.
Deal Sherpa computes MAO automatically for every listing the moment it hits the market — so you only open the ones where the numbers already work.