A maximum allowable offer, shortened to MAO among land buyers, is the highest price at which a purchase still leaves the buyer the margin the buyer set. The value at exit comes first; the costs to buy, hold and sell come off it, and then the margin. Beside each figure sits its source: a quote, a tax bill, a county record, an estimate or a guess.
The guide and the worksheet
Made up for both: the 10-acre lot from the comping guide, valued at $47,500, with $8,750 of costs and a $12,375 margin. The maximum allowable offer, worked term by term brings it to $26,375 and rounds down to a $26,000 walk-away price. It then changes one line at a time. A value 10 percent lower takes $4,132.50 off the maximum, a survey that costs twice its quote takes $2,500, and six more months of holding take $300.
The maximum offer worksheet is the same arithmetic on paper. Walk-away conditions come first, before any number, then the comp table, the cost lines with a source column, the margin as profit, risk buffer and error buffer, and an evidence check that fails if more than two lines say guess.
When land values fell
An FDIC article from 2008 records that farmland values rose 80 percent in inflation-adjusted terms from 1971 to 1981, then fell between 1981 and 1992 to near their level before the 1970s (FDIC Quarterly, 2008, volume 2, number 4). The same article counts 297 farm bank failures between 1977 and 1993.
The flipper's shortcut
Among house flippers, a rule of thumb with no single source puts the maximum at 70 percent of the after-repair value, minus repairs. On the example lot that gives $33,250, which is $6,875 above the line-by-line answer, because a survey and closing costs weigh more on a cheap parcel than on an expensive house.
Reading path
- The maximum allowable offer, worked term by term
The most a buyer can pay for a parcel, built from the value at exit with every cost and every part of the margin on its own line.
Worksheets for this guide
- Maximum offer worksheet for a land parcel
A printable worksheet that takes one parcel from comparable sales to a walk-away price, with a column for where each number came from.