Bank owned properties - how much can I negotiate?

Question

Hi everyone

My realtor sent me a bank owned property. I did the comp analysis and found that the property was still listed over the comps in the area.

1) Can I negotiate the bank owned properties and what would be a good ball park negotiation with the banks?

2) If I am able to pay full cash would banks agree to be able to negotiate further?

May be weird and hypothetical questions, but I want to make sure I am putting my best foot forward when I put the offer.

Thanks

JD Martin · Answer

I had this happen once. I made an offer on a foreclosure and there were 4 or 5 other offers, so the bank decided they had priced it too low and rejected all offers and took it off the market. About 6 months later I got a call from my agent. The bank sold a portfolio of properties to another company, and this was one of them. It was an oddball for the company that bought it, as it wasn't in their target area, so they contacted the agency that listed it and asked them if they knew any investors before they just put it live - that agency called my agent, who called me, and we gave them the same original offer and they took it. That was a nice deal - I've made a bunch of money on that house :)

Evan Polaski · Answer

@Sesha Bhojanapalli, yes you can negotiate. But I would go in with the price that makes sense for the deal. I am not a fan of haggling things. Just like the broader market, you are not going to get through with a super low offer, and in my experience with bank owned properties, they will either accept or decline your offer. There is little back and forth. You offer and they say yes or no. Having clean terms: cash, no inspection, short close, all have a value. But again, you are dealing with a bank that likely does not have the same motives as a person. When I was buying bank properties, I would always go in with my strongest offer that made sense and that was that. For me, that meant cash with no contingencies, 10 day or as soon as title clears close, and at the best price I could. I got several deals this way, and a lost many. But knowing I came in strong, I didn't care that I lost any.And as Jared mentions, just like a house listed directly by an owner, if it is sitting, you can send another offer, or the same one again. Eventually, the bank has to get the property off their books, they do not want to be landlords, but at the same point, they are not going to sell for well below list on day one.

Sesha Bhojanapalli · Answer

Wow, thank you all for the insights. You folks absolutely rock! this has been very helpful. I am going to bid based on the price I think is right, I am good either way on the outcome. Thanks for the suggestions.

Joe Splitrock · Answer

@Sesha Bhojanapalli you can try to negotiate, but the bank will do what is best for them. If they think the value is higher or they need to get more to satisfy the debt, they may hold out for more. I would also ask, how bad do you need this property? Is it your dream home that will be your personal residence or is it an investment property you plan to rent? If it is an investment property, size your offer for what makes the numbers work. You may miss out on some deals because your offer is too low. If every offer you make is accepted, that could mean your offers are too high. My point is that it is ok to lose a deal. Sometimes on bank owned deals you can make another offer in the future. It just depends how hot your market is right now. In my market right now, anything bank owned has multiple offers and sells immediately so that wouldn't work.

JD Martin · Answer

Depends on the property and how long it has been hanging around. I've bought a few foreclosures but things are really on fire now and banks know that.

Jared Hottle · Answer

short answer yes definitely can negoitate. Banked owned properties are weird especially now with the lack of foreclosures they are seemingly trying to get well over what the properties are worth but I have seen a decent amount of people get great deals on some bank owned properties. I would keep the price low and adjust the terms in their favor like cash, no inspection and an above normal non-refundable earnest money check and see if they go for it. Unlike the emotions of a person I think submitting offers consistently like maybe every 2 weeks is a good tactic to use as they may just want it off their books.