20%-30% Foreclosure Discounts

[Stanley E.]

After reading the Millionaire Real Estate Investor, I have been calculating my prospective REI purchases using a 20%-30% discount off the asking price so I can make my money going in. I wanted to know is it reasonable to expect this type of discount with foreclosures or are the banks reluctant to go for this? Thanks for any help with this.

[Ned Carey]

I will gladly give you 30% of my asking prices.  I will just ask for 50% more than I planned. 

A discount off the asking price is the wrong way to look at it. The asking price could be already be below what makes the property a very good deal. It could be also be way higher than anything that makes sense and a 20% discount may be not a good deal at all.

The fact is, banks want as much as they can get for a property. So likely a brand new listing they will not accept that kind of discount. However as a listing ages and especially if there have been no offers (you won't know this) they may accept a low ball offer or countered at a very good price.  Low ball offers are not frequently accepted but the do occasionally get accepted.  

My belief is to  make low offers on properties that have some indicator they might accept a low offer. A high number of days on market or a recent price crop are two indicators. I am against blindly sending out lots of low ball offers hoping something will stick. That is just offer spam. I do not want to be a spammer and no one likes spammers.