Multiple REO Negotiation Strategies - Which Would You Pursue?

[Patrick M.]

Okay- I have made and received a rejection on my first offer on a REO condo in a 47-unit complex that I am certain is significantly overpriced. The listing agent is submitting to PNC Bank via Offersubmissions.com. The building is from 1965 and is well-enough maintained but is workaday housing near a college. Mix of older folks on fixed income and grad students. It has been on the market about 3-4 weeks. I'm not sure anyone else has made an offer.

Some of the math:

Listing price in MLS: $130,000

Last selling price of unit in complex in 2015: $99,000

My offer: $84,150.

The listing realtor wrote back and told me that he agrees the bank has it overpriced, and asked if I could get my offer closer to $91,000.

I am contemplating all of the potential strategies:

1. Respond quickly to keep the dialogue moving with a slightly higher number on my terms, maybe going up to $86,000. At the same time, I will send comps from the neighborhood in the last year showing lower sale prices per square foot, and gently suggest that they have misunderstood the market at the neighborhood level.

2. Respond quickly, anchoring closer to the realtor's suggestion, maybe offering $89,000, again highlighting the comps.

3. Wait a week, then offer $86,000.

4. Wait a week, then offer $89,000.

When I run the numbers, the property cash flows well up to $92,400. It even cash flows okay with good money in year five up to $99,000, which is likely my walk-away price. I do feel some pressure to close quickly because I am right now entering prime leasing season in our area. If I control the property in May, I can be pickier about tenant for the next year than if I control it in June. Then again, I have no idea if there's just a spreadsheet someone is looking at in a bank in Pittsburgh and if I just need to get close enough to a number to get them to engage. I also haven't found a deal where the numbers pencil as well in quite a while.

Would you consider any of these four approaches to be best with a REO seller? Do you have another approach? Do REOs negotiate in smaller movements ($500, $750) and might it be better to start small movements now?

All your opinionated takes are most welcome! Thanks!