REO Price

[Holly Rust]

I am in the DFW market -currently, it's a sellers market. Good deals are going within 1 day and even regular homes that are upgraded decently are on the market for less than 2 weeks. We're currently looking for a deal for our permanent residence. We found a Foreclosure that we do like - however it is over our budget. We'd like to spend 120-125, and the house is currently sitting at 170k.

Normally, I wouldn't even bother with something that over our budget, however I noticed It was orginally listed for 199k, but has dropped 7-8% every month since. It has now been on the market for over 100 days. The last price drop was 15k on June 11th. Zillow 'estimates' the property was foreclosed for 155k.

Is it reasonable for us to go look at this property? It doesn't appear to need much work, if any and is move in ready. I don't forsee the bank selling for what they less than foreclosed on it, especially when the market is the way it is here in DFW. Even if the foreclosure amount is a little off from Zillow, it's still over what we'd like to pay.

[Hattie Dizmond]

Holly,

You're absolutely right about the market.  No inventory will do that to a place. 

As far as the REO, you just never know. Part of it will depend on who the lender is. Most of the bigger banks just want to be done with it and sell. The smaller, portfolio lenders are more concerned with their total loan loss and less concerned with ongoing holding cost loss. It's just a different philosophy. Also, some of the banks are using brokers to help with their REO liquidations. As a result, you will run into some situations where they will hold, rehab and then sell at ARV.

In this case, place an offer on the house you're comfortable with.  Set a max amount and don't exceed it, under any condition.  You're dealing with a lender, so there is no emotional factor of a seller being offended by the offer.  The worse thing that will happen is that the lender will reject your offer without a counter.  The best thing that happens is they accept your offer.  You're not going to know what they will do, unless you place an offer.

Get comps for the house. Do a thorough walk-thru and account for any repairs, upgrades and/or updates you feel the house needs to be valued at the comp level. (Make sure you never bid above ARV - rehab costs.) When you submit your offer, make sure you stress ALL the things that need to be done. Even if you don't feel they are mandatory, make your wish list, because your goal is to make the lender understand why your offer is low.

Good luck!

Hattie