Auctions - finding amount owed & what banks will accept

[Jonathan Johnson]

Hello BP,

Looking at auctions and seeing the titles, often I can find out how much the loan was originally financed for and when it matures. I can estimate how much is still left with a few mortgage calculators, but do banks accept less than what's owed?

Say in this situation:

There's probably 63-65k still left on the mortgage if it was a 30 year. Would the bank accept half of that at auction? I'm not sure if every bank is different here or not.

[William Hochstedler]

Every bank is different.  Not only that but within a bank you may get different responses.  There are a number of factors completely unavailable to us such as capital ratios, quotas, write-offs, internal market analysis, performance of other loans in the pool, etc that desks within banks use to determine whether or not they will accept an offer.

Banks get several broker price opinions (BPO's) during the course of the foreclosure and after they own the asset to get an idea of market value and what the property will sell for.  Like any seller, they want to maximize their return.  Lately, we haven't seen much of a discount.

The biggest single indicator of whether they'll take a discount is how long the property has been on the market.  They have to sell these assets and will continue to lower the price until they can liquidate it regardless of the underlying loan.

The great thing about making offers on bank owned properties is that the worst thing that can happen is they reject your offer.  As there is no emotion involved, you can just keep making offers until something sticks without sullying the deal by low-balling.

Good luck.