Percentage off asking?

Question

Hi, 
Not an investor, but thought that you all being pros- might have some advice.

Interested in a property listed at 260K (relisted 100 days ago and description states 75k price reduction- but not sure if this is accurate)

According to title Wells Fargo has owned since Oct 2008
can't find trustee record so don't know how much wells put out for it when foreclosed

Last owner paid 310 in 2006

Its been shown A LOT (millions of cards on kitchen counter) but has been sitting for a long time (don't know total dom- but most likely 12-16 months) This is most likely due to a monster gravity heat system.

I'd like to offer around 230k ish  (about 11-12% off current asking) and ask for replacement or credit for furnace replacement. (I suspect this will be upwards of 10k)

Is it likely/unlikely this will be accepted? (I've heard from a friend that Wells can be more difficult about low offers- true or no?)
 Any thoughts appreciated- Thanks!

Justin S. · Answer

I do not like giving advice on stuff like this because its hard to take off my investor hat.

BUT, I will give advice.

You never mentioned the actual value, so I will assume it is the listing price.

I would offer 80-85% with a higher than average earnest for two reasons.

1.  You want them counter to you to get the lowest price.  Hence the somewhat low offer.
2.  Earnest shows you are serious and not afraid to put your money with your mouth is.

Good luck with the house.  I hope others post their advice to give you a range of options.

Calvin N. · Answer

Always counter!  Bump your initial offer a little and have the agent resubmit.  If the bank counters again at list price then I would hold off a few weeks and try again.  I have seen some come back with a much lower offer and others stick to the list price.  Don't try to figure their bidding out...cause it usually doesn't make sense!

Michael P. · Answer

Just because they came back at full price doesn't mean they won't come down.  I have seen this many times and you know what my next counter would be.

229k or 230k, though I would have started at 221k probably.  I like odd numbers.

On your second house I would start around 135k and see what they say.

If you don't fear another buyer swooping in I always negotiate with banks by small amounts.  I can't recall ever going up more than 5k at a time and usually only 1k at a time no matter how much they reduce from their asking price.

I've gotta ask though why are you stuck on foreclosures?  Just find yourself a nice house that is owned by individuals.  The benefit with those is you can more easily go back to the sellers after inspections to ask for repairs.

Jon Holdman · Answer

Yes, wait to bring up the furnace.  Get the inspector in there and let him comment on its condition.  Since its obvious there is a gravity furnace, they probably won't give you a credit to replace it, if its safe and working.  OTOH, if the inspector finds issues with it, then you have a reason to ask for a credit.  If you really want it replaced no matter what, I would include the replacement cost in your offer.

Peter Giardini · Answer

Justin's question regarding actual value is an important one...

With that being said... don't let a specific % drive you offer price.  The fewer the contengencies in the offer the more likely a lower price will be accepted.

Also, you might be able to make a low offer, leave the furnance contengency out and get a 203K to replace the furnance.

Best of luck!

W L · Answer

Uugh. I got the response today. They countered with asking (259k).

I don't get this- over 500 dom. It is owned by wells fargo, but it isn't listed on the pasreo site (pasreo claims no knowledge of the property at all) . I think it is actually owned by the bank and not the mortgage division.

Anway- listing agent says they have had over 30 offers (most recent 2 weeks ago) and each time the counter has been asking.

Public trustee says wells paid 245 in July 2008 (for some reason it is shown as "closed" and I couldn't find it searching the site)

Honestly, I think 228k was a reasonable offer, and I can't imagine why they aren't negotiating on this house. 
I'd probably pay up to 240 at higest- is it worth it to counter with 234? Or will they most likely come back at asking?

Does this scenario happen often- bank holding on to a house and rejecting over 30 offers (probably many reasonable)?

Also- my back-up is a tiny tiny freddie mac house in another neighborhood-  130 dom asking 160 with a 5k price reduction a month ago. Is 148k a reasonable offer or should I go a little higher?

Thank you for all of your advice- I've enjoyed reading these forums for the last few years!

Jerry R. · Answer

Let us know how you do.

Good luck

W L · Answer

Thank you all-
Jerry- I am using the 245k estimate as the price I think it would sell if it were listed more reasonably in its current condition- it might be more like 240k. 
There is nothing comparable right now that is in decent condition for that price.

So- I think I will offer 228k this afternoon, not bring up the furnace unless under contract, and at that point give replacement and asbestos abatement estimates (probably 12-18k)

Even if the gravity system is functional (they never seem to break- but they are obviusly not recommended) is it reasonable for me to submit approx 15k for the removal/replacement and think that wells will consider crediting me for it?

I know I'm getting ahead of myself- and that reos can be hearbreaking- but I think 228 is a reasonable offer on 259 asking  being that it's been sitting for 1.5 years  and I'm expecting them to counter

But to be sure- I should wait to bring up the gravity furnace/ asbestos removal until inspection (even if it's still functioning)?

Thanks.

Andy J. · Answer

If the house needs a new furnace, you will be better off waiting until after the inspection to ask.  Most of the time, banks do not make repairs to properties.  However, I have negotiated a lower sales price after inspection.

Have your inspector look thoroughly for mold, bad roof, asbestos, lead based paint, polybutylene, etc.., pretty much anything which sounds bad (hype in my mind) that would lower the value from the bank's perspective.  Even though the severity of these issues may be very minor, it's a good bargaining chip for you to use.

I had a house where my inspector found about 2 square inches of mold on the garage ceiling (dry wall, would have cost $100 to cut out and patch) and because of this I got the bank to drop $7k off the sales price immediately.

I agree with Justin, give a big earnest money check, on that house I'd go $10k.

Percentage off asking?

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