How much to low-ball on a foreclosure?

[Dave Mosher]

I have been noticing a few bank owned foreclosures in my area that have caught my eye.  In your opinions, how negotiable is the listing price and how willing are banks to accept a lowball offer?  I am looking at one that went under deposit in August, came back on the market in late October (I am thinking financing fell through), and now I am looking at it.  It has a huge hole in the chimney that would need to be repaired but overall the rest is just cosmetic stuff.  The chimney hole is in the attic.  I hear about these incredible deals on foreclosure properties but wonder if I should make my offer for 5% below asking, 20% or 40% below.  Also, on a side note if anyone could estimate how much a new chimney costs that would be great.  Thanks,

[Aaron K.]

It really depends on the market, in California short sales and REOs are usually listed slightly below market and will sell for at or even above list price most of the time unless they have major defects.  But in that case the defects are usually priced into the list price.

[Brad L.]

Varies by market. Another variable can be the Lender that owns the property.

IMO just run your numbers and make an offer you're comfortable with. There are always deals you'll realize you could've gotten cheaper, but if you're going to make money you're happy with it's better than not getting it at all.

[Dave Mosher]

That is true, I guess I should be more focused on getting the property rather than trying to get the rock bottom price.  Since there should be some hefty equity in this home once I redo it, that should be my focus.  Thank you for your suggestions.

[Michael Plante]

from what ihave seen here there is not much negotiating room as evidenced by the counter offers we receive 

[Steve DellaPelle]

@Dave Mosher I know you can check how much the property foreclosed for and basically see what the bank paid for it...if they paid $200,000 but are asking $250,000 then there may be some wiggle room.

I have no experience with foreclosures but that is always how I imagined I would go about it lol

[Dave Mosher]

I guess it is good to know they would at least counter offer.  I will check what it foreclosed for too.  where would i find that information?

[Mindy Jensen]

@Dave Mosher , I live in a house that was purchased through the Fannie Mae Homepath program as a foreclosure. FM wants to put in owner occupants, so I had to live in the property for one year. But that was the difference between me getting it, and the other buyer I was up against, who was an investor.

If it's a Fannie Mae foreclosure, they want to put owner occupants in their houses, and will generally accept the lower OO offer. Mine was listed at $199 and I bought it for $176.

[Dave Mosher]

interesting, i think it was a VA loan that foreclosed on the home if that makes a difference. thanks again

[Michael Noto]

@Dave Mosher Are you working with an agent here in CT that has experience with closing foreclosure deals? If so, they should be able to answer a lot of the questions you pose on here. 

Whether the foreclosure is a HUD, Fannie Mae, etc can definitely make a difference on the offer they would be willing to accept at this point on a given property as others have mentioned.

If you need any guidance at all feel free to reach out. I have a lot of experience with foreclosures all over the state.

[Sam Shueh]

I have been contacted by a 12 dollar an hourly assistant he was told to bid 45 cents on a dollar. He said the offering price was low but that was his job.  He made and signed 350 offers and got 1 accepted in a bad part of Oakland, CA. Now he got 349 realtors upset. Most agents will refuse to write it up. If you don't have the assistant you can do it yourself with a license.

[Kelley Gabany]

Short Sales and Foreclosures in my market are normally listed below market value. These past few months, I've seen them sell maybe 5k below what they are listed, or sell at asking price and sometimes they have been selling above what banks have been listing them for. It all depends on your local market.

[Ian Walsh]

You make offers that work for YOU not the bank.  I suggest doing it with ones that are already discounted a bit so you are not wasting time and can smell a little motivation.

[Tom Gimer]

@Dave Mosher The current deed should recite the method of sale/transfer and if the lender bid in at the foreclosure sale the dollar amount of that bid will be clearly stated. 

[Dave Mosher]

thank you everyone, the information everyone is willing to share and the collective knowledge on this site is amazing.  I am obviously new, but I really appreciate the feedback and willingness to help me!

[Anthony Dooley]

@Dave Mosher they will take the highest net to the seller. You noticed the foreclosure? Do you think you are the only one that noticed it? Don't you think they get low ball offers every day? The question is not how low will they go. The question is, how much are you willing to pay to get your offer accepted, and it's still a good deal for you. You must know the ARV, then estimate repair, holding costs, and commission to sell. Factor in some profit for yourself, and you will end up with an offer. Make the offer. If you just drive by it everyday wondering, you will never know.

[Account Closed]

REOs that are in fact good deals, if appropriately priced in the first place, tend to sell at or above list with multiple offers. If the REO has been sitting, there is very likely a reason the REI community is not jumping on it. That is not to say you may not have found that gold nugget no one else noticed, but that is rare. Of course properties that don't move are over priced. The reasons behind being over-priced can be many, simply too high of list (maybe the seller needs to reduce loss), defects not accounted for, external influences not accounted for, anything really that people know will cost them money and whoever listed the property was not accounting for it. Or, old fashioned list it high and see what happens could be in play.

Figure out what makes it work for you and offer accordingly. I think I made offers on about 5-10 properties before I got one my first time, might have been closer to 15.    

Cost of chimney repair depends. That could very well be why its not moving. Just like you don't know what it costs to fix it, a lot of other investors don't know either, and no one likes an unknown. You need to get someone in there for a bid. Might turn out to be minor and then you may have found a nugget. Might turn out to be major and you will walk like everyone else. Cost to fix is anywhere from $300 to thousands.

[Cody Evans]

Interesting thread. I am wholesaling right now and I usually skip passed bank owned and just track down Pre-foreclosures when I'm driving for dollars. Is this dumb?

At the end of the day @Dave Mosher you only care about the things you can make a deal out of so you offer YOUR price that you will pay. The only question I think I may ask in your situation is the time spend making offer on bank owned properties worth the time or should you focus on other properties? I don't know the answer to that but am looking to find out.

[Dave Mosher]

good question @cody evans. If I had to guess I think it may still be worth doing provided that the bank will make a counter offer rather than just saying NO. but i definitely see your point about finding a motivated seller who may be willing to negotiate terms more than a bank would. i may also have to get off the MLS and try to find some off market deals to find a decent purchase.

[Alex Dem]

@Dave Mosher, we bought foreclosures in the past. Depending on what type of foreclosure that is , there are different resources to find out foreclosure history. CT Is a judicial state so judicial website is a good place to start 

http://civilinquiry.jud.ct.gov/PropertyAddressSear...

Hers is the link, just put the address in - less is more a general rule with judicial website. Just street number and name and town name.

Given it is recorded with the judicial branch, there you will find case details including the total amount of lien that is being foreclosed and the amount of superior encumbrances ( taxes, water / sewer / IRS , etc.)

Usually it will be disclosed in foreclosure worksheet. 

But from what I can see, banks are not in the business of Real Estate and their goal is not to get profit, but rather to minimize bad debt expense.

[Dave Mosher]

excellent, thank you very much for that.  I really appreciate you sharing that link

[Levi T.]

We’ve done a few... They post it below market price to create a small bidding war. Once all offers are in, they tell everyone to submit their highest and best... that results in 2-3  people loosing their ever loving minds, and making absolute top offer that sinks all other reasonable offers.

We win some from time to time, best you can do it toss in a decent offer around or slightly above asking and walk away, hopefully you win.

[Account Closed]

I agree with @Anthony Dooley a lot.

He got the main key point.

In today seller hot market, the strategy to buy a house is,

How much are you willing to pay to get the offer accepted and you can still make money?

I have been using this strategy last 12 months to get my offer accepted.

From year 2012 to 2015, I usually make low balls offers, take times to negotiate back and forth with the sellers. However, since 2015 or 2016, forgot when, in the middle of negotiating with the sellers, either somebody else (other buyers) offer had got accepted before the seller countered me back or I lost on multiple offers, after losing opportunities buying several properties, I have changed my strategy.

I check the math, ask myself,
What is the maximum price I’m willing to pay and I can still make money that I’m satisfied.
Then I make an offer that is close to my highest and best to the seller, to compete with other buyers, to get my offer accepted.

[Account Closed]

I have purchased several foreclosure before. Buying a foreclosure is the almost the same as buying a normal house.

From my experience, usually foreclosure are a few thousands cheaper than the normal house. They are more strict on closing date, repairs and title company.

Usually foreclosure “force” buyer to use seller’s prefer title company. They are not willing to make any repairs and want to sell the property as-if, strict on closing date, not much room to extend the closing date.