How low can I go?

Question

What are banks accepting now vs list price? I plan to offer on an reo sfd that is being auctioned. Is an offer of 65 or 70% of mls price likely to be accepted, assuming I'm not outbid? 
This is a house that they've been trying to sell since it was foreclosed in April 2010. My offer is cash.

Anson Young · Answer

No magic #, however from experience:

When first listed, bank wont take less than 95% of list
If the asset is aged, 90-120 days, you can get away with much more, usually it has gone through 2-4 price reductions by then.

Auction, try to pick up PRE auction if you can, less competition.  If you cant, there is a period POST auction where if it didnt sell you have a chance to pick it up there before it might hit MLS again.

Jon Holdman · Answer

Notice this says:

This is protecting them against coming back after closing and demanding money for some fault you don't find until later.  If you do the inspection and find something significant, you can certainly back out.  At the very worst, you lose your earnest money.  If this is like the bank contracts I've dealt with, there is usually about a week after the contract is executed (everyone has signed) for you to do the inspection and back out if your don't like what you find.  In one case, the inspector noted the plumbing was old galvanized pipe and needed to be replaced.  I used that to negotiate an additional $2500 off the price.  In another case, we were able to peel back some of the paneling in a closet and noted mold inside the wall behind a bathroom.  In this case, the wouldn't budge, and we canceled the contract.

Another piece of advice is to never, ever fall in love with any REO.  Your odds of buying any specific one are quite low.  If you make offers on 10 or 20, you'll probably be able to buy one.  If you want to buy one specific one, you'll most likely just get your heart broken.  Certainly if you want a screaming deal like you're talking about then buying a specific house is essentially impossible.  If you make dozens off offers you may get a screaming deal on one of them.

Jon Holdman · Answer

If you find a problem with the inspection, you may still be able to negotiate the price.  I have been able to get price reductions after we had a contract, one time for an inspection issue (plumbing, not something that was obvious during a walk through) and another time when the appraisal came in lower than expected.

Offer whatever price makes sense to you.  If they don't take it, and if its 40% less than their current listing price I think its unlikely, you can offer more.  Or, wait for the price drops and resubmit your offer.

Harry M. · Answer

The property being sold as-is just means that the bank will not perform any repairs based on the results of the inspection, as is often the case when the deal is between two individuals. The inspection contigency still offers you the freedom to back out of the contract within a certain time period with no fault to you if the inspection turns up significant flaws that were not known about. Do check the specific language of the contract as there may be some restrictions.

J Scott · Answer

If the property is basically in move-in condition, the bank is unlikely to take an offer as low as 65-70%. They are probably waiting for an owner occupant, and once they get tired of waiting, they'll drop the price by 10% and keep waiting.

These types of houses are much different than those that require a lot of rehab and will likely only be sold to an investor -- on those types of houses, the banks tend to be more willing to negotiate and accept a lower offer, as the buyer pool is much smaller.

Just my experience...

Mary R. · Answer

Turns out the reserve price was so high that a full priced offer makes more sense...

Mary R. · Answer

Of the 32 properties in my area on the list, 6 were bid on during the auction time. None met the reserve amount. I was the only one bidding on my property. I raised my bid a bit, hoping to meet the reserve, but I did not. I hope I'm close enough to it that they will counter. 
Now it's in a 7 day post bid period. I hope no one bids against me, and that they counter.

NB: The "bidassist" function page does not say that in order to use the "BidAssist" it must be used with a bid. One can't place a bid, then later decide to use the bidassist. If one does that, one has to place another bid.
Lesson learned.

Mary R. · Answer

Thanks. I'll bid the starting amount. There's no bids on that property. Of the several in the zip code, there are bids on 8, and of those a few have several bids. These close on Monday.

Mitch Kronowit · Answer

The list price doesn't mean bupkis! Banks play all kinds of games with this number: List it artificially low in order to generate a great deal of traffic, start a bidding war, etc.

Simply figure out how much the property is worth to YOU and offer that. Plain and simple. If you get outbid, the property was simply worth more to somebody else. NOT YOUR PROBLEM. If the bank turns down your offer flat, move on to the next one. There's simply too many properties out there worth pursuing to waste time with any single one.

Good luck.

Aly W. · Answer

Are all the utilities on? I was under contract for a SFR "as is". The inspection had to go forward prior to the seller (a corporation) turning on the water. They simply didn't want to. The inspection went fine....until much later, when the water was finally turned on.

Surprise...a pipe burst. The seller said, too bad, "as is'", no repairs by us. We responded by saying "as is" at the time of the inspection meant there were no burst pipes, no water all over the floor. Eventually, they agreed to fix the plumbing. So don't give up, as Jon says, "as is" doesn't always mean what it seems.

How low can I go?

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