Why won't they haggle?

Question

I found the perfect home and was even more excited to see it had been REO for several years! I made an offer with my real estate agent and the bank countered by barely moving down. After a bit more research (small town Oklahoma, everyone knows everyone's business), the bank has refused multiple offers over the years near asking price. I'm curious if there are some common reasons why they would stick to their guns and hold onto a house for so long. Are there any strategies to use to help with negotiations? I've heard about offering to get the loan through the bank as an incentive for them to haggle but besides meeting them at asking price, that's about it.

Joe Villeneuve · Answer

It used to be that the banks couldn't make a profit when unloading their REO's. That changed a number of years ago. Now they can, and when it's a seller's market, they usually hold out for top dollar...but not forever.

Keep trying, stick to your number...not their's.

Ron S. · Answer

Scott said it right...Banks don't like financing their troubled assets. Regulators like it even less. I literally have to provide a monthly report to the suits to explain to them how every troubled asset paid off, and if any of them paid off by us financing them...again, we have to explain further and show our work to ensure we didn't take a bad asset and turn it into a good asset by giving another loan. It's churning the portfolio and its frowned upon. I wouldn't try to entice them that you'll do the loan with their bank, especially if you are looking for favorable terms.

Frank Wong · Answer

Hi Ron,

The banks at this time do not need to sell their assets.  Regardless of what someone may think of its worth, they have holding power. They don't need to sell it at your price they will sell it on what they deem is fair.  Back during the crash liquidity was a major issue and no one had access to it nor did anyone want to buy.  That's why banks were taking much lower offers and trying to move the assets.  This is all about liquidity and demand of the market.

Bob B. · Answer

Pay their price if it's fair and get them to provide financing terms in your favor.  Maybe a lower down payment, lower interest rate, lower closing costs or longer terms.  Get creative,

Scott Mac · Answer

Hi Ron,

It might be an accounting issue with how they report to their loans and assets.

If it is, you're probably not going to get them to change that.

I've heard it referred to as Grey Box Assets (where they don't want to show the loan as bad) because it upsets the ratios they must maintain (But they will probably not tell you that.)

(Like in the old movie "It's a Wonderful Life"-- the ratios for the bank examiner).

Although they would love to sell it, just on their terms.

That's my guess.

Good Luck!

Ron S. · Answer

It was recognized as an impaired asset when it went 90 days down...

Jaron Walling · Answer

Hahahaha case in point! This exact thing happened to me last year and the bank wanted "best and final offer", as if other idiots were bidding against me.

We were $15K apart so I walked. The house was over priced.

Ron Todd · Answer

@Bob B. Thanks for the response. Would you mind giving an example of what you are looking for when setting your own terms?

Jay Hinrichs · Answer

if the bank already owns it then they have had to mark to market already..  if its a small bank then its owned by the owners of the bank usually el president and head credit officer are the major stock holders .. so they are just like any other seller.. they want what they want.

IF this is a small local commercial bank.. not a big bank.

Bob B. · Answer

@Ron Todd If they are a local bank and  won't budge on the price maybe they will help with some terms.  Offer them their price but with financing terms.  I've always felt that it's good to let the seller set the price if I set the terms.

Why won't they haggle?

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