Negotiating with the bank

[Scott S.]

I an a new member from the Hampton Roads area of Virginia and could some feedback on a deal I am trying to finish. I am a buy and hold investor of three townhouse properties over the past 20 years, one of which was a rehab. In the last few years I sold two of the properties and I am looking to pick another for a hold.

I found a 2br/1.5ba townhouse REO property owned by one of the big national banks. It was listed for $61,000 and had been on the market for four months with only one lowball offer. I wrote a contract for $50,000 and the bank countered at $60,700. Weeks later I checked and no other offers had come in so I asked the listing agent to resubmit my $50,000 offer. She advised the bank was dropping the price to $52,000 and letting an auction company sell it at an auction. I told her $50k wasn't far from $52k and told her I would buy it for the $52k. They said no, it's going to auction.

I showed up at the auction and I was the high bid at $34,000. The auctioneer looked like he wanted me to keep bidding, but the only other bidder said he was out, so it was over. He said the banks reserve was $49,000, so my bid was not accepted.

I would be willing to split the difference and go to $42,000, but I get the feeling the bank will not budge. The property is not as bad as it might sound and I know I can make it very nice and make money on it. I liked it at $50,000, but I feel like the market has spoken too. Hold out, or go back to their reserve price?