Frankly, offering less than 10 percent of the value of the home, regardless of its condition, will almost assuredly result in your not being able to purchase the home. While you may value the costs for repairs at $120,000, in reality, new windows, doors, roof, heating units (AC is an option--not a necessity), water heater and carpet should not cost more than $35000 to complete (and I'm using California estimates for a standard 2000 square foot home) and which, if applied to the value of the home, would bring the price to around $100,000. Keep in mind that the asset manager who is empowered to approve sales of foreclosure properties also knows the value of this home and will not "fire sale" the property even if the condition is less than perfect.
Remember, the true value of the home is actually determined by the sales comparables in the area around this home, and not by the best price less the estimated costs of repairs. Working with a qualified real estate agent in this area will help you determine the price that the bank might accept. And the agent will help you package your offer in a manner that might be most attractive to the asset manager handling this foreclosure property.
Finally, I suspect that as a new home buyer with limited resources, obtaining even another $35000 to complete repairs on any home might be difficult, so your best housing choices would be to concentrate on homes that do not require such expensive repairs to the interior and exterior of the home. If $10,000 is all that you can really afford to spend on a home, it might be worthwhile to work with a qualified loan agent to determine if now is a good time for you to consider a home purchase. Remember, home ownership is a LOT more than simply paying the monthly mortgage. It also includes continued renovations and maintenance, insurance, property taxes and closing costs for the sales transaction and these expense can quickly add up unless you are truly prepared, financially, to cover those unexpected costs. If we learn anything, as consumers, from this recession it should be to buy only those homes you can truly afford to own and maintain. Working with a qualified loan broker will help you pinpoint how much money you'll need to buy a home and how much you'll need to continue to maintain the property.
Area Pro Realty
Your very very low offer is likely to be ignored by the lender and no matter what the current owner thinks, the bank has the last word on acceptance of any short sale offer. The bank is going to have a good idea what the home is worth and what the land is worth. In some places (like here where I am) the land is worth more than the house on it in most cases. You need to determine what the house would be worth with the repairs made and look at making an offer that makes sense to the lender who is not in any mood to give it away. They can foreclose, kick out the owner, and then give it away if they have too so at this point they are looking for a better way out.
The short and simple answer is yes- you can offer anything you want, providing you can supply proof of funds to close on the amount you have offered. The more salient question is, "Will the bank even respond to your offer?" In this case my guess is no. The general principal for Bank Owned property is that they price it at what they believe is around 20% less than current market value. This pricing should take into account actual condition of the property. Since the property has been on the market so long clearly they missed the mark on this one. What you should do to make an offer on this property is determine what the value would be if it were in good repair and then reduce that amount by 20%. From the adjusted value deduct the cost of all of the repairs that are needed to make the property habitable. NOTICE I said habitable- if you want to change the windows because they are single pane and not newer double pane- this is not a necessary repair. Conversely if the windows are broken or do not work properly than a case can be made that it is a necessary repair. Determining this should give you a reasonable idea of what the property might be worth. From there you might go forward and offer something like 75% of the value and give them a clean quick close.
The best thing I can tell you however- is if you haven't already gotten yourself a buyer's agent - do so. Engage someone that is experienced at working with Bank owned properties as they will understand the process and be able to help you work through the transaction.
Best of Luck and Have Fun-
Carole & Greg
Yes, there is some "play" with the list price; but I don't believe anything over 90% would be considered. Yes you can offer and see what happens; but you should expect to be turned down.