Ann,
You have been given some really valuable advice. I want to add my two cents in as a mortgage broker. Regardless if you were not sure on what the property would or would not appraise for, your real estate agent could have given you the numbers you needed. For future reference, never pay for an apparsial prior to an accepted offer unless you are working with cash. Most lenders now a days will not even accept a private appraisial, because of all the lending changes and requirements, appraisers have become part of a lottery so to speak. The lender calls an appairser and makes the appointment, it is no longer the buyers or any other parties choice. If you were going FHA or VA you more than likely just threw away $300. I am personally using my own VA loan to purchase my new home in Kentucky and they told me, they order the appraisal, I find this the same with Bank of America and a few other lenders.
As far as your $200. As a seller, if a buyer presented me a good faith payment of $200 and the offer was not that strong I would more than likely turn it away. The real estate agents that have posted here are correct. To be take seriously $1000 will get any sellers attention, but the money doesn't go to them, it goes towards your closing expenses.
Next time you look at a foreclosure or a property that needs heavy work,. Instead of ordering an appraisal, order an inspection or hire a contractor to give you an estimate on the repairs, then use that number to determine your offer. Its cheaper and much more through than an apprasial. Good luck with your home buying.

Short answer...Yes, it shows ME you're interested. But no, its not going to fly with an Asset Manager.

This is a good example of why it is important to choose a Realtor that has experience in dealing with the type of property that you are wanting to purchase. Foreclosures are a different breed and do pose some issues you wouldn't otherwise have to worry about with a typical purchase (like the property being in such bad shape it may not appraise). Your Realtor should be able to provide comparables to determine a range of value. This should help you decide what to bid. Obviously if the comps are lower than the sale price you simply lower your bid rather than seeing if you can justify paying what the bank is asking. Truth be known, the bank could care less what the appraisal came in at. They are not going to lower their price based on your appraisal (as a homeowner might) because they are going to sell to the highest bidder. That price may be $20k less or $10k MORE than asking. There are enough cash buyers that the appraisal is virtually meaningless to THEM (I understand it was important to you for your financing).

That brings me to my second point. Your financing may have been the problem as well. When practical, especially when dealing with a property that is in poor condition as this seems to be, I would have encouraged my buyer to obtain investor financing that wouldn't have required an appraisal but rather an opinion from the bank of its value. They come out and look at the property, get your estimates of repairs to be done and make a decision to approve based on the value of completed work. This is typically a 6 month, interest only deal. At the end of the period you would refinance into a 30 year fixed program. While this takes a bigger down payment or proof of equity, you end up getting a better deal in the end because your Loan to Value for your permanent financing is often less than 80%, thus avoiding mortgage insurance.

For what its worth, anyone purchasing a foreclosure in the Louisville area should be prepared to have a $500 or $1000 deposit depending on the price of the property and bank involved.

When you’re purchasing a foreclosure, it is likely that they will require a minimum deposit, usually $1000. What you have already spent to assess the property for your own well being is not really relevant. The upside? It is a deposit and you will get it back if your offer is not accepted or when you close (reduces your bottom line). In our market it is a convention, not a requirement. On a regular offer with financing, I encourage my clients to make a deposit of at least 1%.

Hi Ann, It is true that Most foreclosure properties do require at least $500.00 for a Good Faith check and I have often seen a min. of $1,000. It is very rare to get a appraisal done before you have made a offer, most buyers wait untill the offer is accepted becouse you could be out the $300.00 if the Bank accepts another buyers offer. I usually pull up all the comparable homes for my buyers, that are in the neighborhood of the home that they are most interested in to get a good idea of the home's value and another thing that I do is look up the Tax Value. I hope that you get the home that you want and it turns out well for you, Angie Adair

Thumbs up,everyone for some good advice! Ann- did your agent make clear that the $500 is not a payment but a deposit which will be returned to you at closing?

Ann:

Dealing with a bank owned property is a little different than an individually owned property. The banks have a set of guidelines that a potential buyer must follow or they wont even consider your offer. They could have multiple offers that they review, if you only give them $200 for good faith, they probably wont even consider your offer.

I quite confused on why you had an appraisal done on the property, Not to bash your Realtor, but he should be able to help you determine the value of the property and save you the $300.00 appraisal fee. He also should do a little better job of educating you on the process rather than being rude.

I should note: The only reason I had the appraisal done before my offer was accepted is because this property is in bad shape and I wasn't even sure that it would appraise for the asking price and sure enough it didn't. And I needed to know where to start with my offer to compensate for the money I will need to fix it up. As far as only putting $500 down...this house has been on the market for several months with no interest because it needs a ton of renovating. Thanks

Both you and your agent are correct. Your appraisal initiative is a gesture of serious interest however the bank is interested in holding an amount of money that will cause you second thoughts prior to walking away from the deal.

$500 is a small amount for a "good faith" deposit. As the buyer of a "foreclosure" part of the game is to make your offer appear better than others and portray yourself as a serious contender. We're not sure a $500 deposit will get the attention you require let alone decrease it to $200.

Listen to your agent...........

Hi Ann:

In most cases the bank will state what goof faith estimate they want to even look at your offer. Most banks require a minimum of $1000 in my area. I don't know why you paid for an appraisal before you knew the bank would even accept your offer. You could very easily not get your offer accepted by the bank if another bid comes in at the same time. Your Realtor is correct about the appraisal fee. The seller doesn't get any money out of it if you walk away from the contract.

Hope this helps
Dawn