Foreclosure in 11735>Question Details

Rose San Fil…, Real Estate Pro in 11701

How can I get banks to negotiate lower prices on REO properties?

Asked by Rose San Filippo, 11701 Thu Feb 23, 2012

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Paying cash and buying in bulk will definitely get a bank to sell you properties cheaper. Although, this isn't doable for most people. From my experience, every bank negotiates differently. Some have a strategy of putting a home on the market at near market price, then lowering the price every month. Other banks I have seen list well below market value generating immediate multiple offers. Others have been like the average seller, list at market price and sit and wait.

So, it's really tough to answer your question. Although, I would agree with others who have said the longer it's on the market, the more willing to negotiate the bank will be. Sometimes submitting a list of needed repairs along with pictures can help, because most of the time the person at the bank has never even seen the property.

Good luck!
2 votes Thank Flag Link Fri Feb 24, 2012
It is really hard to give you advice since you are in Hawaii and that is a real specialty market with many buyers being from other countries. It would be great if a Realtor® from Hawaii would jump in and give us more information about their market. Anyway this is my general post about flipping in the Midwest.
General rules of investing in real estate! (Flipping homes)
Many may ask the first question based on TV shows “how much can I make?” In our market it’s generally 10-20%. The response from the rookie investor is “but on TV they doubled their money and bought the home for pennies on the dollar!”
The general investment rules for my market (Kansas City)
1) On most REO properties investors are held back from bidding on properties for the first 15 days owner occupants get the first look and the first opportunity to purchase a foreclosed home.
2) When flipping homes it is generally better to flip in existing neighborhoods with 50 or more like and type similar homes. This helps with area stability and appraisals which are needed to sale the property at later point in time. Homes off the beaten path with huge swings in area value may cause an investor problem when the appraisal is done and FHA case # assigned.
3) Location, location, location this sells real estate and helps a home’s value and appraisal.
4) Schools go hand in hand with location; in our area the Kansas City Missouri school district has lost their accreditation from the State of Missouri. Flipping homes in this area may not be in the best interest of the investor since good schools are high on the list for most home owners.
5) Once the first look has passed for owner occupants and the process is opened up to investors, a new investor should tour 15-20 properties to try and get the feel of what’s available in the marketplace.
6) When making offers you will probably only have 1 out of 5 accepted. One of the reasons this happens is there are generally many people looking at the same property and multiple bids being offered by many investors, even when they ask for your final and best offer you may not be the winner even if you have the highest bid. The banks look at your ability to perform the contract and cash offers get an edge, followed by seasoned investors with a track record of solid performance.
7) When making an offer, time on the market pays a big role in what might be accepted. Many times the properties that we purchase are at 180+ days on market. The banks will negotiate a little harder on these properties. In the first 90 days they generally have a set system of price reductions over a period of time until they find a buyer, if you make an offer on a property during this time frame a general rule of thumb is no more than 10% off the current price, much more than that you are wasting everyone’s time. If you agent is smart and you are interested in the home the agent should (fishing expedition) leave feedback or make a call to the other agent with comments such as my client has no interest at x price but would have some interest at y price is there any way we can get together on this?
8) Other types of opportunities: houses in estates & trust’s, many times these are motivated sellers who just want to conclude business in a quick manner. Large discounts maybe available on these types of purchases.

These general guidelines were written for persons considering becoming an investor in real estate. If I can be of service or help you find a property please contact me at 816-809-1903 Thanks, Scott
1 vote Thank Flag Link Fri Feb 24, 2012
Heather is right Rose, time heals all wounds especially Real Estate. The longer an REO property sits the better chance you have to negotiate. I had an investor a year ago who made an offer the first 2 weeks the property was listed, bank wouldn't ever offer a counter-offer. After 2.5 months sitting on the market my investor client bought the property even lower than initial offer.

You have to be able to wait them out and be willing to walk away from the property at any time they try to pull a fast one on you.

Hope it all works out for you,

Rob
1 vote Thank Flag Link Fri Feb 24, 2012
Banks here where I work price the properties to sell. I have noticed that many of the properties that are on the market are priced really well and when they come on they have multiple offers the first weekend. Their are some that sit for a while. I would say that if a listing has been on for a while then its pretty safe to try and negotiate a lower price. It all depends on many factors however. Good luck!

Heather
1 vote Thank Flag Link Thu Feb 23, 2012
You can lead a horse to water but you can't make it drink. Banks are like horses. Banks can and will ignore you and not let you pressure them into losing more money than they already are and they will wait fro better offers which will come.
1 vote Thank Flag Link Thu Feb 23, 2012
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