If your goal is to flip this property, proceed with caution. These strategies typically only work for the novice investor/speculator in appreciating markets, as appreciation will serve as a hedge against any downside risk or mistakes in calculation.
If you are purchasing to live, it's a different ball of wax all together. This area has been addressed well by the below responses.
I would caution, as much as possible, not to make a decision based entirely on emotion. The real estate market is truly in a glut. And to get out of it based on solid fundamentals, we need purchasers to be realistic.
The "good" thing about banks is that they are seldom emotional. What I mean is this: If you were buying from an individual, you would run the risk of offending them and cutting off negotiations. The downside is this: if the bank is getting offers from other buyers, then they will simply not respond to one that is too low and you'll be out in the cold. However, since the property has been with them for a year now, it doesn't seem they are flooded with offers, now does it?
There is an art and a science to making an offer and one should never guess at it. Use this as your starting point: get a CMA on livable (move-in ready) homes in the area. This will give you an idea of what the home should be worth once all repairs are done. MAKE SURE the CMA is done properly, as a CMA is (quite frankly) not an official statement (aka: different agents might come up with many drastically different figures, but, if done right, there will be much consistency). From there, deduct the cost of repairs, if done by professionals. If you do this process correctly, you will come up with a MAXIMUM amount you should pay for the property. The listing price has absolutely NOTHING to do with ANYTHING and should never be a consideration for what you offer for a property. Neither should the break even point for the bank. These are both figures that you should keep in mind only to know what they are expecting. Oh, and by the way, the so called "break even" point for the bank is always a misleading figure that will tell you exactly nothing unless you know how it was calculated. The odds are that you will not have access to that sort of information.
In short, attempt to figure out the fair market value for the house and offer no less than 20% below that, all depending on dozens of variables. I would strongly advise the representation of a REALTOR.
OR... if you are not buying this property for your own use; if you are wanting to become an investor, then you will want to become very VERY educated on this process before you put your own money on the line; it's extremely risky. Therefore, if you are trying to break into the world of investment buying and selling (flipping), the advice above will be completely different. In that case you would make offers based on YOUR information as much as the bank's and the property's information. In other words, it gets much more complicated.
It's a hard question to answer since the answer can be different for every property if looked at individually.
With the details you have mentioned, you seem to have a lot of "estimate" costs of things to be done if your offer is accepted. These all sound like things to be discussed in the offer..inspections,appraisals,repairs, is it as-is, ect..
As to what the reasonable offer is? If you do read the other thread I think you'll see that it can be unexpected more than predicted.... Just an opinion..
Many of my buyers ask me the same question. To me, the answer is based on many factors. The bottom line is what the bank is willing to take is very unpredictable.
What is the home worth compared to recent sales in the area? Has the priced been reduced since it has been on the market and is it now a fair price? If you had a home for sale priced at $229,900 and knew it was worth $215,000 all day.... what would your reaction be to a $160,000 offer? Who knows the bank may be interested in just getting it off the books.
How serious are you about buying the home? How far under asking price are the comps bringing? If your trying to base your offer on what they bank is owed, is their "break even" point including other additional costs they have paid and the potential realtor fees they will pay on a sale. The break even could easily be $200,000+
I know the line of thinking is I want to start low just incase they take it. You need to decide where you are willing to end. What if you offer 160k and the bank comes back at 220k, what is your next move. I would say offer what you feel is best and depending on how bad you want the home be prepared to have a plan B. I would say move forward on it and see what you get back, and best of luck. Brent
Long and Foster Real Estate Inc.