Foreclosure in Pompano Beach>Question Details

Karen G, Home Buyer in Ocean City, MD

If you were going to buy a foreclosure and paying cash, how much discount would you expect to take off an asking price for a home, if any.

Asked by Karen G, Ocean City, MD Thu Jan 14, 2010

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I believe your question is regarding a "discount" because you are paying "cash" not what to expect to discount from the sales price because it is a foreclosure. If that is correct, typically a Seller does not care if you are bringing a bag full of cash or if you are pre-approved with a reputable lender. Money is money. A cash buyer can be just as risky to a Seller as a financed buyer. If you come in the day before the closing and claim that the cash is gone - they are stuck. Many deals fall apart at the last minute because the person can "no longer qualify" for the purchase financially. I would look at the purchase based on it's own merit; value of home currently, amount in repairs, value the home will bring in the current market when refurbished and make your decision based on a cash-flow analysis.
2 votes Thank Flag Link Thu Jan 14, 2010
I would not expect any discount as a result of offering cash. I would simply offer what the property is worth to me. If it is a great deal, there will probably be mulitple offers and the bank will take the highest and best offer. If there is only one offer (yours) the bank may negotiate or take lower than asking price.
1 vote Thank Flag Link Thu Jan 14, 2010
You will have to make a decision at one point of the value of the currency you are applying to purchase with.
The US Dollar has been running on empty for the past two years. At one point interest rates must go up to stabilize the dollar. Before that happens we will need to watch the inflationary signs. Real Estate is till the best bet to hedge against inflation. Presently as a buyer you have an amazing opportunity. As I suggested earlier with the combination of cash and a low interest rate on a small mortgage you have accomplished the best solution if you act now. The money that you do not sink into the property will provide you a higher return when rates go up. So in fact the scenario I given you will benefit you immediately. The bottom line is to secure a house where the debt is low and affordable. When the house meets the purpose in every detail stop over analyzing or you will loose an opportunity that may never come again. Your realtor may have a different prospective that is why you need to challenge yourself and ask if you are ready buy now or pass.?
My dad use to say never run after a bus for an other one will come in a few minutes.

gabepal@gmail.com
Exclusive Buyer's Agent
0 votes Thank Flag Link Wed Jan 20, 2010
Looking at the stats in my local market, cash buyers are paying closer to full asking price, compared to buyers getting conventional loans. However, that may be deceptive because I think most cash buyers have been studying the market for 5 years, and are willing to act quickly when the better buys (usually bank owned) come on the market at ridiculously low prices. So, the quick answer is that the amount of discount from list price really depends on how much the property is over-priced.
0 votes Thank Flag Link Wed Jan 20, 2010
Wow, thanks for all of the responses!

Given the complete uncertainity in this SoFL market, all the comments are helpful. I am currently working with an agent, and many of the listings we are looking at are foreclosures.

Is there any hedging involved in the offering price these days (i.e., since all reports on the real estate housing front are all negative and that the market pricing will continue to go down -- esp when the buyer incentives disappear).

Be interested to hear any additional thoughts on that! Thanks!
0 votes Thank Flag Link Wed Jan 20, 2010
I would pay not more than 65% of the asking price in cash and take the balance in a mortgage. You can afford to overbid the asking price by five percent to place you in a win win position.
Cash buyers usually under bid and they usually loose by a few thousand dollars.
When you are using OP money at a low interest rate you can afford to gamble and over bid. You have placed yourself in safety with some cash left over.
Foreclosures are usually heavily discounted. The real value is realized if the purpose is served.

gabepal@gmail.com
Exclusively Buyer's Agent
954-562-0010
Happy Herald Realty
0 votes Thank Flag Link Tue Jan 19, 2010
Hello Karen,

I know you have a few answers but I want to make sure you understand the real estate market in South Florida. Cash buyers are king. That’s the good news. The bad news is that you aren’t the only one. In determining the price you want to ask there is one question you have to ask yourself. What kind of deal is it? Many brokers are deliberately pricing their foreclosures WAYYYYY below market. This causes multiple offers (the most I’ve seen on one property is 24). You might be one of 5 or 6 cash offers. You’re not going to get anything offering below the asking price. Don’t get me wrong, not all foreclosures sell above list price but many do. That’s why you need a realtor that can help you determine what offer is appropriate. Another thing to consider, I’m not sure how much cash you have but if you’re in the under $100,000 market that market is loaded with cash buyers so you can expect a lot of competition. Good luck with your search. If I can be of help please call or email.

Gary Benson
Ecobroker
Keyes Company

Direct 561-445-2331
0 votes Thank Flag Link Thu Jan 14, 2010
Ron nails the answer. Seller cares not where the cash comes from, it spends the same.

All that matter is what you can buy the home for, what is the Market value. Which is why you need someone that is in the market place every day, someone that can tell you what the value is. This is done by a BPO or CMA - about the same thing, what similar homes in the area sold for.
0 votes Thank Flag Link Thu Jan 14, 2010
When you are buying a foreclosure , and there are other offers the bank may take the best offer. The bank may have qualified the other buyer for mortgage. Yes you can get a discount but do not count on it. You may be able o get your offer accepted all other things being equal but if the person is offering a lot more then you may lose the deal.
It depends on the market and the comps.Some banks list the home low and get multiple offers. Some leave room for negotiation. Your agent can help you. or if you are buying directly, do your home work.
Web Reference: http://www.gitabantwal.com
0 votes Thank Flag Link Thu Jan 14, 2010
Hi Karen,

Abosolutely find out what recent sales prices have been for similar units, and figure in the cost of repairs. You can always offer less, but keep in mind that the banks have usually made up their mind what their minimum will be.

Make an offer you're comfortable with and see if it flies. You might just get the deal you want. Keep in your mind the maximum you are willing to pay, and if there is a counteroffer from the bank you have a decision to make. If you feel the counteroffer is too high, have your agent increase the price incrementally and have them say that this is your "highest and best offer". You may offer $100 or $1,000 or more than the original offer and find that the bank acceps your offer. If the bank is unwilling to budge, move on to another property.

Good luck. If I can be of further service please let me know.

Nadine Mauro
Realty Hub, Inc.
954-464-5664
NadineMauroRE@yahoo.com
0 votes Thank Flag Link Thu Jan 14, 2010
Karen, you may need to offer more.

All depends on market. What Richard said is true. You have to know what the market price is.

Find you a local Realtor to help you - tons of good ones in your area, and they cost you nothing as they are paid by the sellers agent.
0 votes Thank Flag Link Thu Jan 14, 2010
if there is competition in that area for that product then ask your Realtor to pull comps. If there is healthy competition then you may not be able to get it for less than asking price. If the property is a bank foreclosure which you've proposed in your question, keep in mind that for the most part banks do an appraisal, BPO valuation or both to learn what the value is. If your offer doesn't jive with what they think it's worth then they may wait for a finance offer that will net more. HTH
0 votes Thank Flag Link Thu Jan 14, 2010
Hi, Karen. Now that it's hard to get a loan "cash is king" and that makes the transaction much easier and faster. However, there really isn't any set "rule of thumb" on a discount. If you are working with a real estate agent ask her to give you property comparables and then you will be able to make an informed decision on how much you want to offer. If you are not working with a real estate agent I am happy to help you with this. You may reach me at 561-445-8743 or Nicole@BuySellBoca.com

Thank you,
Nicole Mason, Realtor
Web Reference: http://www.BuySellBoca.com
0 votes Thank Flag Link Thu Jan 14, 2010
Hi Karen!

I buy foreclosures... and while theire are a lot of factors involved in making a decision on an offer price. I general rule of thumb that does not seem too offensive is about 10%- 15% off the Gross Sales Price.
This is just a ballpark figure I use after reviewing the "comps."
Please check with a REALTOR in your area...

~Kurt
Web Reference: http://kurtd.longrealty.com
0 votes Thank Flag Link Thu Jan 14, 2010
First find out what the comps are. Then what is the cost to fix the home up. tehn I think you have an idea of fair market value. Offer less and see what happens.
0 votes Thank Flag Link Thu Jan 14, 2010
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