It's easier to knock on a door of a house that needs repair and say "my wife and I are looking for a home in this area and yours looks cute from the outside". Do you know anyone selling in this area? A hand written note works well too. My closure rate is almost 70% on the notes.... And you get the best deals with no competition.
Now in the year of two the bank has owned it, it can only have lost value. Nationwide values have dropped. The bank let the landscaping die. So, best case scenario, it might be worth at tops $255K., but probably less than the $242K that they have on their books.
The way I see it you are willing to offer 100% or more of the value for the repo. So offer away if you want, but even if they accept your low ball offer you are not getting a screaming bargain.
Do banks ever overprice their listings? Yes. They do.
Words of caution....all that glistens is not gold!!! Foreclosures CAN be a great opportunity, but did you ever see the movie "The Money Pit"????? It's not easy to give up your "home" to the bank...and many homeowners in that position have done severe damage to the property. In other words, even if you CAN purchase the home at an excessively low price, there may be tens of thou$ands in repairs necessary to make the home livable. Tread with caution and BE SURE you know what you're getting into BEFORE you sign on the dotted line. As someone else wisely said .... Be aware and Beware!!!
Don't believe you are the first person who has thought about making a lowball offer on this foreclosure. The fact that it's been on the market for 6 months shows the bank isn't exactly willing to 'give it away'.
Also, be sure you know all you can about the house before getting into a contract because foreclosures are notoriously shrouded in mystery: no disclosures, 'as is', no survey, no history.
There's no harm in trying, just beware and be aware!
With the massive amout of inventory that most banks are holding you would think that the banks should accept whatever any buyer is willing to pay for it. Unfortunately, that is not the case. Banks have had several evaluations on the property and they will only be willing to take what they think is a reasonable market value on the home. The listing agent has to give the bank updates often on pricing, it the home has been sitting for a while at a certain price with no offer the agent will recommend a new list price. This process goes on until the right price triggers an offer.
This is a dirty trick to get the listing at low price, get multiple offers and then mess up the others agents' offers and push forward their own clients offer to get a dual commission representing both buyers and the bank.
I wonder why these bank executives get so much paid, after all they are acting very stupidly with the banks assets.
The bank should make it clear to the listing firms that they will get only selling side commission in case of dual agency.
This will benefit the banks in many ways.
1. No agent will low ball banks' assets.
2. Banks will get the best offers, not only the offers that listing agents want.
3. Banks will sell at highest possible market price not a discounted price.
4. This will force all parties in transaction to be more open and share information.
From buyers point of view, you have to be ready to pay little above asking price otherwise you will not get the property.
You can go to my website to find REO Homes in San Jose Area
You will have to come up after that since they will most likely refuse the first time around and possibly counter. You can always offer more if you really want it.
I presented an offer where my client came in about 15% under list. The property has had NO offers, is a mixed use, non-conforming comercial office building, vacant, on a busy street. The bank didn't even counter. My client basically told me they can sit on it!! We're going to go back after Xmas and offer a tad more. The other agent is defending the bank's position (fiduciary I can understand) and her pricing. Sometimes it is NOT the banks/lenders who are at fault but the agents who, like a mother goose, are protecting their eggs!!
Sounds like you've done your initial homework regarding preapproval and knowing what was owed to the bank. Now what you've got to do is find out what the home is worth on the open market. You can figure it's not worth $325,000, or it would have sold. You already know that. But what are the current comps? The point to this step of the exercise is to make sure you don't overpay. The bank should have some idea of what it's worth--it probably had a BPO (broker's price opinion) done on it. And they'll know, too, that it's not worth close to $325,000.
Problem is, some banks like to hold on to property if they think the market will recover fairly soon. That way, long term, they can cover their losses. On the other hand, sometimes they want to clean up some of their non-performing loans, so a non-motivated lender a month ago may be motivated now.
Bottom line: Determine the comps. Make an offer that does not exceed the comps (and probably should be comfortably under, since prices probably will continue to decline for awhile), and that is under your pre-approved limit.
Hope that helps.
1) What have got to loose by writing an offer? The worse that can happen is that the bank says no. Atleast you'll know
2) Banks DO deal!!! In Calfornia, after about 60 days, I assume across the nation, they lower their prices every 30 days until it sells or goes to auction. They don't want to carry any longer then they have to. I have low balled for several clients on bank owned and yes, if its not been easy but patience has got my clients a screaming deal many a time.
Be patient and stand your ground but first and foremost, make sure the REO agent gets your ability to close when and where the banks wants to, across to the bank. The agent just populates data on the portal so a full cover letter won't work, you have to really talk to the agent and show your financial stability.
Why THIS home?
It sounds like you did a title search in order to get the foreclosed amount? What was the 2nd for? Is the home listed in the MLS? Are you working with a Buyer's agent? Are you sure that the bank that is selling the property is the 1st mortgage holder? What was the total value of the two loans combined? Was it $325K or higher or lower. What do the comps say the house is worth?
I made a low ball offer last year on a REO that had been on the market for over 6 months and several price reductions. I included a letter along with comps justifying my offer (through our Realtor). The offer was countered with $500 toward closing costs and that was it. We bought a regular listed home instead at as big of a discount (from fixed up value) as the REO. Six months later the REO finally sold for the price we offered after more multiple price reductions.
Look at some homes closer to your price range. Make lowball offers but you might find one that has numerous price reductions and when you see it you will KNOW it is a bargain.
Jim: In the Chicagoland area about every other suburb has gone up in value. If Wheaton is one of those going up, the deterioration of the home would probably cause the appreciation to be a wash, not a decrease in value.
the home drop in price 100k.... if nothing has happened... Offer 225,000 as is.... Do it before the price drops.. Otherwise when the hatchet comes down, unless you have cash.. Say Bye..Bye.. Good Luck.
Call me with questions....