Question Details

T, Home Buyer in Indiana

Question about buying a bank owned home

Asked by T, Indiana Tue Feb 12, 2013

Hello. We are currently looking at buying a bank owned/repo property and are wondering what to offer. The current price of the house is $104,500, but it has sat empty with the bank for 3 years with not much interest. It would need a new roof, new siding and the inside would need fixed up (new kitchen, new flooring, paint), but it's in pretty good condition other than the siding and roof. Would it be out of question to put in an offer of $60,000-$80,000? We want to get a good deal (but also have enough to update), but we also don't want to insult the bank.

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Michael Cheng’s answer
The good thing in dealing with a bank is that you don't have to worry about insulting them. Your offer will go to an asset manager who probably has no idea of what is being sold and never seen the property. It's just a line item that he'll try to sell for as much as possible.

If you've found a deal that nobody is touching, then go ahead and put in a low-ball bid. Sometimes the bank has strict figures they need to reach that'll prevent the sale and sometimes they'll just let it go.
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3 votes Thank Flag Link Wed Feb 13, 2013
My guess is that after this much time, they will be very ready to just get rid of it and will be very willing to accept offers. The less contingent you can make you offer, they better it will look to them at any given price. They will NOT be insulted; it['s business for you to buy as low as you can just as it is for them to sell as dear as they can; there's not the emotional attachment that comes from living there. If they don't like your low offer, they will either say "no" or will counter it. I have had excellent success on property such as this, emphasizing that my offer is for cash and I will take it as it is. All I want is clear title and the property - give that to me and I give you money, that simple.

If you don't have enough cash or if you don't know enough about spotting and estimating what needs to be repaired, be sure to have the appropriate contingencies in your offer, even though that may lessen its impact.
0 votes Thank Flag Link Wed Feb 13, 2013
Here is a formula that a lot of active wholesalers are using to compute whether a house will be a good deal or not. The formula is solving for the After Repair Value (ARV) or what would be known as the market value if in good condition. You can use this formula to figure out your highest asking price.

(ARV x 70%) - Rehab Costs = Wholesale Price

Some investors are either looking for greater profit or unwilling to take as much risk, so their formula is this:

(ARV x 60%) - Rehab Costs = Wholesale Price

Once you figure out the wholesale price, you can start make offers from there. Make sure that your offer is contingent on a satisfactory home inspection. That way, if the inspector finds out that the house needs more repairs than you are willing to make, they you can get out of the contract and get your earnest money returned.
0 votes Thank Flag Link Wed Feb 13, 2013
Make sure you get this house inspected. There may be additional problems that aren't as obvious.

But I agree with Michael, no harm in trying a low-ball here.
0 votes Thank Flag Link Wed Feb 13, 2013
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