Foreclosure in 17268>Question Details

Buyer In Wbo, Home Buyer in 17268

What is the minimum bid one should make on a REO property?

Asked by Buyer In Wbo, 17268 Tue Jun 16, 2009

I am looking at one that needs multiple repairs yet the asking price is set rather high considering what needs to be done.

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Wow this was asked in June 2009. Buyer In WBO what happen did you ever make a bid and get the property? Update us.
0 votes Thank Flag Link Sun Jan 1, 2012
Buyer,

This is such a common question.... best advice. Pretend the asking price does not exist. Do lots of research with your buyer agent to determine it's worth, then try to get it for that or lower. It would do no good to tell you to offer 10% under ask if it's 30% overpriced. By the same token don't bat an eyelash at going significantly over asking price if it's still a great deal.
0 votes Thank Flag Link Sun Jan 1, 2012
REO’s are not necessarily a good deal when first listed! Like any other financial transaction the homeowner/ investor want to maximize their ROI. I have seen REO’s with days on market approach 450 days, was this product priced as a deal right out of the gate? I think not, the tax record/appraisal/ BPO indicated a value of approx. 120k it was listed for 100kl the price was reduced approx. 10% every 4-6 weeks when the property sold was sold for 18,000! The reason for this is usually the asset manager incorrectly pricing the home from the start because he was unaware of the extent of the foundation problem. Example #2 a home is newly listed for 30k, several offers are received and highest and best is asked, the winning bid is 47k. As you can see in these examples the process of buying an REO can yield unlikely results. The way we do it! The money is made on the front end, you should already know your repair cost, and future sale price (be realistic), overhead, real estate costs, taxes, insurance, and profit or equity then it’s just simple math to determine the price of the home. Not every deal works out because everyone has a different idea of the problems and how to correct them. We have offered above list price for several properties and below listed price on many others, it really just depends on the property. When we offer on a properties we get about 1 out of 5, and we make a net profit of 10-15% in 6-9 months.
0 votes Thank Flag Link Sun Jan 1, 2012
I would look at the repairs and back out the cost of those repairs. Look at the prices in the neighborhood to make sure that after repairs you would not spending more than what the house is worth. Adjust your offer accordingly. I would also back out the cost of your financing. That way, you know you should be in an equity position from day one.
0 votes Thank Flag Link Sun Jan 1, 2012
What a Bank is willing to accept on a property can vary from month to month according to their balance sheet. If you are looking for a general rule percentage number some like to use 70 percent on the dollar. In my experience I have seen Banks accept even less than that on some offers. I have also seen nearly full price offers rejected. Keep in mind that just because there is a asking price set on a property however it might not mean that price is fair market value. In today's Market a lot of times a Bank might just want to move a property to get another one off the books. This can work in your favor.
0 votes Thank Flag Link Sun Jan 1, 2012
There is nothing to be lost by bringing a "low ball" offer to the bank. In the case of a occupant Seller, they once in a while take a "insulted" position and refuse to deal with you, only hurting themselves. But to the bank this is just business.

If you are considering an FHA loan, the home will have to meet some minimum habitable requirements and if they are lacking a low ball offer won't be conducive to the foreclosing bank's making repairs and many time the bank outright refuses no matter the circumstances.

Would you like to make an offer?
0 votes Thank Flag Link Tue Jun 16, 2009
We are not looking to resell the property. Just to renovate over time for ourselves but due to putting money down and keeping some aside for items required (fridge, stove, etc.) we wouldn't be able to make all repairs instantly.
I understand the property is "supposed" to be priced as is at a fair market price but I can't see paying full price with the repairs needed. Is there a certain percentage one should bid under or do the banks stick to the set price on an REO property?
0 votes Thank Flag Link Tue Jun 16, 2009
If you are thinking of fixing and reselling then the answer is simply economics with your profit margin guiding you as well as your best projection of the immediate future market.

The bank has in all likelihood gotten an estimate in some form of the market price of the house. If that was an accurate one is anyone's guess. It's possible that the bank is just wanting the place off the books and will take any reasonable offer. You really need to get an agent to give you their best guess at the value based on as many comparable SOLD homes in Waynesboro that have changed hands in the last six months or so. There are a lot of other factors that will come into play. I would be happy to help in anyway I can.

It's possible that the bank is just wanting the place off the books and will take any reasonable offer.
0 votes Thank Flag Link Tue Jun 16, 2009
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