Home Buying in 92508>Question Details

Jentsmail, Home Buyer in Riverside, CA

I read in Newsweek to start with a bid to buy a home 14% less than comps and the bank will usually come back at 7% counter as a final offer?

Asked by Jentsmail, Riverside, CA Wed Jul 13, 2011

My agent says this is not the case but I'm worried he's just looking out for his commision. The area is flooded with short sales and foreclosure.

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Answers

18
Ron Thomas’ answer
You won't listen to the Professional standing in front of you,
but you will listen to some stanger in New York who writes stories for a living!

Do you want to think about this for a minute?

Good luck and may God bless
2 votes Thank Flag Link Wed Jul 13, 2011
Jentsmail,

Echoing the sentiments of those below me, it makes no sense to take a national article and apply it to a local market. If there were pat multipliers like this then everyone would be buying for 7% off, which is definitely not the case.

And stats can be very misleading. For example, the Case-Shiller Index recently reported that "San Francisco" was down 40% off its highs of 2006. What they don't tell you is that "San Francisco" is actually the San Francisco metropolitan service area, which includes far away cities from other counties that have lost as as much as 75% in value .

Real Estate is a local market. If you don't trust your agent for other reasons that's one thing, but if it's only because he/she says that basing buying strategy on a national article doesn't make sense, his/her comments are right on the mark.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
1 vote Thank Flag Link Wed Jul 13, 2011
Hi Jentsmail,
I have to agree with a lot of the answers you received here. One of the dangers of reading a National Paper is that it is basing their opinion and possible information on a national level and not specific to an area. In Riverside County we have a very low amount of inventory right now so you may find yourself in a bidding war of which you would lose. Your Agent probably know this. Please understand that most, not all, but most of us don't base any price on how much commission we would receive. Our commission is the End result of a good job, not the beginning. If you under bid on homes in an area that doesn't work your Agent gets nothing. I honestly do Not believe your Agent is basing anything on his commission he/she is probably just trying to do their job by finding you a great home, in an area you love, at a great price and with the terms and conditions of your loan. Good Luck on your home search.
Grace
1 vote Thank Flag Link Wed Jul 13, 2011
I don't know your Agent, but why would you believe something you read over the Professional you are working with?

If you did your due diligence in choosing the right Agent for the job then you shouldn't be paying attention to all the garbage in the media.

Sammer Mudawar, Broker
RE/MAX Prestige
1 vote Thank Flag Link Wed Jul 13, 2011
For some journalist to write that as some type of rule is not really judicious either. There is no reason you cannot start your offer low but try to use some existing comps in your calculations. No cardinal rule here as each Bank and their bottom line are not etched in stone!
1 vote Thank Flag Link Wed Jul 13, 2011
Dear Jentsmail,

I have sold over 60 bank owned homes in the Riverside area thru banks including Bank of America, Wells Fargo, and Chase to name a few. In my experience, there is no magic formula to get the bank to accept and offer. They will look at the offer and compare it with the Listing Agent's Broker Price Opinion (BPO) as well as the appraisal that was obtained prior to listing.

They will take into account the days on the market and if there have been any other offers on the property. They will also consider any concessions you may be asking for including asking the bank to pay for your closing costs. The bank looks at the net amount they will receive after taking out any concessions from your purchase price. If that meets their needs, they will accept your offer. If it is less than they need, they will counter back to try to get their net amount.

I hope this is helpful. Please feel free to send any additional questions and I will be happy to assist you!

Sincerely,

Jason Shawn McIntyre, Broker
0 votes Thank Flag Link Mon May 12, 2014
Don't believe everything you read, especially in Newsweek. There is no countrywide universal standard. The "Bank" is usually not the owner of the mortgage, but the servicer. The owner is often an investor who has their own idea of what they want or need from the house they have never seen.
0 votes Thank Flag Link Sat Feb 25, 2012
There is no golden rule for that and no magic number, Jentsmail. I see how you suspect a conflict of interest. After all, the lower your offers are - the less likely that the sale will take place and your agent will collect a commission. You mention that the area is flooded with with foreclosures and short sales, so maybe you can go even lower than 14% below comps with your offers. If none of your offers get accepted - then you will know that you need to gradually up them in relation to the comps.
0 votes Thank Flag Link Sat Feb 25, 2012
Jentsmail,

Unfortunately, today we live in a media controlling world which misguides most.

Think about this..... would you go to see a dentist if you had a spinal injury? I bet not. Trust the professional who lives, breathes and eats the business he is in previewing inventory, doing comparative market analysis, etc on a daily basis.

All the best,
Nina Harris
Web Reference: http://ninaharrishomes.com
0 votes Thank Flag Link Sat Feb 25, 2012
The idea that there is some formula by which deals are done is not only false, it's ridiculous. Each deal has its own nuances, and because there are humans involved there will always be variables.

You do want to make sure that your agent is experienced with these types of sales though.
0 votes Thank Flag Link Sat Feb 25, 2012
#1 Most items in the newspaper and news are up to 4 months old information, you are going to get the most up to date and accurate information from a local real estate agent in your area. Go to open houses and talk to a few agents or call some in the area and speak with them. If the real estate market is very active, you will get beat out 9 times out of 10.

Good luck!
0 votes Thank Flag Link Sat Feb 25, 2012
I don't think that's a valid rule to follow. In fact, if you were to look at a cross-section of closed sales, you definitely would NOT see homes with an original list price of $250k (for example) consistantly selling for $232K.

As a whole, much of the IE reo market is correctly priced. There is a HUGE exception. HomePath REO's. These follow a predictable pattern of being listed overpriced, generally sit for a month or so, then Fannie Mae allows the listing agent to drop the price to a reasonable level and they eventually sell. The reason for this is that HomePath financing doesn't require an appraisal, so they do seem to fish for "suckers" in the beginning.

Aside from this anomaly, I just don't see the 14%/7% strategy working out. If you offered me $258k on my $300k listing, it probably wouldn't even make it to the seller.

-John
0 votes Thank Flag Link Sat Feb 25, 2012
every market is different, take advise from a REALTOR you trust
0 votes Thank Flag Link Tue Feb 7, 2012
If you get your real-estate buying strategy from a journalist, then do you also get your news from your Realtor?

Sometimes that strategy might work, and other times it might not work the way you'd like. What if the appraisal were 20% less than the comps (perhaps because the house had some foundation issues)?
0 votes Thank Flag Link Thu Jul 14, 2011
Here's a local Riverside source. [http://www.all-foreclosure.com/counties/riverside.htm]. There are many more. But as all the others have stated. RE is local. Start doing some of your own research. You may or may not have a great RE agent/broker but it's always wise to do your own due diligence. Good luck.
0 votes Thank Flag Link Thu Jul 14, 2011
Real estate is local and your agent will know what is happening in your market. Too many times the media paints a picture of the market with a very broad brush. What is happening with bank homes in Riverside CA may be entirely different then here in Sarasota FL or anywhere else in the country. You need to get as much local knowledge and expertise as you can. Best Wishes.

Bob Schult
Key Solutions Real Estate Group
0 votes Thank Flag Link Wed Jul 13, 2011
National trends or averages do not work in the real world. You should NEVER base your offer on deducting a percenatge off of an asking price. you dont know if that asking oprice is higher than that percentage over market value, already at mkt value or priced way below, you need to assess what the house os worth for yourself and base your offer on that value.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Wed Jul 13, 2011
Jent,

With no transaction thre can be no commission. Your agent is giving you accurate information. To take a "one size fits all" approach may not be the best approach and could be the reason you fall short on getting the home of your dreams.

The local real estate professional will have a feel for the best approach to take. The reality is that in some markets the successful bidder in a foreclosure is nearly always above the bank's asking price while others can be slightly below what the bank is asking. Something to keep in mind is that generally for homes that are "recent" to the market, banks are less receptive to negotiations and those that have been on the market for a longer period may find the bank more receptive.

The issue of short sales is a completely different ball game because you are actually negotiating with two owners.....the present owner and their lender. Thus, there can be two distinct levels of negotiation. Remember, the price you see listed as a short sale may not be your final price....unless you have the good fortune of identifying a "bank approved" short sale price.

Distressed market buyers would be well advised to avoid a "formulated" approach and work with local market trends that can be used o defend your offer amount.

Good luck,

Bill
0 votes Thank Flag Link Wed Jul 13, 2011
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