As an REO Foreclosure listing agent who works directly with asset managers, I often hear this question. The bottom line answer is that REO's are selling at near or over asking price. We are seeing a HUGE increase in buyer's which means NO MORE LOW BALLING! Prices are increasing and days on market are decreasing. Buy now before it's too late!

I am not sure what "discount" really means in a free market home available to everyone looking....you will buy it for what the market says its worth.

If you buy a home for 100k that means basically nobody offered more than that in that time period. So if you were to turn around and sell 2 months later, you may not even be able to sell it for what you offered....so I just dislike the theory of "its worth 150k but I got it for 100k.....even if it appraises for more than the purchase price that doesnt mean it will sell for that.

Per my earlier blog message, the REO discount will increase in the outlying areas of the Phoenix metro. The more popular areas will have lower discounts.

Expect greater discounts in Maricopa, Queen Creek and Buckeye.

The key however, is not so much the discount, but the structural versus cosmetic repairs. Also, malicious goodbyes from the last owner need to be evaluated on the REOs that have been on the market for a while. (example concrete in the drains).

Do not be influenced by a big discount. There may be a reason, not readily apparent. Get a house inspection and check the property again on the day of closing.

Jeff - what are you basing that data off of? In many of the neighborhoods in which I work, those percentages you are quoting simply aren't correct.

UPDATE on the "discount" you can expect when purchasing a REO home in the Phoenix metro market

"Discount" in this case is defined as the purchase price of a REO (Lender owned real estate) in a neighborhood as a percentage of other 'Non-REO homes selling in the same neighborhood or surrounding neighborhoods.

Currently expect the discount for the buyer in this range:

Best 50%

Average 35%

Worst 25%

This depends on the condition of the property and the movement of the homes in the neighborhood. The farther out from downtown (example Buckeye and Queen Creek,) expect the discount to be greater on average.

A consideration almost as important as the discount is the amount of repairs required to make the home liveable. A low discount without structural repairs may be more desirable than a large discount with major repairs. Cosmetic and non structural repairs is so important. The net move-in cost is the key. If you have additional questions or would like to see Arizona Homes and Land for sale with a high buyer discount and low structural repairs, see: http://www.ArizonaHomesLand.com

Banks as seller...no emotional attachment...no sweat equity in the property...

Banks look at data. They list their REO's at current market value, typically pretty accurately.

The current market is already at a big discount. A further discount is unlikely.

If you want to step up to the higher-end market, then you're in a buyer's market. 350K and below, you're in a normal market, with a bit of a frenzy happening, since REO inventory is getting eaten up pretty quickly.

However, there's always an exception. I have found through my own investing and rehabbing experience, that there always seems to be an exception. A property that no one wants to touch. A property that needs vision. I can help you find those exceptions.

A DISCOUNT?

What are you trying to buy?

Think of it this way - you walk into a retail store and the sticker (list) price on the merchandise is half off the price that it was 18 months ago - HALF OFF!

Why would you expect more of a dicsount on top of that?

Arent the retailers already cutting prices enough?

It's a tough concept for someone who isn't eyeballs deep in it everyday to truly understand but I have to agree with Donal Keys and his answer - We are in the midst or a full fledged market shift and it is shifting in the favor of balance.

The list prices are so good right now that if you are expecting a discoutn you will be heart broken and you will miss out on the single best buying opportunity in Phoenix History -

There has never been a better time to buy and there may never be a better time to buy

Expectations in this circumstance can only lead to failure-

You should expect a 50% discount from the inflated prices we saw just a few years ago and you are getting it!

Phoenix is one of the best if not the best City in the Country and with 5% interest rates and ridiculously low prices - you will have competition as a buyer - be prepared to pay over list price because the list price is already so severly discounted

Thanks have a great weekend

Benjamin I Dusan
Realtor®
GRI, ABR, E-PRO
Certified Commercial Sales Specialist
Design and Construction Consultant
Keller Williams Realty Professional Partners
7025 W Bell Rd, Ste 10
Glendale, AZ, 85308
623-776-4961 Office
602-486-9388 Cell
888-593-2362 Fax
http://www.BenDusan.Com
mailto:BenDusan@Gmail.com
"Your referrals are the best gift I can receive and I'm never too busy to answer your questions"

If the home is under $225,000 expect to pay up to 30% ABOVE LIST PRICE in order to win the bid because it is now a SELLER'S MARKET for homes under $225,000. Of course local neighborhood trends are completely different.

It all depends on the price range and the area desired. Email me and I will send you detailed information on our market shift from a BUYER'S MARKET to a SELLER'S MARKET.

http://623homeinfo.com/maysupply.png

Above is a link that shows you that based on the price range you are in what market you are in.

0-4 Months Supply is a SELLER'S MARKET
5-7 Months Supply is a BALANCED MARKET
7+ Months Supply is a BUYER'S MARKET.

As you can see most of the BUYER'S MARKET is GONE!

Feel free to contact me for more valuable reports and insight to the market.

If the home's priced competitively, the statistics are it's selling at about 95% of list price.

If you're looking at homes under $100K, odds are you're going to be paying at or above list price as these homes are receiving multiple offers days after going on the market.

There is less than one month's inventory of bank owned homes left on the market right now - high demand, low supply = little to no discounts on much of the bank owned inventory.

Greetings Shane:

We market homes with several banks in Maricopa County. The short answer is that it depends. "Typically" the house is already discounted when it hits the market, it then depends on the condition of the home and of course the location. The news casters would have you believe that the banks are giving these homes away just to get them off their books. That's simply not the case. There are some good bargins right now and the interest rates are the best they have been in decades. If you find the house that looks good, it has the location your looking for and your Realtor advises that their CMA says it's price right then pull the trigger quickly because it will not be on the market vary long. Their is a host of people looking for that type of property. Find yourself an agent that understands value and give them your criteria, then just do it.

Jeff Daley
Keller Williams Arizona Realty
Licensed REALTOR(R) State of Arizona

Shane,

As in any home sale, the “deal” is relative to the market. We are experiencing a buyer frenzy in the under $200k price range. I have clients that are offering more than list price and have been out bid. The sign of a good deal depends on its relevance to the market around the home.

Get good comparisons and calculate if it truly a good investment.

The last REO contract I negotiated didn't get such a great discount. There are many reasons for this. Condition of the property is something that needs to be considered. This home included all the appliances and washer/ dryer. It also only needed new carpet with no other obvious repairs. The older the home and the more repairs that are noted will allow for a greater discount. Additionally, if the home is priced already in the 'hot zone', their will be other offers to contend with and not allow for a big discount.

You can visit my website http://www.jameswehner.com for lists of REO properties in the Phoenix metro area.

Hi Shane,

I would agree with Donald Keys below. You have to look at what comparable properties in the area are going for. If the list price of the REO is $60-70k below recently sold comps I usually advise my clients to submit a on offer at about $15k below the list price. Now you've got $75-85k in instant equity. I'm not supporting the banks here when I say this, but understand, the banks are already taking a big loss on these homes. They only have so much wiggle room to move on them. They're still fantastic deals. If you've ever read "How to Make Money in Stocks" by William O'Neil, publiser of Investor's Business Daily, you would note that he says one of the BIG mistakes most investors make is waiting for that particular stock to go down another 1/8 or 1/4 of point before they buy. In the end they miss a great buying opportunity and end up paying more for the stock when it takes off. Unfortunately we are seeing a lot of that Pennywise Pound foolish mentality out there in the real estate market right now.

Please visit our website at http://www.ArizonaPremiereLiving.com for more information on the Scottsdale/Phoenix real estate market.

Don't expect any... You are wasting your time....

FORECLOSURE REALITY CHECK…. The only “sellers market” in america is the foreclosure market. Don’t expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market. For government foreclosed homes, by law, they have to be priced “at market”.

The REO manager has a short list of “cash/close in 2 day buyers”, they always get the first right to bid. Then they have to wait for the “public auction” Which drives up those prices. After a 30-60 day period. Then the REO picks the best bid. Sometimes, only sometimes does a REO manager take a property directly to a buyer he knows peronsally. Why should he, he has a bunch of people bidding and driving up the prices.

My REO manager friend likes to joke about all the “first timers” who continue to drive up the bid when they don’t hear anything from the bank. Every time I see the “how come I haven’t heard from the bank about accepting my foreclosure bid after 30+ days” on trulia, I have to let out a chuckle because he’s so right. For those newbies, this is real. They know that when you don’t hear from them that a large percentage of people drop a second or third offer higher than the previous one. **WARNING, YOU ARE BEING TAKEN ADVANTAGE OF HERE**

You want a deal on a property right, everyone wants that…. So the moral of this story is:
1. the 60 days you have to wait to hear from a REO, you could have made 2 or 3 better deals with a property that has been on the market for a long period of time. A good realtor will drop an 80% offer on a property and get one accepted.
2. You are attempting to make a deal in a house covered in a cloud of bad energy, don’t be surprised when it rubs off. Personally I stay away from these for this reason entirely.
3. One way to get a deal is dropping a hand written note on ANY house in a neighborhood you want to buy that says “my girlfriend and I want to buy a house in this neighborhood and yours looks cute from the outside. Do you know anyone that is looking to sell?” I always get responses, better prices and positive energy into the home.

Depends on several factors: How long has the property been listed for sale as an REO? How is it currently priced, below market value, at market value or above market value? What is the condition of the property?

The answers to the above questions should help in determining how much below the list price you may get the home for.

I have several techniques that I use to successfully purchase REO properties for 15% - 20% below list price. Check out my website and contact me if you are interested in buyer representation for any bank owned property purchases.

Steve is correct - whatever the market will bear. I recently worked with a buyer who put in an offer on a home and the bank countered back at almost full price because the bank has multiple offers on the home and it is now in a "bidding war".

What you need to do is have your agent or REALTOR look at what the non-bank owned competiion comparable homes have been selling for. Example if a bank owned home is $180,000 and needs $10,000 in repair compared to the same home that is "move in ready" that may have been selling recently for $230,000 you would be getting a $230,000 home for $190,000 or $40,000 less.

Instead of asking "how much of a discount should I be expecting on an REO" you should be asking "If I buy this property for $$$,$$$ how much am I saving compared to other non REO homes".

Just a suggestion.

The quick answer: Whatever the market will bear. There is no set rule or guideline. A Bank is looking to minimize their loss/maximize their gain like any other property seller. Market demand will gauge how narrow they can make that loss.

Most banks are using an appraisal and trying to get within 90% of distressed appraised value...at least in the early stages of an REO listing. As time goes by, which means demand is low, they get more aggressive. Property condition, of course, is always a big factor.