Home Buying in Scottsdale>Question Details

Paula Faulkn…, Both Buyer and Seller in 85006

what percent over the asking price should i offer on a reo property if multiple offers are involved?

Asked by Paula Faulkner, 85006 Tue May 31, 2011

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BEST ANSWER
Multiple offer scenarios are not bidding wars. You place your offer one time and hope for the best. The key is doing the research and just making an informed educated decision. You are not going to have a 2nd chance to raise your offer again so it is not a bidding war. You have to know the value of the home and understand that the banks list them sometimes extremely competitively to get as many eye balls on the property as possible to sell it quickly. Inventory is tight right now. Buyers are frustrated with the short sale process and waiting around for homes that may not close so the regular sales and foreclosure sales are getting slammed with offers (IF they are priced well). If they are not priced well they will just sit on the market and do strategic price reductions until it is priced competitively and then you can expect the same flood gate of showings/offers. To answer your question on where to place your offer in a multiple offer scenario I tell my buyers to consider the sales history of the area, condition of the home with estimated amount of repairs, how badly you want that particular property, etc. Many times these deals are won and lost over a couple thousand dollars. However, I've seen the banks list them so competitively low that offers come in much higher and still well within the average sales in the area and estimated appraisal value. After you review the sales history and take into consider the condition you can come up with a figure that works for you. This is not a market to be over paying for a property and yes the home will have to appraise if you are financing it. If you get the email/call from your agent 'Sorry but the Sellers selected another offer on this property' and you are kicking yourself than you didn't offer the correct amount. You should be able to walk away satisfied that you didn't get it because your offer was fair and reasonable and based on sales history and research on the neighborhoods. When you offer this way the end result is you are only going to move forward on a property that is at a price you are comfortable with and not a penny more so as long as you do not have regrets on your offer your doing all you can. Currently supply is low and demand is high and every other buyer is in the same boat as you right now. Good luck!
1 vote Thank Flag Link Wed Jun 1, 2011
Paula,
There is no general rule. Speak to your agent to determine the actual market value of the property. Also, remember that the bank is also looking at the terms - cash offers are recommended.
Good luck!
3 votes Thank Flag Link Thu Nov 3, 2011
Paula,
What did you end up doing? Did you get the property? How much above the asking price did the property sell?
Thank you
2 votes Thank Flag Link Sat Nov 5, 2011
Have your agent prepare a CMA (comparative market analysis) to determine the value of the property. This will give you the answer as what is the maximum you should offer.
2 votes Thank Flag Link Thu Nov 3, 2011
It depends on the property, if it is a desirable area, the house is move in ready condition and you can up the bid to 10% above asking start there, the bank will usually come back requesting a Highest and Best Offer from all those that have made an offer. At that point it will depend on what your finances look like, will the house appraise for the amount you want to make the offer for, there are many things involved with an offer.
2 votes Thank Flag Link Wed Nov 2, 2011
I would put in your best offer you are willing to pay for it. That is all you can do. If their is more than 1 offer you are only going to get 1 change.
2 votes Thank Flag Link Wed Nov 2, 2011
Paula ,
If we had the answer we would share that with you. At best our guess is good as yours. it is like playing poker.
You can bluff but in the end there is only one winer.
What makes you a winer is you take your best shot .
The rest is
Blah Blah Blah and Blah offer rejected than what? Arguing with yourself leaves you with one positive conclusion one of you is right.
For others to suggest what to do is like seeing a marriage counselor.
Please.... I have more confidence in how you do in a multiple offer situation.
You either step up or step down.
As for any good realtors we need to know when to shut up.
As a buyer's agents we don't call the shots you do. We just cheer you on and keep our fingers crossed.. Don't you love people in the end who can only say didn't I tell you so? Yeah two days later when the deal falls apart and the property sells for less than you offered. Bam there goes their reputation.
2 votes Thank Flag Link Wed Nov 2, 2011
Paula,
Multiple offers are tough. You should only offer what you are willing to pay for the property (AS-IS). Don't run up the price then change your mind or just leave your bid low and get beaten by a slightly higher bid. Sit down and figure out the max you would pay for the home and bid.
If you loose the bid, then be happy you didn't over pay.
Best of luck to you.
Brad
2 votes Thank Flag Link Wed Jun 1, 2011
There are ways of crafting an offer to make it appear more attractive to the bank, especially if you are a cash buyer. The idea is to GRAB their ATTENTION! Make your offer stand out. Make it an offer they cant refuse. Maybe you don't want to go above list price, but if you are paying cash, increase your Earnest Money to a sizeable amount. Put a quick close date in there and let them know you mean business. Keep the contract clean and know that will put you above offers where financing is invloved. You want to reduce the risk for the bank and minimize any chance that there could be delays in closing, further costing the bank more money. Simplify the offer for the bank!

Hope this helps!
Robin Geiler
Prudential Gary Greene
832-724-5998
Friendswood, TX 77546
1 vote Thank Flag Link Fri Nov 4, 2011
Paula,
If you are in a multiple offer situation you most likely will only get one opportunity to bid and be successful. As for price I always tell my clients to bid the maximum you would pay for the property. To determine that amount this of it this way; If someone else outbids you by $1 you could accept not getting the home. Secondly multiple offer situations are not always about the highest bidder. Sometimes terms and or contingencies win out over the highest price. If you really want this property I would bid my maximum with as few contingencies as possible. I would also offer to close very fast if possible. This gives you the advantage over most other bidders. I hope you are successful.

All the best,
Gary Geer

http://www.GaryGeer.com
1 vote Thank Flag Link Thu Nov 3, 2011
It really depends on the area and the current market where the home is but a good marker is 5-10% above asking price.
1 vote Thank Flag Link Thu Nov 3, 2011
Boy that's a tricky question. I would have a Realtor run a market analysis to see what homes are selling for in the area. If I was your Realtor and there were 2+ offers I would certainly tell you to offer the most you are willing to pay for it given your desire to own the homes. The banks price them quite competitively so you don't want to low ball. Good luck!
1 vote Thank Flag Link Wed Nov 2, 2011
First, make sure what you offer will work for you and that you have a good estimate by a contractor of what the cost of the work to be done will cost you. From there, I would ask your agent to give you an analysis of what the comparable homes in the area are selling for. The "ideal" price is a point in between the bank's list price and that "ideal" price. In many areas you can get information from your title company about what the bank note is and then have your agent work with the title company to "back into" what the cost to sell will be for the bank. They don't want to lose money so do your research and look at what the most attractive offer would be to help the bank become "whole."
1 vote Thank Flag Link Wed Nov 2, 2011
Cathy Bureau down there had a great anwer. Rember though, some of these agents (like myself when I was selling RE) love to take multiple offers and work that up into a bidding war. Though on a REO it is less likely that is what is happening.
What is happening is that the REO agents are taking so long getting back to buyers, that the buyers are making several offers on several homes creating false bidding wars. Don't get roped into paying too much for the house based on bidders who may all be making low ball offers. Keep in mind in most states, REO homes are "as is" and many times it is hard to tell they have dumped cement into the drains, because the drain fine when you just pour water into them. (I had a home buyer who bought a home just like that.)

Cathy's answer is great, how many days has it been on the market? This will let you know how hot all of these offers are.

Also how much is it worth? You buy REO's to save money, but many people assume that because it is an REO the home is a bargain. But REO's need repairs, and many times people over bid on these things.
1 vote Thank Flag Link Wed Nov 2, 2011
Your offer should be the highest you can afford to pay, close as early as possible, and don't ask the seller to pay for much in the transaction. There is no guarantee that the highest price will get the property. Alot has to do with the other terms in the contract that affect the seller. If you are paying cash that will also intice the seller, because they do not have to wait on your loan to be processed.

Good luck
1 vote Thank Flag Link Wed Nov 2, 2011
Offers are not selected or decided strictly on being the highest or best price.
I have found that the first consideration is the proof and availability of immediate funds and the earliest date to close . The simpler the deal without any recourse the better. Cash offers that can close immediately with no contingencies win most of the time.
1 vote Thank Flag Link Wed Nov 2, 2011
For starters you need to make sure that the asking price is even worth it. You need to make sure you look at the comparables in the neighborhood and take into account any work you are going to have to do on the home. If you really like it and you think it is a good price then you should put in your best offer to give you a better chance of getting the home. I have seen in many cases depending on how good the home is priced, buyers offering anywhere from $100-$5,000 over asking price. Again this can vary and sometimes people still offer below asking price because they think the home is still not worth the price the bank is asking. However, banks don't always just go by the highest bid, they take other things into account like closing date, investment or primary home, other contingencies in the contract, etc. You just have to ask yourself how bad do you really want this home.
1 vote Thank Flag Link Wed Nov 2, 2011
Hi Paula -
some things you may want to consider are the following, but there is no set formula and there is no information provided that would help with a suggestion. I highly recommend that you consult with your Realtor about the terms. Hopefully you are using a buyer's agent; it's silly not to do so. You won't get a better deal since the commission is already specified in the listing agreement, and you need somebody on your side that is knowledgeable.

1. Days on market
2. Competition - homes for sale
3. Competition - buyers
4. Property Condition
5. If it's an investment property then you need to consider your cash flow and ROI
6. If it's a residence then think about what will happen if you don't get the house; consider your other options. If it's a great house then offer what you are willing to pay.
7. It must appraise - most REOs are priced close to appraisal value so you may have to pay additional money, the difference between appraised amount and sales price

I hope that helps!

Cathy Bureau
Broker - Owner
Green Home Realty
1 vote Thank Flag Link Wed Jul 13, 2011
There is no definitive percentage. Multiple offers is usually an indication that the interest is high. Knowing the market is critical!!! In most cases the REO is priced to sell quickly. The price is usually below the market. If the market dictates it; go above the list price. Check recent sales; ascertain where it will appraise and make an offer predicated on the recent sales and your appraisal assumption.
1 vote Thank Flag Link Wed Jul 13, 2011
The best REO properties to purchase are HUD owned. They clear the title and actually have a
pretty thorough home inspection and share that with potential sellers on their website. They will
give pretty heavy discounts on homes that have been on the market more than 30 days.

For multiple offers on other REO properties, it's all about the "perceived value". Some banks
list a home that is clearly worth $75K for $50K and the investors and owner occupants come
out in full force with offers. If you are an investor, the owner occupant will beat you every time
since he takes the " investor's profit" out of it. My advice is NOT to use a "rule of thumb" since
all of the other buyers may do the same thing. If you really want the property, bid it up to YOUR
COMFORT LEVEL......if you don't get it, it was't meant to be. There will be another million or so
coming on the market soon! OUCH!
1 vote Thank Flag Link Mon Jul 11, 2011
Dear Paula:

INSIDE TIPS FOR GETTING YOUR OFFER ACCEPTED ON A BANK OWNED PROPERTY

1. Have your agent check the tax records for what bank has the Real Estate Owned (REO).

2. Check heck how long the property has been on the MLS. If it has been on the MLS less than 30 days, and there are multiple offers expect to pay over full price.

3. Based on that information, compute the % discount OR increase that the bank would most likely accept for the home, every bank is different and your REO agent should have a good idea how much discount OR increase you will have to bid to get the home.

4. Double check Multiple Listing Sheet (MLS) very carefully giving the listing agent EVERYTHING they need to submit your offer to the asset manager.

5. Your Loan Status Report (LSR) needs to be COMPLETELY FILLED OUT AND SIGNED by you before I submit your offer to the listing agent.

6. Your REO agent should always prepare your offer on Zip forms and ensure that NO lines are left blank. If there are any mistakes on the contract the asset manager may simply ignore your offer and choose another one that is more complete.

7. Your REO buyer's agent needs to SCAN AND E-MAIL the contract to the REO listing agent, DO NOT FAX YOUR OFFER TO THE REO LISTING AGENT, as faxes tend to be unreadable.

8. Your agent needs to follow up IMMEDIATELY after sending your offer to ensure the listing agent actually received it and has indeed submitted it to the asset manager.

9. If your offer is accepted by the asset manager, I encourage you to get the addendums from the bank back to me ASAP. The bank can and will accept another offer if you do not return the addendums back in a timely manner.

10. Open escrow THE SAME DAY the asset manager sends back the FULLY EXECUTED contract to your agent.

Hope this helps!

Terry S. Smith

Scottsdale Luxury Homes

45 Year Arizona Resident

DPR Realty LLC

8341 E. Gelding Drive

Scottsdale, AZ 85260

Direct (602) 763-1858

Office (480) 994-0800

ScottsdaleForeclosures@Gmail.com

Http://www.ScottsdaleLenderForeclosure.com

Have a Great Day!
1 vote Thank Flag Link Sun Jun 12, 2011
Hi Paula
If it is an REO & there are miltiple offers you should come in with a solid offer to be considered by the seller.
The REO company typlcally looks for a financially strong buyer with minimal contingencies on the contract meaning it should not be contingent on the sale or closing of your present home, It should not be contingent on inpsections, although you are entitled to do them, it should state that you are buying it strictly as is. You should include a preapproval letter from a lender showing that you are qualified to buy it, and also include proof that you have sufficient funds to close: a copy of a recent bank statement helps. When selecting a price come in with your highest & best price in this situation which may need to be over asking price, with a strong initial deposit & short closing date & your offer should stand out over many of the other offers and stand a chance of getting your offer accepted..
1 vote Thank Flag Link Sun Jun 12, 2011
REO property is sold "as is" meaning that air conditioner that isn't working belongs to you, the plumbing that is leaking belongs to you, and without an inspection, you might be placing a bad bet. Most REOs are not in prime condition, so there is always some work, and some are just down right nasty.

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1 vote Thank Flag Link Fri Jun 10, 2011
Assuming you were inside the property, have an idea of project scope and are working with a buyer agent, NOT the listing agent as a dual agent, I recommend going in at your walk away number right away. Dont think of it as a percentage but pretend it isn't a multiple and start with the most you would pay for that house in that condition with comps supporting that price. Another way to think of it is how bad would you feel if someone else got it for $2,000 more than that walk away number? Non price matters too, make sure you have pre approval for category of house, not just a prequalification. Writing in "As Is" still allows you to do a formal home inspection and code violations might be negotiable after you win the bidding if it is a fannie or freddie REO.
1 vote Thank Flag Link Thu Jun 9, 2011
There is no pat answer to this question. Have your REALTOR run comparables for the property that you wish to purchase. Then base your offer on the comparables and the condition of the property. If you get caught up in the fact that there are multiple offers on the property, you will probably bid too high and regret it.
1 vote Thank Flag Link Wed Jun 8, 2011
It all depends if its listed below market value or not. I would always go with an odd number vs an even number to avoid putting in the same offer as another buyer. So for instance, if its listed at 250,000 and its 30k below comps, I would go with 265,107 vs 265,000.

Offers can be bid up considerably if the home has value and is listed below market value. Asset managers/banks will do this to increase the number of bidders on a property, and even go to more than one round of highest and best. Remember the asset managers sell thousands of homes a year and can be very astute at pricing homes to get top dollar. Especially if the asset is in a desirable area.
1 vote Thank Flag Link Wed Jun 8, 2011
Great answers. I can add that the house will indeed need to appraise, sometimes even in a cash situation where the buyer wants to be assured of an appraised value. For the past 15 years, through fast and furious markets as well as more challenging ones, it has been my experience that the trading range for homes has always averaged between 2 and 5 percent of list price.

Good luck!
Web Reference: http://www.williamsnyder.me
1 vote Thank Flag Link Tue May 31, 2011
would hope you have comparable sales to the subject house and comparable asking prices. You should offer what the house is worth to you, but remember, you are buying an REO "as is" no inspection and no repairs. I never get into a bidding war when I don't know the condition of the plumbing, air conditioning, roof.


David Cooper! Las Vegas Bank Owned Foreclosure Investor
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1 vote Thank Flag Link Tue May 31, 2011
This question is from May 31, 2011. This is November 15, 2011. I do not understand why my fellow Realtors are still responding to this question. The question is moot, as the property is long gone.
0 votes Thank Flag Link Tue Nov 15, 2011
Paula
If you are not sure and in doubt but love the property offer a little more . If you are not sure call me . As a broker I cannot legally advice you but I can recognize a good deal without any hesitation and will buy it l for myself if you won't .Now there's an answer that you did not expect huh? Any realtor in his or her capacity as a professional who legally discloses his interest in any property can bid on a REO property if multiple offers are involved.There it goes and who gets the property in the end well your guess is as good as mine.
0 votes Thank Flag Link Sun Nov 13, 2011
As tempting as REO's may be - they are not always great buys. Adding more buyers to the pool can turn into a competition of buying - which is no way to buy a home. If you're working with a buyer's agent they should be able to pull comps and history for you on the home and the homes around it. If they are overpriced - you obviously would want to know that before you made an offer. See where the comps fall and then keep it mind what you need out of the property - meaning how much work it needs and how long you plan on holding it. From there you can decide if it is a right buy for you and what amount you should offer.
Web Reference: http://www.gocompass.net
0 votes Thank Flag Link Sat Nov 12, 2011
If you are acting as an agent for a buyer client who is an investor, you must know what the client expects from the flip, estimate how long the reno will take and the renovation costs. Let's say a house is 100,000 and he believes he needs to do 28K in work and is willing to carry for 3 months while work is being done, you must find out what fully renovated propertys that are comparable within a 1 mile radius are is going for. If the average is $180K minus carrying and fixing expenses and hopefully a commission : ) to flip quickly with an agent who is diligent enough to start marketing the property as soon as work begins. He then has a nut of approximately 40K which gives the investor a 40K return. If he is happy with this number, then offer the full amount. Usually the REO's which you can get for way under asking have a lot of damage and usually need a gut renovation. The numbers have to work for an investor. Now a buyer who is looking for a residence and feels he can put in the sweat equity should try ffor the full price and take a 203K rehab loan. More likely than not he will come out with positive equity after the work is done even if he paid a few $1000 extra . And that will make a happy homeowner.
0 votes Thank Flag Link Sat Nov 12, 2011
2.1 to 3.4% over asking price will get it every time. <kidding> OK seriously this is a question from May 2011 in the foreclosure capital of America.
0 votes Thank Flag Link Sat Nov 12, 2011
3-5% should be sufficient.
0 votes Thank Flag Link Fri Nov 11, 2011
If we have learned one thing from the past few years, it would be not to get caught up in the hype. You should offer what you feel you are willing to pay for the property in its current state. Because when the deal is done, what you will have is a property in the current state at the cost you were willing to pay.
0 votes Thank Flag Link Thu Nov 10, 2011
I have worked exclusively with REO properties for over 10 years and in my experience you need to offer at least the asking price, if not more, to be able to obtain an accepted offer on the property. This, of course, depends on how badly you want the property, but 9 times out of 10, this is what needs to be done.
0 votes Thank Flag Link Thu Nov 10, 2011
Unfortunately there is no magic number to tell you or that you can use. Every situation is different even within the same area. The best advise I can give you is to be working with a qualified agent that will go over in detail the comps in the area so you have a good understanding of the value of the home. If it's an investment property do your numbers so you know what you max is. If it's for you to live, use the comps to justify to you what you are willing to pay for the home. You as the home buyer makes the final decision on what your offer should be as a Realtor I give my clients all the necessary information for them and they make the decision. What you offer in a multiple counter really depends on many factors. How bad do you want the property, how you are financing the purchase, what the list price is compared to market value, number of offers submitted, time on market; Ect.
0 votes Thank Flag Link Thu Nov 10, 2011
It depends on your area. In East TN we are asking, what % under the asking price can we buy at. Recently bought a home for 26% of the tax value.
0 votes Thank Flag Link Wed Nov 9, 2011
If you want it , really want it. I "won" my place from a field of 12 hopfules by having an all cash payment and 12 % over the asking price. However, this was an very undervalued property. The out of state bank had no idea
0 votes Thank Flag Link Wed Nov 9, 2011
Just from listing and selling REO homes for the past 8.5 years. I can tell you that the banks look to accept and offer at 95% of the asking price. Unless, the property has been on the market for a long time. All you can do is present the offer...the bank will counter you if they don't like the offer.
0 votes Thank Flag Link Wed Nov 9, 2011
5% is best more than that and I would say keep looking for other properties
0 votes Thank Flag Link Wed Nov 9, 2011
What is the property really worth to you? Don't get caught up in the buying frenzy and find you really did not want to spend that much.
Web Reference: http://dialdebbiedial.com
0 votes Thank Flag Link Wed Nov 9, 2011
This is totally dependant on the volume of properties available. This is a total numbers game. I could tell you add 10% above the asking price, but my highest and best advice is for you to find a high transaction volume agent that has many many of these transactions under their belt. If you can find an agent that is also buying in the same area as you with the same goals as you, that is your agent and where the answer lies.
0 votes Thank Flag Link Wed Nov 9, 2011
A property is worth what a buyer is willing to pay!
0 votes Thank Flag Link Tue Nov 8, 2011
Bid at least 5% over asking and have your agent contact the REO agent to try and feel out what it will take to get it done.
Web Reference: http://denverloft.com
0 votes Thank Flag Link Tue Nov 8, 2011
Bid what you are willing to pay for the property meaning what is the home worth to you? You may only get one chance I wouldn't try to save a few hundred dollars and take a chance and loose the home.
0 votes Thank Flag Link Tue Nov 8, 2011
Deciding on what your top dollar is and sticking to it is a great start. There are many factors that go along with making an offer on an REO property. The biggest question is are you going to occupy the property or just use it for an investment and flip? when flipping an REO property the lowest dollar amount paid is always the best, But it you want this property and are wanting to live in it then it is worth more to you then an investor. The best decison is to instruct your Realtor with what you are wanting to do with the property and you both come to a number that suits you ( the Buyer) the best.
0 votes Thank Flag Link Mon Nov 7, 2011
It's not that simple. Price is only one factor. My cleint's have recently been winning REO's not with the lowest price, but with the best terms. Consider waiving the inspection or offering to close in a week. Asset managers really like those points.
0 votes Thank Flag Link Mon Nov 7, 2011
Winning a bidding war is not based on a flat percentage and the winning amount over the asking price varies with: 1) the number of offers in the seller's hand, 2) the market in which the property is located, and 3) how much below market value the asking price was set at the time of listing. Your agent needs to have a keen understanding of all these variables and the ability to communicate that insight to you so you can determine whether you have the ability and desire to participate in a bidding war.

For a better understanding of current market dynamics in the San Francisco Bay Area, give me a call at (510) 856-7720
0 votes Thank Flag Link Mon Nov 7, 2011
This depends on how good of deal we are getting! I find that the starting point for every investment is determining current value. Then subtracting acquisition costs, repair costs, holding costs. Once you have figured estimated profit potential then you can decide how much room you have to offer more. There is always a minimum profit expectation to make the deal worth doing! If you are above that number you may decide to give up some of the extra profit potential if you really like the deal! Area, amount of work to repair and fix, proximity to other rentals you own etc....

For more of my thoughts please ask!

Thank You
0 votes Thank Flag Link Mon Nov 7, 2011
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