Cases in point:
1) This property sold for $1.2M in 2006. The bank had foreclosed it for $791K. The list price was reduced to $749K after a couple of months. My buyer wrote an offer for $700K. The bank countered my buyer; and three others; at $730K. My client only wanted to raise his offer to $720K. So it was sold to another buyer at --- you guessed it --- $730K.
2) This property last sold at $570K 2 years ago, and was being offered as a short sale at $299K. We wrote a full price offer, but found ourselves in a multiple offer situation. It finally went to the highest offer of $375K.. The property was on the market for less than one week before receiving multiple offers.
I have other similar cases....but can't really see a pattern. All I can say is that my buyers had nearly only one chance to submit their best and highest offer....and found ourselves competing with other buyers doing the same.
Oh, wait....there is a pattern. Lenders will not accept ridiculously low offers because they know there is an offer that will come close to what they want!
The only time we don't present an offer is if we have specific instruction from the seller to not accept/present offer to them anymore, then that's what we will do.
The prices are already a bargain.
The longer the property is listed especially bank owned the easier it will be.
Call the City and report any violations whether it be Vector Control and/or
any Safety Hazards.
REO-Well in my neck of the woods which is the Inland Empire located in Southern Cal; REO's are
being listed below market value creating multiple offers situation.
REO-When you submit your package make sure you submit a complete package; probably most importantly Proof of Funds, pre-approval letter, and first page of credit report demonstrating FICO's.
I also try to use the lending institution that presently owns the REO.
Short Sales- Do your homework use comps within the last 30 days, if none use 60 etc. etc.
Follow up the ones that are presently in pending or backup status. Attend REO auctions.
Hope this helps...
Like everyone else said, there's no magic number. Each property is a case by case situation. How much was the bank owed when they foreclosed? How much inventory does the bank have on the books? What is the condition of the property? Does it require a cash buyer or rehab type loan? As a buyers agent you are in a difficult position. You owe it to your buyers to make the offers but at the same time you have a business to run. Its important that you educate your buyers on comparables sales, perhaps even put them in touch with a contractor so they can get an estimate of repairs and put the numbers on paper. Comps minus repairs, any below that number would be a good opportunity for a buyer who intends to live in the property. Investors are a different story. Hope this helps.
All cash offers are great, but they don't change the equation that much - the bank knows it will get "cash" whether you provide it yourself or get it through a lender. The one advantage to a cash offer is the ability to close very quickly. This might be the incentive a bank needs to act quickly, HOWEVER, this would be more true of an REO than a short sale. And the word "quickly" does not belong in the same sentence with the words, "short sale!"
Everyone has encountered buyers that think they can get the moon for a song. After all, their cousin got the deal of the century, and the cosmos owes them a good deal as well. Or maybe it was the guy 3 cubicles over 2 companies ago. Whoever it was, theyâ€™ve â€œheardâ€ that banks will accept any old ridiculous offer that comes along because they are so â€œdesperateâ€ to get properties â€œoff their books.â€
There is no set ratio that the banks use and no â€œsweet spotâ€ to determine pricing. And sometimes, the only way buyers figure things is out is to actually let them submit a silly offer and see what happens in â€œreal lifeâ€ and â€œreal time.â€ Listing agents know what is going on when the offers come in and respond accordingly.
You can, however, as you suggest, sweeten the offer. You do this by:
(1) Writing reasonable offers â€“ keep within 5-7% of the comps.
(2) Make sure you contact the listing agent BEFORE you write an offer and discuss all the details with them â€“ they will most likely be able to give you the guidelines you need to write a decent offer. DO NOT just write an offer without calling first and then fax it over. It is SO frustrating to listing agents when offers â€œmagicallyâ€ appear in the fax machine â€“ especially when there are already 4 other offers on the property and the agent writing the offer never bothered to check.
(3) Including a complete offer package that includes the following:
* Purchase agreement and buyerâ€™s advisory
* AS-IS Addendum (donâ€™t use a WPA)
* Statewide Disclosure
* Short Sale Addendum
* Broker Cooperating Commission Agreement with the Short Sale box checked
* PreApproval letter
* Photocopy of the deposit check
I also just wrote another post that may be helpful:
I think the question should be - how bad does the client want the house?
Does the client want to come in #5 on an REO with 7 offers?
The banks are taking a hit with the prices dropping but they will only go so low. They will do at least one BPO before they agree on a price. I've seen them get as many as three BPOs before they agree.
As you know, some properties are going for above list if they are priced right.