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.
As in any home sale, the â€œdealâ€ 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.
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.
In the North Scottsdale market, foreclosures are currently listed for about 50% less than what they were listed at just a few years ago. As others have stated, you probably shouldn't expect to get a lot off of the asking price since the bank has already decreased the list price significantly. That doesn't mean that you are not getting a good deal, it just means that in many cases the foreclosures are currently priced very competitively and will have multiple offers within the first couple of days. Sometimes if a foreclosure is listed low enough it will actually sell above list price. Then of course you have the banks that will not budge and will keep the overpriced foreclosures on the market for a very very long time.
Basically, if a foreclosure is priced well it will sell fast and there will be very little room for negotiation.
FORECLOSURE REALITY CHECKâ€¦. The only â€œsellers marketâ€ in america is the foreclosure market. Donâ€™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 â€œat marketâ€. "" from Perry Henderson
Perry, - STAY IN TEXAS. YOU DON'T KNOW A DARN THING ABOUT ARIZONA - EVERYTHING IS FOR SALE. ITS A BUYERS MARKET FOR REO's
IF I AM LYING THAN GO TO http://www.altisource.com - OCWEN's portal and see how list prices go down and people bid much less in real time.
Best of Luck To You,
Happy to Help in AZ!
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.
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.
"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:
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 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.
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.
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 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.
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.
Keller Williams Arizona Realty
Licensed REALTOR(R) State of Arizona
You can visit my website http://www.jameswehner.com for lists of REO properties in the Phoenix metro area.
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.
FORECLOSURE REALITY CHECKâ€¦. The only â€œsellers marketâ€ in america is the foreclosure market. Donâ€™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 â€œat marketâ€.
The REO manager has a short list of â€œcash/close in 2 day buyersâ€, they always get the first right to bid. Then they have to wait for the â€œpublic auctionâ€ 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 â€œfirst timersâ€ who continue to drive up the bid when they donâ€™t hear anything from the bank. Every time I see the â€œhow come I havenâ€™t heard from the bank about accepting my foreclosure bid after 30+ daysâ€ on trulia, I have to let out a chuckle because heâ€™s so right. For those newbies, this is real. They know that when you donâ€™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 thatâ€¦. 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, donâ€™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 â€œmy 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?â€ I always get responses, better prices and positive energy into the home.
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.