Foreclosure in San Diego>Question Details

Christelle, Home Buyer in San Diego, CA

Offer on a REO...advice please.

Asked by Christelle, San Diego, CA Wed Apr 23, 2008

am willing to pay more but since it is a REO, I have been told not to offer more than asking.

Here is the situation. Asking price is $439,900. The bank aquired the property at $455,000.

Is it in our best interest to:

1. Offer exactly what they are asking and ask for nothing else.

2. Offer $10,000 more BUT ask for $10,000 back in closing costs.

3. Any other suggestions?

For us, choice #2 would be best since it would put more cash in our pocket to cover replacing the human urine soiled carpet and graffitied walls :) However, if option 1 is best, we will do that... we WANT this home!

Help the community by answering this question:


For REO properties, just as any property, how much will it take to get the seller to say yes, and is that amount worth it to you?

If a competing buyer comes in with a better offer, the bank will move toward that buyer. In the prior posts, there were several good suggestions and points made, such as a review of the comps, and the local market.

How does the bank’s ask price compare to the market value? There are times when bank properties are priced 20% below market and multiple offers are submitted. In those instances, the buyer who paid over list may still have a great deal Be less concerned w/ ask price and focus on the market value. If you pay over list or under list does not matter.

The bank’s willingness to come down from their price will depend upon the market feedback they received to the offering. How long has it been on the market? Have they received other offers? What happened w/ those offers?

Learn as much as you can about the seller. Know the market well enough to feel comfortable at your walk away price.

A seller can contribute to your closing costs, but those may not reach the 10K threshold. There is no problem w/ asking for this contribution, but the net to the seller (the bank) must be acceptable.

The acquisition price does not provide any insight into the market value. It the property was highly leveraged at purchase, and the foreclosure process added default interest, legal fees, etc., this would all add to the final price. Consider an example of a property that had a 5% down, interest only loan w/ a purchase price in 2005. If the market went down, and costs accrued, the acquisition could easily rise 10’s of thousands quickly above market.

Study the comps, the market, and find out what you can about any other buyer interest.

Deborah Madey - Broker
Peninsula Realty Group
732 530-6350
1 vote Thank Flag Link Fri Apr 25, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
Hi Christelle,

My first suggestion would be to contact a realtor who is familiar with the area/neighborhood the property is located in. Your realtor should be familiar with pricing and provide you with a CMA (comparative market analysis) this should be your fist step and will give you an idea of value. Then I would look at how long the property has been on the market and the condition the property is in. If the property has been on the market over 120 days with no offers it would be a good bet that the bank is going to be more willing to negotiate on price and similarly I would look at the condition of the property and factor in the costs of bringing the property up to your "standards." This should give you a good starting point and again your realtor will be able to assist you in all this. I would not pay as much attention to what the bank paid for the prop but more to what the comps are, what it can or will appraise at and the overall condition. If you need the extra cash it is always fine to ask for closing costs but just remember it basically comes down to the final number, so factor that into the offer!
If you dont have a realtor and have further questions please feel free to contact me!
0 votes Thank Flag Link Tue Apr 29, 2008
Contact an expert in your area (realtor) who can help you price the property before you place an offer. The asking price is just an asking price, you have to also think what the property will appraise. If the property is in the market for a long time and the price has not been adjusted based on the market, it's likely it won't sell for that price. Justify your offer based on what the market value in your neigborhood, comps - pending and recently sold. Ask your agent to do a market analysis to determine if the property will appraise for that price. It your approval is suffecient for that price (askign price), it's best to offer with that price and work your adjustment when you get the appraisal. Counter the bank if you can. Best offer is consider best for the bank and they will sit down and work with your offer.

Charita King
0 votes Thank Flag Link Fri Apr 25, 2008
Brian Curry from Coldwell Banker in Scripps Ranch here. I may be able to help you out finding some more info about this property. give me a call at the office 858-621-5233.
0 votes Thank Flag Link Thu Apr 24, 2008
FIRST Find the value of the property. What the bank "paid" or bid at the foreclosure auction may have nothing to do with the property's actual value. Engage the services of an agent to get advice and at least a rough CMA to give you an idea of what the property would be worth. Without knowing how much the property is worth within reason, "adding or substracting" $10,000 from the asking price means nothing. A possible scenario is that the bank is aware they screwed up on loaning way over a property's worth, and some VP in the bank is concerned with his job, so he bids "what they are owed"...

SECOND, armed with solid information, meet with the decision maker at the bank. Discuss and negotiate based on your findings and not on "what the bank paid". The bank knows it's upside down on this deal and they are only trying to salvage as much money as possible. Timing is on your side, if you can offer a clean, no-contingencies, rapid-closure offer, they are much likely to take much less than the loan they had on the property.

The property could be worth 300K... so IT IS IMPERATIVE to find out and research well what it's really worth. I cannot overemphasize the importance to get local expertise to assist you.
0 votes Thank Flag Link Thu Apr 24, 2008
Your real estate should be advising you what is best to do. They should be showing you the comparable sales and helping you discover what the value of the home is base upon its condition.

What the bank paid for the home has nothing to do what you should offer.

If it is priced under the current market even for its condition, it will sell at full price or more in this market. If it is not priced right, then you can offer what you and your real estate feel is good. You can also ask for the $10,000 credit for closing costs.

The best thing is to write a reasonable offer and start the negotiations with the bank. They will counter you and you can decide what you want to do with the counter.

If you don't have a realtor representing you then, that would be the first step. I would like to apply for the job.
0 votes Thank Flag Link Thu Apr 24, 2008
These professionals below have all answered and given great advise about making your offer. I however, would like to address 2. Offer $10,000 more BUT ask for $10,000 back in closing costs.

You should check with a California Real Estate Professional to see if offering more for a listing in hopes of getting money back at the closing table to help with needed repairs is legal. Here in Georgia, it would never float! You can have the seller pay for all closing costs but if you specify an amount such as your $10K and the closing costs only come to a total of $3K, you will NOT get the surplus $7K money back at the closing table.
Also, if you plan on obtaining a loan for the purchase of this property, the Underwriter for that bank or mortgage company will kick that price out and not approve your loan. Unwriters are privy to the listing price of the home. To pay more for a home with expectations of receiving money back at the closing table could possibly be considered mortgage Fraud!
My suggestion would be if the home requires repairs, even minor repairs, you may want to piggy-back a home equity line of credit (HELOC) to make the needed repairs. Please consult a Real Estate Professional in your area and do NOT rely upon the advise of those not trained in Real Estate Law.
Good Luck to you!

Donna Smith, Broker
Donna Smith Properties, inc.
0 votes Thank Flag Link Thu Apr 24, 2008
if its 439,900 the sales agent is getting at least 20k so the bank only wants 319.900 and that not counting clossing etc etc... so you should offer at least 429k
0 votes Thank Flag Link Thu Apr 24, 2008
They say that real estate is local. Don't take this as advice, but see it as more info to add to your pool when making your descions.

We are currently in escrow on an very nice REO located in Lake Elsinore. Just north of Temecula and not terribly far from San Diego. The listing went up in the middle of January for $375,000. At the end of March it was reduced to $345,000. We are in escrow at $330,000 and they are paying $8K towards closing. The listing realtor *said* there were other offers, but we are suspiscious. Not that it matters at this point.

In **our** case our realtor was pushing us to go higher early in the negotiations. We stuck to our guns, and our own research, and it paid off in the end. I repeat, our case, all realtors are a different.

Good luck, hope this helps a bit in your negotiations.
0 votes Thank Flag Link Wed Apr 23, 2008
I would not worry about what the bank took the property back for. You need to make an offer based on the expected value of the home at closing and the value in the near future. Get a home inspector to list the defects/issues with the home (this can be done, now or during the inspection period). If major problems exist, get a contractor to estimate the cost for needed repairs (don't get the low workmanship/quality estimate). Check how long the property has been on the market (this could have a major impact on the price). Have your agent deliver the offer to the listing agent with any support information. You might ask for an interest rate buydown to help with financing, if the bank won't spring for repair help. Consider getting your own appraisal too. I can give you referrals to agents, lenders, appraisers, home inspectors, contractors etc.. See our site below for more buying information. You can use my company, Chicago Title, for title and or escrow, since we have an REO discount rate.
0 votes Thank Flag Link Wed Apr 23, 2008
Hi Christelle,
I do agree with many of the tips the other realtors have offered. I would definitely talk with your realtor re: the comparables on this property. Also determine if the listing agent has recently done a BPO (a Broker's Price Opinion - which the bank uses to price the property). With values falling so quickly, it is important that the bank has the best, most recent value; it is their only measuring stick. Remember, the banks are usually located far away from your property and don't know a darn thing about the neighborhood. If your realtor tracks statistics, he/she can forward the market trends( especially if your market is declining) to the listing agent to then pass on to the bank.
I have found that most REO agents want to get rid of the property, so any help your agent can give them, they will appreciate it. Also, have your agent find out if there are any other foreclosures or short sales in that neighborhood. If there are, chances are good that values willl get pushed down even further. The listing agent will want to pass that information on to the bank.

Good luck - and don't forget to get a home inspection so you know what you're getting into!
0 votes Thank Flag Link Wed Apr 23, 2008
How long has it been on the market? Are there any offers on the property? Have you run the comps on this house? What is the price track record, ie..has there been price drops? Is there bank addendums that have to be submitted with the offer (some banks won't accept an offer without signed addendums), if so-have you and your realtor read them?
If you have not written an offer yet make sure you get these questions answered.
If you really want this house, you should communicate with your realtor. He/she will be able to help you.

If there are no offers, and the house has been on the market for over 30 have the power. Why spend more than you have to? The longer an REO has been on the market, the more leverage you have. with your realtor...and make sure the offer you submit whatever the dollar amount, that it is clean and that your offer reflects that you are a strong buyer. I have beat out other on REO's with multiple offers by presenting a clean offer...not asking for anything and agreeing to speedy 2 week close.

Good Luck to you!
Alison Bell
0 votes Thank Flag Link Wed Apr 23, 2008
Hello Christelle,

I would suggest having your agent find out if there are any other offers on the property. If you are not competing with other buyers you will have more leverage in negotiating a price. REO's are essentially like buying property from any seller, except that you will not get any disclosure as to the history of the property nor will any repairs completed to allow for transfer (sold "as is"). An offer that is 10% below current market value on REOs is not uncommon, especially if there are no other pending offers. Keep in mind that current market value is not so easily discernable in the market bacause of all the short sales and REO sales. The bank will typically counter you at the price that they are willing to accept. Offering below asking will provide peace of mind that you didn't leave $$ on the table by offering too high.

Just as an example, I just submitted an offer on an REO for a client. Asking price was $469,000. We offered $420,000. The bank countered at $440,000. Other identical properties are selling around $460,000.... but we got them to come down significantly below that! Bottom line, you don't know how the bank will respond.

I hope this helps!! Best of luck!
0 votes Thank Flag Link Wed Apr 23, 2008
Sorry I don't know why the first part of my question got cut ...
The last home that sold on that street was last month and was for $40,000 more than this home's asking price. Same development but slightly larger and remodeled.
0 votes Thank Flag Link Wed Apr 23, 2008
Do you know the market value of the house once is fixed, and for how much it'll be fixed.
It's important that you know the answer to find out if it's a good deal...
0 votes Thank Flag Link Wed Apr 23, 2008
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