Asking price on a home going into foreclosure was 70,000. I offered 45,000 because of needed repairs and it was refused. How do u judge the offer?

Asked by Duke, Saint Clair, MI Thu Sep 1, 2011

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Annette Law…, Agent, Palm Harbor, FL
Thu Sep 1, 2011
Who rejected your offer, the owner or the bank?
Let's assume the owner rejected, perhaps with the guidance of a trusted advisor.
It is very relevant to understand if the listed $70,000 was reflective of current condition. Area comparable sales for authentic properties may have recently sold for $140,000. This would suggest the listed price was reflective of the condition of the house.

Now you must consider if the $70,000 is the teaser price, obviously way below market value. The intent is to stimulate multiple offers from which the owner can choose or subsequently suggest highest and best offer. This is very important when considering the possibility of a bank counter.

Finally, your offer to purchase at $45,000 is only part of the story. Were there ANY contingencies, financing or other issues that could compromise the process. At $45,000 you need a 'slam-dunk' absolute cash offer, as is, where is, close tomorrow. Slamming the door to tight on a low-ball offer will not inspire further conversation with seller. Your trusted advisor can create for you the framework for a proper strategic position.

Then of course, as mentioned earlier, the bank has the final say. Should the bank counter your $45,000 with $60,000, $70,000 and yes it is possible the bank could counter at $100,000 if BPO supports value, and if you are unwilling to come up with the balance, everyone involved has wasted their time.

Yes, everyone is looking for a bargain, but the 'too good to be true' ones don't exist. Really good values are available for those who are decisive, competitive, know the facts and able to respond quickly.

How do I judge your offer? Sorry, don't have all the facts.
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Ron Thomas, Agent, Fresno, CA
Thu Sep 1, 2011
It sounds like the $70 took everything into consideration;
You chose to deduct more because you though otherwise.
You need to involve a Realtor to do a set of CMA's so that you know the VALUE of the property.
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Caroline Choi, Agent, Los Angeles, CA
Thu Sep 1, 2011
Yes, the bank will do BPOs or broker price opinions to determine listing price, based on the market value of the home, and also will take into consideration the condition. Have your agent pull comps for you to determine the market value, and from there you can deduct any costs you would incur for the repairs. If your $45K offer was too low based on that number, you'll understand why your offer was refused. Best of luck, Caroline
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Don Tepper, Agent, Burke, VA
Thu Sep 1, 2011
Whether it was a short sale or a foreclosure, the lender will have had a BPO done to determine the value of the property. The BPO might or might not be accurate, but that's what the lender will use in judging the reasonableness of the offer.

If the property was a short sale ("going into foreclosure"), then the offer first is presented to the owner. The owner might reject the offer because he/she feels that the lender will reject it. On the other hand, the seller--in a short sale--won't receive any revenues, so it really doesn't matter to him/her the amount of your offer (other than, as noted earlier, whether the bank will approve it).

How do you decide what's a reasonable offer?

Have your agent do a CMA (competitive market analysis) of the property. Determine what the property would be worth in decent, fixed-up condition. Then subtract from that number all needed repairs. That's the most you should pay. You probably should offer somewhat less.

Example: The property in fixed-up condition would be worth $90,000. It needs $25,000 in repairs. Pay no more than $65,000. Probably offer less.

Tip: In either a short sale or a foreclosure--particularly a foreclosure--submit as much detailed justification as possible to the lender--your comps, the bids you've received from contractors for the work that needs to be done, photos of the property (highlighting the areas in poorest condition), and so on.

Hope that helps.
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Anna M Brocco, Agent, Williston Park, NY
Thu Sep 1, 2011
The offer should have been based on comps--recently sold similar properties in the immediate area--was the data reviwed beforehand...
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