As far as your situation, I would suspect that condition is the issue as opposed to all 3 running into financing issues. If condition is the issue and the bank has lost 3 deals, they may be willing to talk a deal. Since I'm speaking from the investment side, it's all about numbers and no emotion should ever go into a deal. It's very different if you are planning to occupy the home.....but as an investment, don't pay more than you can justify on your financial plan for the property and if they done budge, walk.
I bought a foreclosed duplex 3 years ago for around 13% below list price. It needed some major work and had been under contract previously. My agent thought I was low balling but taking emotion out of the picture, I offered what I thought and got it.
So, fair market value is what you shoot for based on condition, but if you are looking at rental rates and return on your investment, let the numbers speak to you.
By the way, I love multi-family investments if the numbers are right.....check out my blog on them:
Darrell D. Drouillard
Home Team of America
16719 Huebner Rd., Bldg 4
San Antonio, Texas 78248
'Serving all Your Real Estate Needs'
Understand that the LISTING PRICE has one primary objective, to attract attention: It is not intended to be set in stone, and in many cases it is not even a good guideline toward the SELLING PRICE.
Some Sellers believe that by setting the LISTING PRICE high, they can always come down, and people will make an offer anyway: WRONG! Buyers will just bypass the property and look at houses that are within their price range. And six months from now, the Seller will slowly start lowering the PRICE, (this is called â€œchasing the curveâ€) and Buyers will be asking the question; â€œWhatâ€™s wrong with that house?â€ and â€œWhy has it been on the Market so long?â€
Other Sellers set the LISTING PRICE low, to attract multiple offers. (The correct strategy.) We are asked; â€œArenâ€™t you obligated to sell at this price if someone offers it?â€ The answer is probably not; for that to happen, you would first have to have only one offer, and secondly, the offer would have be exactly the same, down to the smallest detail, (please discuss this with your Realtor).
Another thought; Buyer will search for potential properties by groups; for example, $400,000 to $450,000, and $250,000 to $300,000. If your house is priced at $460,000 or $310,000, the Buyers will never see it. (something else to discuss with your Agent.)
Different Banks have different philosophies about pricing their properties: You cannot draw any conclusions without a good analysis.
Have your Realtor do a CMA, (Comparative Market Analysis) to help you determine your Offering Price. It is the surest way to determine the Market Value of the property.
I have represented REO and short sales as well as provided pricing structures to institutions for REO liquidation, I do pricing for about 400 properties per year. Banks typically look at three different values when pricing their property.
1. Fair market value. This represents what the property will sell for in average marketing time for the subject's market with no title issues and sold to a buyer that is not in "arm's reach."
2. Distressed value. This represents what the property will sell for as an REO or short sale under average marketing time.
3. 30-day cash value. This represents the value that the property will sell to a cash buyer in under 30 days with no contingencies and possibly has a cloud or lien on the title.
Did you figure out why the financing did not go through? This is the important piece. If 3 other people took a run at it and failed try to find out why they failed. The property may be unwarrantable under a standard loan and you may have to get a portfolio loan if you want to pick up the property.
As far as offering less lots of things come into play. Who is the seller? If it has been foreclosed and it is a bank then the selling agent really just wants to get this deal done and may have a good idea of what the bank needs to make the deal happen. Try to find out what is owed on the property. This can be found in public records.
If there appears to be a good amount of interest in the property then offering lower will likely put you out of the running.
The other best way to value the property is to seriously compare other sold properties in the area. That will give you the best idea of what the property is actually worth.
The last thing to take into mind is the fact that banks can take weeks to get back to you with an answer to an offer. The agent will ultimately be your best guide to wether the bank is open to a lower offer.
1. Why did the previous deals fall through? If it's because of the buyers' personal financing, then you are surely in a great position to negotiate. It may be even worth more money in your pocket if you wave the mortgage contingency altogether. (But you must have an appraisal contingency).
2. Did the previous buyers get to the appraisal stage? If so, did the appraisal come in at asking? If not, the seller would be foolish to try and take the same offers, because the transactions will keep falling apart.
3. What's the home's value? Forget city assessment. You need a market analysis done by a buyer's broker. How much are you willing to pay for this house compared with recent activity and where you think the market is going?
I understand the last offers fell apart because of financing, but which part? Appraisal or the buyers? This is important information. But either way, you are in good situation to negotiate the price so it reflects value to you. And don't be disheartened if the listing broker is not thrilled with that.
A homes value is a homes value and does not change based upon your financing. With that said, I would tender any offer you thought reasonable.
Nothing beats a competent buyers agent providing you with a Comparative market Analysis to determine value.
The real question is why did the financing fall through on the property the previous 3 times. It is my experience that properties do not sell for 1 of 2 reasons. The price or the property condition. The property has been under agreement 3 times so I am guessing the price is not the issue.
If the property condition is the issue with financing, 25% down won't eliminate those issues.
You need to find out why the other loans did not go forward...If they all fell apart because the buyers did not qualify, I would love to get an introduction. There is real value in having a lender you trust pre-approve potential buyers.