Foreclosure in Boston>Question Details

Gina, Home Buyer in

Can I offer lower for this foreclosed multifamily home since Im a strong candidate?

Asked by Gina, Wed Jul 11, 2012

It's asking price is around 240k. On the market for a total of 199 days. I will be the 4th person who will be doing a P&s. The last 3's finance did not go through. However, once it hits the market, it takes about 2-3 weeks to be in a P&s. This time when they listed it, it was $100 less. I am doing a conventional loan with 25% down. This is the Boston area. I was thinking they might be willing to go down 10k-15k? According to property assessment, it's worth around 310k but around the area the houses are worth 210k.

Help the community by answering this question:


James Furlong’s answer
The Boston market is strong right now. The inventory for investor property is low. This is a bank owned property and the banks (in general) are not willing to just dump their REO because they understand the negative impact such a rash action could have on the local real estate and including the other REO properties that they own in the area. The big question here is how the values of $310K and $210K have been determined - obviously both cannot be right and why would you only want to drop $10K to $15K if you believe the property is $100K overpriced?? As regards your offer strength, If you were buying "all cash" you might have a stronger position but 25% down is common place for investment properties. You might want to consider taking your mortgage with the lender who currently owns the property - it shouldn't make a difference but it often does.
0 votes Thank Flag Link Tue Jul 24, 2012
Ok, I'm an investor and here is the deal with tax assessment values. They mean nothing! From my standpoint, when I am holding a property, I want to protest the taxes and get the value as low as possible. When I am selling a property, I want the tax assessment as high as possible since the public thinks they mean something.

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
210-881-6760 (Fax)

'Serving all Your Real Estate Needs'
0 votes Thank Flag Link Wed Jul 11, 2012
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 “chasing the curve”) and Buyers will be asking the question; “What’s wrong with that house?” and “Why has it been on the Market so long?”

Other Sellers set the LISTING PRICE low, to attract multiple offers. (The correct strategy.) We are asked; “Aren’t you obligated to sell at this price if someone offers it?” 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.
0 votes Thank Flag Link Wed Jul 11, 2012
All of the answers here are very good. One thing to add, you may not be as desirable as you think given that you are still financing the property. Typically only cash offers are considered more desirable over any kind of financing and a seller may be willing to accept a lower number with a cash buyer.

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.
0 votes Thank Flag Link Wed Jul 11, 2012
Okay. First off the assessment does not have much to do with the price. The tax assessment was done a few years ago to calculate taxes and is a rough, out of date, stagnant valuation. Do not pay much attention to it.

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.
0 votes Thank Flag Link Wed Jul 11, 2012
Hi Gina - A strong financial candidate is worth money. The questions you want to ask are:
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.
0 votes Thank Flag Link Wed Jul 11, 2012
Tax assessment means nothing... view this article I wrote Tax Assessment vs. Fair Market Value:…

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.
0 votes Thank Flag Link Wed Jul 11, 2012
Firstly, do not go by the property assessment - they rarely are close to reality in Boston. Second, are you certain that the other deals fell apart because of financing? If Yes, was the problem with the appraised value?It is unlikely that all 3 buyers failed to get financing because of their credit situation. Lastly, you can offer as low as you want but it does not mean you will get the property. You do not say if you are working with an agent - the agent will give you advice on the market conditions and offers etc.
0 votes Thank Flag Link Wed Jul 11, 2012
The homes value doesn;t change based on your credit profile. It sounds like they dropped the price ($100 Less), although if it's $100 and not $100,000 I don't know that I would consider that a price drop.

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.
0 votes Thank Flag Link Wed Jul 11, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer