Lowball offer on foreclosure?

Asked by Trina B., Wheaton, IL Mon Oct 8, 2007

I have my eye on a property in DuPage county. It's listed for $325,000. I did some research and found that the house is acutally a foreclosure owned by the bank. The bank foreclosed for 242,000. It's been sitting vacant for over a year and on the market for at least 6 months as far as I can tell. What are the chances that the bank will accept a low ball offer of say $255,000, which is what I'm preapproved for?

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Mike Kelly A…, Agent, Santa Rosa, CA
Mon Oct 8, 2007
You never can tell! I've seen bigger numbers here in the greatest state of California. If it's been on the market for 6 months then all the better for you. However, I can't belive someone walked from that amount of equity unless it was either WAY overpriced or had more loans "behind" the first--like a 2nd or 3rd. But they are now vapor. Give it a shot but a word of caution--your homebuying "eyes" are bigger than your pocketbook!! Once you start looking at properties almost $90,000 higher than you are pre-approved, it's going to be harder and harder to get you back to the reality of your pre-approval amount!! Your probably driving your Realtor nuts!
3 votes
Perry Hender…, Agent, Austin, TX
Mon Oct 8, 2007
I've said this over and over in previous posts.... The F-word is for the novice or average frustrated investor. What makes people think that putting an offer on a foreclosed house is going to get them the best price? You can count the number of TV ads promoting a system that teaches how to buy foreclosures.... That makes 50 other people dropping offers at the same time, at a price that was already "market".... That's just crazy talk. You want a deal, ok I can understand that but you are not going to find it with a foreclosure without one of two things 1. cash and personal connection with a REO manager or 2. a overpriced offer that you beat 15 other people for.

It's easier to knock on a door of a house that needs repair and say "my wife and I are looking for a home in this area and yours looks cute from the outside". Do you know anyone selling in this area? A hand written note works well too. My closure rate is almost 70% on the notes.... And you get the best deals with no competition.
5 votes
Bill Wahl, C…, , Lombard, IL
Mon Oct 8, 2007
You may want to go below your preapproval alittle. So go ahead and make your offer. If you don't you may regret it later. Remember they can only do three things: Accept, deny or counter.

Good Luck
Web Reference:  http://www.justcallwahl.com
4 votes
Jim Walker, Agent, Carmichael, CA
Tue Oct 9, 2007
The bank foreclosed for $242K ? That means it was probably worth no more than $270K before the bank took it. If it had been worth more the previous owner would have listed it, paid a commission, put some money in their pocket and sold it.

Now in the year of two the bank has owned it, it can only have lost value. Nationwide values have dropped. The bank let the landscaping die. So, best case scenario, it might be worth at tops $255K., but probably less than the $242K that they have on their books.

The way I see it you are willing to offer 100% or more of the value for the repo. So offer away if you want, but even if they accept your low ball offer you are not getting a screaming bargain.

Do banks ever overprice their listings? Yes. They do.
2 votes
The amount a house sells at sheriff auction is pretty meaningless. It simply means nobody else bid higher. It has absolutely no bearing on the home value of the amount of the loan that was defaulted on. In my county in Ohio - the starting bid is 2/3 of a drive by appraisal by a county appointed person who I don't even think is a licensed appraiser or agent. Bank will almost always bid up to what they are owed. What everyone should be telling this guy asking the question is how methodical most banks are in their negotiations and price drops. Typically - in the first weeks of listing or after every price drop, most banks won't negotiate much more than 3-5% of the current asking price.. Not until the next price drop rolls around, usually about every 4-6 weeks. I have sold for Countrywide, Bank of America, PennyMac, Roundpoint, Huntington, Fifth Third, Matt Marten, Ocwen, PNC... a bunch of asset management companies.. Pretty much across the board, it's the same.
Flag Thu Oct 1, 2015
Judi Bryan, Agent, Bloomingdale, IL
Sun Nov 11, 2007

Words of caution....all that glistens is not gold!!! Foreclosures CAN be a great opportunity, but did you ever see the movie "The Money Pit"????? It's not easy to give up your "home" to the bank...and many homeowners in that position have done severe damage to the property. In other words, even if you CAN purchase the home at an excessively low price, there may be tens of thou$ands in repairs necessary to make the home livable. Tread with caution and BE SURE you know what you're getting into BEFORE you sign on the dotted line. As someone else wisely said .... Be aware and Beware!!!

1 vote
Trina B., Home Buyer, Wheaton, IL
Wed Oct 10, 2007
Thanks for the responses. I will offer a little less than my pre-approval and see what happens.
1 vote
Patti Pereyra, , Chicago, IL
Mon Oct 8, 2007
Hi Trina,

Don't believe you are the first person who has thought about making a lowball offer on this foreclosure. The fact that it's been on the market for 6 months shows the bank isn't exactly willing to 'give it away'.

Also, be sure you know all you can about the house before getting into a contract because foreclosures are notoriously shrouded in mystery: no disclosures, 'as is', no survey, no history.

There's no harm in trying, just beware and be aware!

Good luck.
1 vote
Lizadiai, Home Buyer, Deer Park, NY
Tue Aug 18, 2015
It all depends on the market you are in. If the market is very competitive due to a lack of inventory, you probably wouldn't get anywhere with a low ball offer on a foreclosure at this moment, but who knows! http://ForeclosureIQ.com :)

First thing...you should definitely find an experienced Realtor to help you with the process. This could go one of two ways

1. They reject your offer totally.
2. They counter your offer.
0 votes
Diane Lynch, Agent, Wheaton, IL
Wed Feb 23, 2011
Foreclosures are not always a steal... The banks are in business to make money when they can. They want fair market value whenever possible. They reduce as necessary to move inventory.
0 votes
Josie Morris…, Agent, Lisle, IL
Fri Aug 20, 2010
With the massive amout of inventory that most banks are holding you would think that the banks should accept whatever any buyer is willing to pay for it. Unfortunately, that is not the case. Banks have had several evaluations on the property and they will only be willing to take what they think is a reasonable market value on the home. The listing agent has to give the bank updates often on pricing, it the home has been sitting for a while at a certain price with no offer the agent will recommend a new list price. This process goes on until the right price triggers an offer.
0 votes
Corey Schraw, Agent, Wheaton, IL
Thu Nov 5, 2009
There is a high likelyhood that you could by the home for what the bank foreclosed on it at. Banks don't want to own homes. Make a low but reasonable offer. I consider what the bank owes on the the property a reasonable offer. not a low offer.
0 votes
Voices Member, , San Jose, CA
Wed Nov 4, 2009
In most cases, you do not have to low ball the offering price. Most likely the listing agent, will do that for you. It looks that is common practice to low ball the listing price by brokers working with assets mangers.

This is a dirty trick to get the listing at low price, get multiple offers and then mess up the others agents' offers and push forward their own clients offer to get a dual commission representing both buyers and the bank.

I wonder why these bank executives get so much paid, after all they are acting very stupidly with the banks assets.

The bank should make it clear to the listing firms that they will get only selling side commission in case of dual agency.

This will benefit the banks in many ways.

1. No agent will low ball banks' assets.
2. Banks will get the best offers, not only the offers that listing agents want.
3. Banks will sell at highest possible market price not a discounted price.
4. This will force all parties in transaction to be more open and share information.

From buyers point of view, you have to be ready to pay little above asking price otherwise you will not get the property.

You can go to my website to find REO Homes in San Jose Area
0 votes
For Sale, Agent, Northlake, IL
Wed Jun 11, 2008
I think you are offering too much in this case. I would shoot for under $200,000.00. What is the worst that can happen? They will say no.

You will have to come up after that since they will most likely refuse the first time around and possibly counter. You can always offer more if you really want it.
0 votes
Sue Hedlund, Agent, WHEATON, IL
Thu Jun 5, 2008
It is a question of time, the bank may eventually come around. It is not worth trying to pay more, just shop for other properties if they are not willing to work with you. You can also go my website and click on Property Search and then click on Foreclosures to find additional opportunites. My website is shedlund.illinoisproperty.com
0 votes
Greg Zaccagni, , Illinois
Sat Mar 29, 2008
The way to buy real estate or stocks is on the downside, when most others don't want them. When the market turns around you will enjoy the greatest amount of appreciation. Even the experts in these industries will admit it is virtually impossible to know precisely the lowest point in any market. Therefore, any time during a down market is a great time to buy provided you intend to hold on till the market rebounds. Worst case I have read is 2010. It usually takes 2 years to recover closing & resale costs even in an appreciating market.

Greg Zaccagni
0 votes
Ekerry.com, , Wheaton-Glen Ellyn
Fri Mar 28, 2008
Just do it, you have nothing to lose.
0 votes
Dave Eisley, , Dupage County, IL
Mon Mar 10, 2008
I would advise to go for it, but be prepared to wait a while. The banks are aggressively accepting offers, but are so overloaded with a glut of foreclosures/short sales that your offer will wait in a long line.
0 votes
Jennifer, , Aurora, Naperville & Plainfield
Fri Mar 7, 2008
Trina-Did you ever get the home or are you still waiting on the bank? These properties can take forever for the bank to answer on so I was curious. Also if that home has not gone through & you are still considering buying I would suggest you look back at Ruths response. Sometime when dealing with the homeowners you will get a better price & response time. Don't rule out a great deal on a regularly listed home!
0 votes
Mike Kelly A…, Agent, Santa Rosa, CA
Sun Dec 23, 2007
I agree with Perry; better deals can be had with a motivated Seller in this marketplace. I work with a fiduciary who needs to close estates and he is very realistic about his pricing and about offers presented. The issue I have with the REO's usually revolves around the Realtors/Licensees representing them. They DONOT wish to kill the goose who laid the golden egg so they are very lax and indifferent about forcing the issue with their lenders.
I presented an offer where my client came in about 15% under list. The property has had NO offers, is a mixed use, non-conforming comercial office building, vacant, on a busy street. The bank didn't even counter. My client basically told me they can sit on it!! We're going to go back after Xmas and offer a tad more. The other agent is defending the bank's position (fiduciary I can understand) and her pricing. Sometimes it is NOT the banks/lenders who are at fault but the agents who, like a mother goose, are protecting their eggs!!
0 votes
Greg Zaccagni, , Illinois
Sun Dec 23, 2007
Let us know whether the bank accepts your offer...

Greg Z
0 votes
Don Tepper, Agent, Burke, VA
Sun Dec 23, 2007
Give it a shot. Banks' motivations change. Maybe it wasn't motivated before, and it is now. Maybe potential buyers have been listening to the naysayers (including some below) who wonder why a bank would accept a low offer. And you can be pretty much confident that, despite what's written below, there aren't 20-30 people competing for the same house. Otherwise, it'd be long sold.

Sounds like you've done your initial homework regarding preapproval and knowing what was owed to the bank. Now what you've got to do is find out what the home is worth on the open market. You can figure it's not worth $325,000, or it would have sold. You already know that. But what are the current comps? The point to this step of the exercise is to make sure you don't overpay. The bank should have some idea of what it's worth--it probably had a BPO (broker's price opinion) done on it. And they'll know, too, that it's not worth close to $325,000.

Problem is, some banks like to hold on to property if they think the market will recover fairly soon. That way, long term, they can cover their losses. On the other hand, sometimes they want to clean up some of their non-performing loans, so a non-motivated lender a month ago may be motivated now.

Bottom line: Determine the comps. Make an offer that does not exceed the comps (and probably should be comfortably under, since prices probably will continue to decline for awhile), and that is under your pre-approved limit.

Hope that helps.
0 votes
Team Forss,…, Agent, Temecula, CA
Sun Dec 23, 2007
Ok, I'm going to walk the middle line on this one....

1) What have got to loose by writing an offer? The worse that can happen is that the bank says no. Atleast you'll know

2) Banks DO deal!!! In Calfornia, after about 60 days, I assume across the nation, they lower their prices every 30 days until it sells or goes to auction. They don't want to carry any longer then they have to. I have low balled for several clients on bank owned and yes, if its not been easy but patience has got my clients a screaming deal many a time.

Be patient and stand your ground but first and foremost, make sure the REO agent gets your ability to close when and where the banks wants to, across to the bank. The agent just populates data on the portal so a full cover letter won't work, you have to really talk to the agent and show your financial stability.
0 votes
Perry Hender…, Agent, Austin, TX
Mon Nov 12, 2007
You are wasting time. No foreclosure wll ever take a lowball offer. Why would youy think it would get cheaper when you have 20-30 people competing for the same house. Face it guys, there is too much competition when buying a REO. It's better to go drop an offer on a house that's been on the market longer..
0 votes
Ruthless, , 60558
Mon Nov 12, 2007

Why THIS home?

It sounds like you did a title search in order to get the foreclosed amount? What was the 2nd for? Is the home listed in the MLS? Are you working with a Buyer's agent? Are you sure that the bank that is selling the property is the 1st mortgage holder? What was the total value of the two loans combined? Was it $325K or higher or lower. What do the comps say the house is worth?

I made a low ball offer last year on a REO that had been on the market for over 6 months and several price reductions. I included a letter along with comps justifying my offer (through our Realtor). The offer was countered with $500 toward closing costs and that was it. We bought a regular listed home instead at as big of a discount (from fixed up value) as the REO. Six months later the REO finally sold for the price we offered after more multiple price reductions.

Look at some homes closer to your price range. Make lowball offers but you might find one that has numerous price reductions and when you see it you will KNOW it is a bargain.

Good Luck,

Jim: In the Chicagoland area about every other suburb has gone up in value. If Wheaton is one of those going up, the deterioration of the home would probably cause the appreciation to be a wash, not a decrease in value.
0 votes
Jeannine Fol…, , 95634, 95633, 95614
Thu Nov 8, 2007
Without going into detail... It is on the chopping block. In our area if no action it is not a surprise to have
the home drop in price 100k.... if nothing has happened... Offer 225,000 as is.... Do it before the price drops.. Otherwise when the hatchet comes down, unless you have cash.. Say Bye..Bye.. Good Luck.
Call me with questions....
0 votes
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