On bank owned properties in Foreclosures, are the prices listed the only price the bank will accept?

Asked by James Peklenk, Arlington, VA Thu May 8, 2008

Will the bank negotiate like paying closing costs and realtors commission?

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Mike Rosen, Agent, Ashburn, VA
Sun Feb 22, 2009
Hey James -

The short and sweet answer is - the banks will do whatever is in their best interest. Some bank owned properties hit the market priced well under other comparable bank owned houses. Those properties tend to sell quickly and attract multiple contracts - sometimes selling for over list price. I've helped many clients purchase bank owned properties in similar situations - they usually don't get bid back up to market price so it's can be a great value.

Others hit the market at a higher price and may sit for a while. These properties will usually sell for a discount from list price. The bank will most likely negotiate if they don't have multiple offers on the table. Also keep in mind that the terms in your offer DO matter. You can write a really clean and streamlined offer (maybe all cash) and the bank will take that into consideration.

As for the realtor commissions - for every bank owned listing I've seen the bank pays the commissions. Now if the bank is only offering 2.5% to the buyer agent (as an example) and you have an agreement with your agent for 3% then you will have to make up the 0.5% difference.

Hope that helps. By the way you can search for bank owned properties on FranklyMLS .... try this one for Arlington bank owned ....

Let me know if you need help with an advanced search.
2 votes
AJ Heidmann, Agent, Arlington, VA
Tue Jun 10, 2008
Banks are in the business of making loans and opening accounts, not owning real estate and acting as property managers. So the list price is a starting point for negotiations, but there are several things to consider: 1) How long has it been listed 2) How much competion is there to the property 3) What is the condition of the property?

Generally the longer it has been on the market, the more competition there is, and the worse the condition, the more willing a bank is to negotiate. An agent in my office had a REO listing where the foreclosed owners took the cabinetry, granite counters, toilets, and cut out large sections of the wall to wall carpeting before fleeing into the night. After 90+ days with a place that showed liked it had been robbed, the lender got very flexible on price and ultimately sold the property.

Those listings that are in the multiple listing system for Northern Virginia include an offer of compensation to the agent that brings the buyer, so that will be paid for by the seller.

Beware the dreaded Bank Addendum! They vary from bank to bank and often will transfer fees that are normally paid for by the seller over to the buyer such as the; Grantors Tax ($1 per $1000) or the cost of HOA or condo documents, etc. Often, trying to get the addendum prior to making an offer is impossible. I've never heard of a property in this area where the bank was willing to cover your closing costs, so I wouldn't count on it.

One final thing, these properties are sold "As-Is", so you may want to have the home inspection done prior to making an offer, as you generally won't be able to change the price after the offer is ratified.
2 votes
Phil Young, , 23323
Thu May 15, 2008
First you have to know what's owed on the property. Usually not the list price. Takes some research to find out whats owed.

On average they will accept 80%-85% on the low side. If the property needs work you might try a "fix-up" loan program that is FHA backed. The minimum is $5K in repairs. That might replace some flooring and paint.

Web Reference:  http://www.teamfavorite.com
2 votes
, ,
Fri May 9, 2008

I'm a mortgage professional and not a realtor. But I have done loans for clients who have bought bank owned properties. In one particular case the bank accepted a lower offer and was willing to pay closing costs as well. Remember in real estate everything is negotiable. The seller which in this case is the bank 99% of the time pays the commision to the realtors unless its a FSBO by the bank. As mentioned below keep in mind if someone else also puts in an offer you could loose the house due to lower purchase price or even asking for closing costs. If you need assistance with your mortgage please feel free to contact me. Thank you and good luck
1 vote
Phil Young, , 23323
Sat Sep 27, 2008
I don't think James is here anymore :(
Web Reference:  http://www.teamfavorite.con
0 votes
Christina, , Virginia
Sat Sep 27, 2008
James, some of the answers given by others is not correct. Yes, most banks will negotiate; however, multiple offers are becoming more common on well-priced properties. Banks are concerned with their net price in the deal...so they will pay closing costs depending on the sales price you offer. Almost all of my bank deals involve the seller paying closing costs of some kind.

You cannot do any inspections prior to an accepted offer without the seller's approval. Every bank I've worked with allows a 7-10 day inspection period (as spelled out in their addendum) after contract ratification to have any and all inspections completed.

Banks will negotiate on commission, with the broker's approval. I've dropped my commission to make the deal work for my clients...not something I like to do, but if my clients have nothing else to offer, I think it's worth it in the end.... I always seem to get referrals from those clients. Find a good agent, have realistic expectations, and good luck :)
0 votes
Scott Godzyk, Agent, Manchester, NH
Fri Sep 26, 2008
on a bank owned home as with any home it is the asking price. The bid the bank will accept has more to do with one, is there any competing bids driving the price up. Your best bet is to get a buyer broker, you can negotiate it so it does not cost you anything extra as they will receive their fee from what the listing agent is offering a buyer broker in MLS. An experience buyer broker can assist you in purchasing foreclosures and assist you through each step of the buying process.

make sure you do your inspections before bidding, it is sold as is and the bank will not renegotiate after accepting an ofer. Have your financing in order, you will need to include a pre approval letter with your offer and be ready to close within 30 days of acceptance. make sure your deposit is at least 1% of teh selling price and in the form of a bank check. Good Luck with your purchase.
Web Reference:  http://www.ScottSellsNH.com
0 votes
Linda L. Pay…, , Alexandria, VA
Fri Sep 26, 2008
Negotiating on a bank owned property is much like negotiating on a property that is owned by a non-bank seller. In that the same considerations such as location, time on the market and condition come into play. Some say that in the DC suburbs, the only considerations are location, location, location but that is not always the case in this economy.
Banks do not want to be in the real estate business so they are sometimes more realistic than an ordinary seller. If closing costs fit into their bottom line and the property has been on the market for a while and/or in bad condition, yes they will consider closing costs.
They will always pay your realtor's commission as stated in the listing.
Get yourself a good buyer's agent who is familiar with foreclosures and short sales in the DC suburbs and go for it.
0 votes
Vangie Willi…, , Spotsylvania County, VA
Tue Jul 8, 2008
I am a listing agent who has closed several short sales and foreclosures in the last few months. All prices are negotiable, make an offer, but make a reasonable offer, don't think that your client is going to buy a house for 70% on the dollar. The listing agent has to watch out for their clients best interest as well. What you could do is do a mock BPO and see what figures you come up with and submit an offer based on those figures.

Regarding commissions, most bank will not pay over 5% for two agents and as low as 2% for dual agents (this is being challenged in Virginia, but that is an entirely different topic. And in some cases will come back with a ridiculous 4%, fight that one. Each of you deserve more than that for having to deal with the "long" short sale.

As far as closing cost (and I am going to throw in down payment assistance programs)-Closing Cost are usually paid by the bank and up until recently so was some down payment assistance. If your client needs down payment assistance. You are not going to get both and it will be a waste of time for everyone.

Hope this helps.

0 votes
Mary Ann Maz…, , Myrtle Beach, SC
Thu May 8, 2008
No, you can make offers but keep in mind others might also be making offers. In addition, sometimes it takes weeks until they tell you if they have accepted your offer. Usually the seller, in this case the bank pays the commissions to the agents involved. I have seen them pay some closing costs but I'm not sure if that's common.
0 votes
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