Can you still negotiate a deal on a REO property? I have excellent credit and willing to put 20% down

Asked by John, San Ramon, CA Fri Jun 13, 2008

Help the community by answering this question:

+ web reference
Web reference:


Elliott Faxs…, , Napa, CA
Sat Jun 14, 2008
Yes you can deal -- but your offer has to be relatively close to the market price. Banks get an estimate of the market value from real estate agents or from an appraisser. They will accept or counter an offer that is in the same ball park as the market value they have determined.

Banks set prices on REOs in two ways. One is market price and they expect offers around their listing price. A second strategy is setting a price well below the market price. This is done to encourage multiple offers and bidding to a higher price than list price. Often times they will get 8 to 10 bidders. The key is to know whether the list price is around market or substantially below.

Be ready for a slow process. Banks often take 4 to 8 weeks to respond, though of late they have gotten much better.

Be ready to act. In my market, Napa California, the REOs and short sale properties at the low end of our market have been moving quite well.

For more information call me at (707) 225-3703; Elliott Faxstein, Morgan Lane Real Estate, Napa, CA
0 votes
AJ Cohen, Agent, Danville, CA
Sat Jun 14, 2008
Hi again buyer,
Yes there are more coming, many short sales will be moving over to an REO, there are a ton of BPO (broker price opinions) out now on new San Ramon foreclosures. Did you see the new one (4 days) old on Quimby? This is exactly why I mentioned in my first email that you should work with an agent that can put you on a free service such as propertyminder that will alert you of upcoming homes and activity. You can reach me at or 925.819.2747 to set up an alert system if you would like.
AJ Cohen
0 votes
Steven Ornel…, Agent, Fremont, CA
Sat Jun 14, 2008
"Buyer" asking: "do you know if more SF homes will come in windemere in high 600k range? Any REO?"

I know a great way to find out! Contact me at 510.461.6011 or
0 votes
Buyer, Home Buyer, san ramonn
Sat Jun 14, 2008
do you know if more SF homes will come in windemere in high 600k range? Any REO?
0 votes
Steven Ornel…, Agent, Fremont, CA
Sat Jun 14, 2008
Hi John,

Yes, absolutely, REO "deals" can be had. Here's something else you should consider as well: Auctions. According to a recent Fitch Ratings Special Report on REOs, to get properties off their books and reduce long-term carrying costs six out of 10 loan servicers are resorting to auctioning off their REOs now, despite evidence they will likely see bigger losses than if the REOs are marketed and sold in a more traditional fashion. The report goes on to state, "the use of auctions will continue to increase as servicers are faced with growing REO inventories and increasing loss severities." Although losses are typically higher taking an up-front loss at an auction is preferable to taking the time to market a property, the report concluded. This is especially true in a market that still has not found a bottom. From a buyer perspective, Auctions provide a clean, fast transaction, which leads me to my next point ....

Your best bet is to start working with a licensed Realtor or Mortgage Banker for identifying a distressed property. Realtors will have access to the MLS listing the Short Sale and Foreclosures, while a Mortgage Banker (and some Realtors) will have access to the Bank's own databases of REOs. I’m both a Realtor and Mortgage Banker.

However, while you might identify a Rose out in the REO garden, you should be fully aware of where the thorns are located that the media rarely covers when they are hyping these opportunities, as follows:

-- The process of buying a Short Sale/Foreclosure/REO (SS/F/REO) home is much slower (60+ days), and greater-than-normal documentation can be required (depending on which of the three options we are talking about), as compared to buying from a private seller.

-- Most banks are notorious for NOT returning phone calls and obtaining status of the transaction is like shouting into a valley and not even hearing your own echo. In all fairness, Banks are inundated right now.

-- Only about 33%-50% of deals are actually accepted and close.

-- Water and/or electricity can be turned off, which makes it very difficult to confirm condition. There’s also not much effort to clean up or repair SS/F/REOs. They can be in pretty bad shape. Be careful of SS/F/REOs priced suspiciously low as the completed cost of the repairs may exceed the market value of the home after the repairs are done. Definitely consider finding a contractor you can trust and take her/him with you when you are viewing SS/F/REOs. True, some foreclosures are in better shape than others, and just when the excitement builds you realize you are going to be up against a 60-day bout of the Bank’s “silent treatment.” This is why many buyers “just say no” to SS/F/REOs, opting for a condition-verifiable, MLS listed home that is competitively priced.

If your stomach isn’t queasy and you want to move forward buying one of these properties I would suggest that you also ask your friends and family for references of at least three people that have actually run the SS/F/REOs gauntlet.

On the other hand, if you are thinking, “just say no” and would like to find a condition-verifiable home that is competitively priced, or want a partner to perform research prior to an auction please give me a ring.

One final note on the 20% down: Depending on your financial situation and the eventual deal that is pulled together, from a purely financial standpoint, it is better to keep as much of your money working for you in an interest-bearing account as you can. If you would like to read more about how to safely manage your home equity shoot me a short email and I'll send you the 4-page document that provides a "do-the-analysis" of why this is so.

Best Regards,

Steven A. Ornellas, GRI, ABR, e-PRO, CMPS, RE Masters, MBA
REALTOR® / Mortgage Banker-Broker / Certified Mortgage Planning Specialist

Steven Anthony Real Estate & Financial Services
Expect Excellence. Get What You Expect.â„¢
Cell: 510.461.6011
0 votes
Eric Bryant, , Long Beach, CA
Sat Jun 14, 2008
John, This is America! everythings negotiable :) But seriously, of course you can negotiate, that's where an experienced, savvy Real estate professional can help! Best of Luck! The Coach
Web Reference:
0 votes
AJ Cohen, Agent, Danville, CA
Fri Jun 13, 2008
Hi John,
You can definately negotiate on an REO, there are actually some steps that you can take to make it more pleasant for the bank and more economical for you. Some steps are...
1. You know that all REOs are virtually as-is but many banks are willing to give money up front towards any needed repairs (even if no repairs are evident) or closing costs, so always ask for it right up front. I have had offers where the agent representing the REO told me to come in with a fair offer and if we need extra for repairs or anything else make sure to put it in the original offer.
2. Ask for the bank to pay for a 1 year home warranty, especially since you are buying as-is
3. Check all of the comps and get your agent to feel out the other side and what kind of activity they are getting, a good agent can get more than enough info on the other side to feel out how much wiggle room you may have.
4. Get yourself on a property minder list that is set up for REOs. A good agent can set you up so both you and your agent are notified as soon as anything hits the market, any time of day so you can react.
5. Some of the best deals can be had on around day 30 or 45 of an overpriced REO. This is just about the time that the bank will be making a readjustment so if you can catch them with a lower offer before anyone else knows one is even coming.
6.Find yourself an agent who knows the area, the market, and has dealt with these types of deals.
If this has helped in any way and you have an agent already, best of luck. If you are trying to do this without the needed support I would be happy to help you out. You can reach me at or 925.819.2747.
Have a great evening,
AJ Cohen
Alain Pinel Realtors
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Jun 13, 2008
Hi John:

You can negotiate on a REO Property, but whether they will accept it is another story - just like anything else, depends on how it is priced, if there are other interest, how long the bank has it listed at that price, the condition of the house and how desperately the bank owner is.

0 votes
Search Advice
Ask our community a question
Home Buying in San Ramon Zip Codes

Email me when…

Learn more