How low is too low for an offer?

Asked by Jon Olson, San Diego, CA Fri Oct 10, 2008

For some homes in the area that simply have been sitting on the market in foreclosure for over a year or more, how low is too low for an offer? What are bank's motivation to sell homes quickly these days? How much do you need to offer for a bank-owned home in order to make the sale worth the bank's time? Is it worth it to make an offer on a bank-owned home that is extremely low? If you pay in cash?

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Diane Conaway, Agent, Escondido, CA
Fri Oct 10, 2008
Hi Jon,

I remember you! Haven't bought yet I see. Have you made any offers in the last month or 2? These are complicated times and yours are complex questions. For your other question, there's not much of an advantage to you for a seller to quit claim the property to you. Lots of advantages for them though! You're not on the loan so the owner will be on the hook for the mortgage until you refi. If he has equity, why is he going to give it to you? As for this question, there are 2 levels of bank pricing - many have caught on to what I call "low to go". These are the ones selling for more than the asking price with multiple bids because the bank has priced them very, very low. They are great deals. Pricing option #2 defies logic. Some banks have so much inventory they lose sight of what they have and what it's worth. By all means, make a low offer. There's no formula for how low and it doesn't matter much about cash. It's all cash to the bank in the end. They just want an acceptable price and quick close. Good luck!

Diane Conaway, RE/MAX United, (760) 749-2888
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Diane Wheatl…, Agent, Upland, CA
Fri Oct 10, 2008
Well in a nutshell, an offer that is not accepted is too low. If the bank has already agreed on paper to sell a property at a certain price by listing it at why you consider a low price then of course you should make an offer on that property.

I just closed an REO this week that had been sitting on the market for months at a much higher price. Once the price was reduced to where it probably should have been to begin with several offers came in including my buyer's which was accepted. Because I was told by the listing agent that other offers were in and coming in I told my buyer that if he truly wanted that home he needed to make an offer that would stand out among the others and not an offer that would be pushed to the wayside. He was able to purchase the home for a great value by realizing that the list price was just reduced to an extremely low list price already therefore did not make an offer much lower than the new list price. Our first offer was accepted.

Cash does not really mean much in reality because the seller will be receiving his price in the form of "cash" at the closing anyhow by means of financing or someone's willingness to pay from their savings. However, I must add that in today's economical times, banks are so stringent on their lending guidelines and requirements that cash is becoming more attractive to agents and sellers because they are relieved of the burden of not truly knowing if the bank or lending institution will change their qualifying processes mid way through a purchase escrow. With cash a seller knows there won't be any loan contingencies that could possibly tie things up and there's no worry about the appraisals not meeting the purchase prices.

Cash does rule over financing when it comes to successfully closing an escrow on time and with little hassle. Could be a valid reason one offer is chosen over another.

Good luck to you and I hope that I helped you. Have a great day and weekend!

Diane Wheatley, Broker
1 vote
Jay Becker S…, Agent, La Jolla, CA
Thu Jul 4, 2013
Bank's are not heavily Coastal San Diego, and even if you have a bank-owned property in escrow at an agreed upon price, prior to close they retain the right to have the property re-appraised and can ask you for more $. The bottom line is the banks do not want to leave much (if any) money on the table. Buyer beware.

Jay Becker - Senior Real Estate Consultant
Lux-RE-Homes -
Office: 858.222.4321x7 | Mobile: 858.335.4235
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Donna Davis, Agent, Escondido, CA
Sun Mar 8, 2009
I have personally not seen a foreclosure on the market for over a year. Most foreclosures in North San Diego County are priced accurately because they have been appraised and valued many times prior to coming on the market. They are usually brought on the market at a discount in order to secure a quick sale. This typically means that there are several offers on each foreclosure and that the highest and best offer takes the property. If you are continually getting beat out by other buyers, remember that doing the same thing over and over will probably get you the same results. You may want to look at investing in really distressed markets such as some of Riverside County or even out of state where there may be properties with really long marketing times. REO agents I know usually expect that the discounted (often by 20% or more) properties will sell within 95% of ask.
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Kari Shea, Agent, San Diego, CA
Sun Mar 8, 2009
Stats say that offers greater than 20% below list are considered Low Ball offers
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Dawn Lewis, Agent, San Diego, CA
Sun Mar 8, 2009

There are not many REO's on the market for over a year. These are most likely short sales. My suggestion is to write an offer and see and then the mystery would be over. Let me know what homes you want to write offers on.

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James Baxter, Agent, Encinitas, CA
Tue Feb 24, 2009
If your agent is not embarrassed to present the offer.... you are offering too much for the house.
Bottom line it really depends on where the house is and at what price range. A lot of factors go into way a house is still sitting on the market (ie bad marketing, cracked slab, pricing, title issues, ect.)
If it is a short that has been on the market for a long time, that is pretty normal.
If it is a REO you might want to bring your contractor with you.

Bargain hunting is not easy and it takes time and effort - you can not expect to submit 5 offers and get the deal you are looking for, it may be at 55 or 105 offers you will find the deal you are looking for.
Using cash or if you are pre quailed - they are about the same,
the banks want to know that you will be able to deliver and close the deal.
Where the difference comes in on cash is if it is a true cash offer with no contingency's
I have seen low ball cash offers with no contingency's beat out a pre approved loan offer.
The less red tape a seller/bank see's on your offer the more appealing it will be to them

If you find a home that you really like it is no time for low ball offers you need to sit down with your agent and really go over the comps and put your best foot forward.
Write the offer you are most comfortable with. If you do not get it then you know it was not meant to be.
If you do get it you know you got a good deal because you did your home work and you did what it takes to get the home.

Good Luck!
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Jeffrey Doug…, , San Diego, CA
Tue Feb 3, 2009
Here are 5 tips for writing a successful offer - please visit my blog at San Diego Lifestyle.

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Scott Godzyk, Agent, Manchester, NH
Fri Oct 17, 2008
it is always worth it to make an offer otherwise you will not know if they will take it or not. Most banks are not firesaling their properties, they can only take so much of a loss in each month or quarter. so timing is everything. your best bet is to take each property seperately, determine its current as is value and determine what its value is to you. make your offer based on that. some banks price the house to sell, others add 20% or even list it at retail and play the offer and counter offer game. Most important make sure your offer is in tact and better than any other, as terms are just as important as price. Include a pre approval letter or a letter of proof of funds with your offer, dont ask the bank to do anything, dont make any changes to teh bank addendums, dont put in any conmtingincies, put down a healty deposit and be ready to close in 30 days. good luck with your hunt for deals.
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Donna Davis, Agent, Escondido, CA
Fri Oct 17, 2008
Just because a home has had a for sale sign up for a year does not mean that it was really available for a year. The home may be a foreclosure that has title issues that needed to be resolved. The homeowner may have gone bankrupt making it necessay to go through a lengthy process for the lender to unravel prior to sale. The property may have had squatters who moved in and needed to be evicted. All kinds of issues that made the home impossible to sell for a while.

A newly listed foreclosure often has multiple offers in this market. If you low ball you will lose these properties. When the lender comes back with highest and best offer, you need to know 2 things: What is the market value of the property? What am I willing to pay? If you know it is a good deal, there are probably many other people who agree with you and who are making offers too. This is why it is market value, whether or not it is a foreclosure. The best deal, in any market, is getting a home that truly suits your needs and that you are happy living in at a price that you can afford.

Cash is good if you are over paying and the property will not appraise. The bank owned property asset manager does not care whether you pull the money out of your wallet or a lender's loan. They want the most money they can get regardless of the source of funds.

Best of luck with your purchase
Donna Davis, Realtor
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The Hagley G…, Agent, Pleasanton, CA
Sun Oct 12, 2008
I disagree with does indeed make a difference when submitting an offer....but so do other things, like length of time to close, length of time on the market, amount of inventory on the market and comparable sales. Your Realtor should be able to halp you evaluate these and come up with a solid offer. Good luck!
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Dallas Texas, Agent, Dallas, TN
Fri Oct 10, 2008
Cash makes no difference in purchasing a property. Have your buyers agent work on your behalf determine the best interest in submitting an offer.
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