REO question? My mortgage broker told me that an REO is assessed at the current market level. So the list

Asked by Jerry, Massachusetts Tue Jul 29, 2008

price already includes a discount. She believes that offering the bank what they are asking and then have the bank cover the closing costs is the way to go. In my situation the approx. closing costs would be around 8k. So would offering the asking price and getting the closing covered be a reasonable expectation? Or would it be feasable to offer less than asking along with closing?

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7
Jonathan Bow…, Agent, Stoughton, MA
Thu Jul 31, 2008
Hi Jerry, don't rely on mortgage brokers for answers relating to real estate values. Every REO situation is different and you may be leaving money on the table with the advice that this person is giving you.
Web Reference:  http://www.bowenboston.com
1 vote
John Zhang, Agent, Quincy, MA
Thu Jul 31, 2008
Hi Jerry:

All answers here are valuable and should be well considered and digested. My input for you and other REO buyers is following: as REO is one of hot areas now to get better deals, best way to close on them, in my opinion, is to team up with local EXPERIENCED Buyer Agent, who is able to tell customers and clients with the nature of REO process and transactions, able to provide clients with REO listings or PRE-REO listings in timely manner, able to screen and analyze them of true current market value and After Repair Value of such a particular property under client's interests, able to reduce or limit potential risks and provide possible options and solutions, able to recommend insider knowledge and strategy for client to make right decisions, able to negotiate use realistic terms and better price on the deals, able to prepare clients with right funding source and EXIT Strategy, able to successful work with REO Agents to get job done, able to communicate and coordinate all activities and related parties efficiently in the process, best of all your buyer agent is alway there for you !
0 votes
David Rivas, , Sunnyvale, CA
Tue Jul 29, 2008
You need to find someone who know what is going on. Like a Realtor or someone who subscribes to a foreclosure site. Why? Because if you know what the bank took the home back for at the auction, its like playing cards with someone with see through cards. Example; The bank owns the property and they hire a Realtor to sell it for them for 750,000. But the home has been on the market for 100 days with no sale. If you knew the bank took the home back at auction at a price of 625,000 offer 5,000 over that amount . It will sit on the banks desk until someone offers more money. If no one offers more and another 45 days go by, guess who they will be calling to get that money back on their books. YOU! So doing your homework first can save you alot of money.
David Rivas
Good luck
0 votes
Melissa Manc…, Agent, Plainville, MA
Tue Jul 29, 2008
Hi Jerry,

My simple answer is; it depends. I have found REO’s priced under and over market value and everything in between. (*keeping in mind “market value” is the most probable price a buyer would be willing to pay in a current market) In this market, I have worked on sales where the properties have been priced low and there were up to 8 competing offers and it sold for almost $20k above list price. I have also worked on ones where there weren’t any competing offers on the table, and the bank wouldn’t negotiate despite the days on market climbing. The good news is that a buyer agent can do a market analysis for you to determine fair market value and you can use that as a guide through your negotiations. You should also know if there are any other offers on the table, keeping in mind that a good 2-5 days will pass before you will get a response from the bank, allowing other offers to continue to pile in during this time.

And do your closing costs contain money for repairs?..

Best of Luck
~M
Web Reference:  http://MelissaBMancini.com
0 votes
Eric Egeland, Agent, Buffalo Grove, IL
Tue Jul 29, 2008
Jerry,
The REO should be priced very close to the appropriate assessed level. They most likely received both BPO's (Broker Price Opinions) & appraisals by licensed appraisers. The banks do not want the inventory so they are generally priced to go....that being said, it is not out of the question that someone has priced the home incorrectly.

You can still offer less than ask price & if reasonable it could be accepted.

Unlike a homeowner though you will not get them to cover closing costs, make repairs, etc.

Best of luck,
Eric
Web Reference:  http://www.NorthShoreREO.com
0 votes
Mike Hughes…, Agent, Waltham, MA
Tue Jul 29, 2008
Jerry,
It's definately possible to offer less and pay less. Remember who your mortgage broker works for ... the banks. I'd recommend working with an agent on on any purchase ... especially a foreclosure/ REO. Most importantly, be prepared to play the hurry-up and wait game.
Good luck,
Mike
Web Reference:  http://www.mphughes.com
0 votes
Jeff and Gin…, Agent, Vero Beach, FL
Tue Jul 29, 2008
Your mortgage broker correct. The lender has at minimum received a BPO - Broker Price Opinion or hired an Appraiser to set a current market value price. It has also been our experience that most of the short sale and REO sales we know about have been close to or even slightly over the listing price. Remember that you may or may not hear back quickly about an REO listing, so there are possibly going to be several offers on the table.

Your Realtor should also offer expert advice about the value of the home. If it has been listed for a while, the value may have dropped. However, the mortgage lenders sometimes drop the price to attract bids and then they actually become competitive. The lender is looking for the best offer possible to diminish losses. Knowing what to offer is not an exact science, though, because there are so many variables and people involved, not just cold hard facts. Proceed carefully because there could be liens on the property. The title company should them all but still be sure to buy title insurance! Good luck to you.
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