Looking for a Foreclsoure Bargain? Don’t Expect the Bank to Give it Away.
Almost everyone is looking for and expecting to get a great bargain these days. There’s no question it’s a buyer’s market, but when it comes to foreclosures, don’t expect the banks to give it away, any more than a private seller would. REO’s (i.e., foreclosed, bank-owned) properties do offer some of the best bargains around, but if you’re expecting banks to accept your lowball offer, you need to keep in mind a few things.
First, banks have already taken a substantial hit by the time they become the owner of the property they have foreclosed on. They’re not in a very charitable mood to lose any more than they have to. Second, before the property is listed with a real estate agent, the bank has obtained at least 2 or 3 BPO’s (Broker Price Opinions) and an appraisal. Consequently, the lender seller sets the asking price at current market value, if not slightly below. Depending on the property and the price point, these properties generally move fairly quickly. Homebuyers and investors who know the market will recognize these as good value and move quickly. If a buyer makes an unreasonably low offer, many banks won’t even respond or they’ll flat out reject the offer with no counteroffer.
You have to keep in mind, too, that banks are not really concerned about a buyer’s timeframe, even the one set out in the proposed contract. They move at their own speed. So, if they don’t accept your offer or respond by your acceptance deadline because it’s not a reasonable offer, it’s no skin off their nose. They may wait for another offer or two to come in. If there are multiple offers, they may ask all buyers to submit another offer and take their best shot.
This doesn’t mean you can’t make a killer deal on a foreclosure, however. Unlike the private seller, banks or their asset managers handling the sale, have no emotion wrapped up in the property or a pressing reason to sell, other than to get these assets off their books. Therefore, if the property doesn’t move within the first 30 days or so, many lenders will periodically reduce the price until they hit that “sweet spot” that will get it sold.
For these reasons, if you are basically an investor with time and patience, you should pay attention to days on the market and try to time any offer for 3-4 weeks after the property is first listed or the last price reduction. On the other hand, if you really fall in love with the REO home that is perfect for you and your family, then don’t wait or lowball. Make your best offer as close to the asking price as possible, if not slightly over, and hope another offer is not on the way. It will still be a good bargain as well as home sweet home.
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