BiggerPockets

Last REO I purchased I offered, I think, 72k on an 89k listing with 90+ days on the market. My rational was something like 1) the listing agreement expired in a week or so, 2)original principal loaned was 76k in 2004 3) had been marked down one or twice and was due for a markdown soon so I might as well take the 8-10k markdown and then ask for more.

I represented myself but I am a new realtor (and I basically got my license because I couldn't find a realtor who would make a bid on a HUD for less than 5%.)

So.... REO World told the listing broker that they couln't go below 78k without "going to the bank management". Which they ended up doing.

Listing broker implied that the "thing to do" is to wait until a listing is reduced to within 10-12% of what I am willing to pay and then make an offer. But he was very nice and happy to unload the dog.

So it sounds like the asset managers have a certain window for which they are authorized to take less than list price. Either that or they always say they have to go to bank management like car salesmen do just to test your negotiating skills or resolve.

I have been looking at the MLS solds and I just don't see that many large gaps between list price and sold price.

I am under the impression that HUD home will go for 87% of list unless they have been sitting there for a couple of months because HUD would rather reduce the price and try to get more competition--so I guess for a HUD that has been on the extended list for 2 months you could offer list minus 10% or whatever the usual markdown is and then something above 87% of that number.

But what about the banks? Any magic numbers? Is BOA more desperate than Chase or viceversa? Also, my last offer was cash. What is that worth? And is a preapproved loan with Chase for say 75k accompanied with a copy of an untapped HELOC for 100k and a brokerage account statement with 100k in assets and an offer Not Contingent upon loan approval as good as a cash offer?

We always offer 85% of list price.

Thanks for the replies. I guess the problem is I don't want it that bad. I was thinking about offering 70-75% for a house in the 100k range. I had thought of the repair list, but the repairs don't add up to the discount I want :) The price is too high or it would have sold by now, 90 days+.

60% off is a steep discount, Ron. Was the first offer for 25k or did they just take the 30k offer? Foundation problems, termites, rot or just a lot of work?

With today's interest rates it just isn't very attractive for young buyers to go for the sweat equity when for less than $200 more a month they can buy a move-in ready place. And sweat equity costs cash AND sweat.

Never cared for what it is listed i've bought at same, above or mainly below as long as you know your market, costs and educated quess on profit you have to feel confortable evaluatting every possible deal.

I agree with Edgar. Every market is different. Often times properties are priced right, so your equation goes out the window. Sometimes the strategies are different, and the properties are priced below market to induce multiple offers or a quicker sale. Either way, you should examine the market to determine what you should offer and put less weight on the list price.

Yeh, it really depends on the market. How many comps, REO, what the mix of the neighborhood. I've gotten some REOs at 60% of list and flipped them for a nice little profit. Lately the listing have been closer to what they sell for though.

I agree market play a big roll but I also think a big factor is the particular bank. Usually the REO listing agent can give you some insight to how the bank in question will react to different offers.

There is one house in my area that was listed for 70k. Nobody bought it, and over time it went down to 60k. The house has mold and a really we basement. A different bank took possession, not sure why, but now it being listed at 90k. Some of these banks just do what they want to do, ignoring local agents and appraisers.

In my opinion if you know your market, you set the price where you need it to be to make money. I thought by law they had to submit your offer. That HUD % listed is similar to what I have seen.

every market is different and its all about supply and demand

Originally posted by Curt Davis

@James Martin - You guys are paying too much for your property if your offering 85% of list price. I would offer much less and then negotiate up if needed.

How can you tell that?

Too much of a generalization. If you don't know what list price he is talking about and what are the comps and the ARV how can you tell that 85% of list price is too much? :roll:

Depending on his area, his exit strategy and competition 85% could be right or not...

With the way we approach a potential property, we don't really care what the asking price is. We'll walkthrough, put together our conservative rehab budget, add in our fixed costs, look at the comps to come up with a conservative ARV, and then back-calculate what the maximum purchase price we could get the property for in order to meet our profit expectations.

Sometimes, our max purchase price will be above the listing price and sometimes it will be 50% of listing. We use DOM, seller motivation, etc. do determine if we make an offer if we will be asking significantly below listing.

We then offer somewhere less than our max purchase price and go from there. If we can't work with the seller, we move onto the next one.

Hi Marian,

To answer your question, you can offer anything you want. You make an offer for what you think the property is worth. The worst the bank can do is reject your offer.

I have only purchased 2 properties from banks and rest have been non-REO properties, so I don't have much experience when it comes to REOs. But the two I purchased from banks were settled at 51.11% and 80% of the asking price.