BiggerPockets

Get a reduced price or a repair credit.

Normally re-negotiating after the inspections is a great idea but it depends on a lot of factors if you should. I represent REO properties right now and even though prices are falling the inventory is not the same as it was 1 year ago. Banks hate to re-negotiate after the inspections. In those cases I tell my clients if ythey are willing to walk away from the deal if they don't get at least some relief, then ask for the repair/credit. But if they would go ahead with the deal if the bank says no then don't ask. One of my bank clients cancelled a deal for the simple fact that the buyers asked for repairs and they were within their rights in the contract.

It also depends on how you offered to purchase the property. If you said you would buy it AS-IS then take it AS-IS. Unless again if the repairs are so much that you would walk away if the seller does not give a credit.

In a normal transaction ask for the credit. You have nothing to lose and everything to gain. But be resonable. The things you mentioned sounded resonable but some people take this to extremes and think that it is an opportunity to get the seller to buy you a new home. Even new homes are not perfect.

I hope that helps.

Sorry but I must disagree because I've done it. Even on an as-is property, you can renegotiate, and banks will adjust their prices. You probably won't get much adjustment by complaining about things that were obvious from a casual walk-through. But if the inspector finds something hidden, you can certainly bring it up. Maybe they will refuse, in which case you can walk away or you can pay the previous price. If the bank cancels the offer because you asked for a price adjustment (I've never seen one actually do a "repair credit"), then who cares. Next!

As stated before, Banks are hard to negotiate with when it comes to REO purchase post inspection. Also, some banks require 10% earnest money in cashier check for any cash buy. That could potentially put you in a substantial loss should you decide to opt out the deal. Here is an exit clause I always put in my contracts and you can modify it to your own needs:

"The Purchaser will hire a licensed home inspector to inspect the property within five business days of the acceptance of this agreement. Should the inspection concludes that the property possesses fundamental flaws which renders the property Inhabitable and /or the repair costs of those flaws would equal or accede the sale price of the property, the Purchaser then reserves the right to remove himself and all his obligations of this contract and the seller agrees to refund the earnest money to the Purchaser in full."

Originally posted by Jon Holdman

I was actually diagreeing with Curt. REOs are sold as-is, but the banks will still negotiate regarding repairs. I actually think a good strategy is to get a property under contract, then work the price based on condition or appraisal.

I could care less what banks hate. I hate they force me to use their terms, which slant the transaction so heavily in their favor. I hate that they force the use of their title company. I hate special warranty deeds. But you can get good deals this way. So if I have to use any leverage I can, I will.

Certainly you have to have the right contingencies in your contract, and you have to watch your dates. A bank is not going to say "that's ok, here's your EM" if you miss a deadline and want out.

Jon, everting you said is true, but it's all goes market by market. In the area of my investment where banks lower the asking price to a ridiculous number tot generate multiple offers, they don't tend to negotiate anything. You have to put it under contract and you have to put it with an acceptable number to them. Now, that doesn't mean you shouldn't try to negotiate, but the reality is that they most likely would say no, and turn to the next offer lined up.

Our market is quite competitive, and its very hard to get an accepted offer on a REO that works as a rental. Even flips are tough because we're seeing lots of people trying to buy cheap, driving up "wholesale" prices while retail prices haven't seen any upward movement. On the last deal I did (its in my blog), we initially bid something like $75K on a house with a $69K listing price. The deal went to someone else. But a few weeks later we had a call from the broker saying the deal had fallen through and would we like to make another bid. After looking at comps again, we big $77K, and got the deal. We had inspection and financing contingencies. Didn't hire an inspector, but did turn on the utilities and checked things out carefully. Didn't see anything too bad, though there was a damaged hose bib that caused water to gush into the basement. Might have freaked out the first buyer. The problem was the appraisal came in about $10K under what we expected. We ended up going back to the listing agent and saying "here's the form to get our earnest money back, and here's an amend/extend for $7K less, take your pick". The took the new offer. We did say we would remove all contingencies and we would close in one week. I'm sure they had other offers that were higher than our new offer, but I guess the bird in hand won out.

I take your point Jon, but appraising issue is a whole lot different then inspection. Lower appraising, means an issue of getting a loan. This thread is about Inspection and when you buy a REO for $12K-25K many don't even bother with inspection. The deal is cash and no one even bother to waste they money on appraising.

[please delete--I just realized someone else bumped a year old thread to post spam]