I apologies for my newbie questionâ¦ is an REO asking price negotiable? Can I offer less than the asking price? What should I do to increase my chances when putting an offer for a home-path property?
The short answer is yes BUT you have to set the climate for an offer.
We looked at a property in a tough area. I discovered 2 other vacant props in the neighborhood had been broken into copper removed at this point the one we were looking at had not been broken into. Knowing the property value would go down when broken into we offered less and was accepted.
I researched one found a murder occurred out front 2 months earlier lower offer accepted. It takes a year for a neighborhood to get over a murder.
Any changes I documents with full photos I was often the first one to inform the broker of the change.
Consider asking the broker what property he needs to sell in the next 30 days. If he does that will come with a reduction.
Thank you Paul!
Yes, you can offer whatever you want. Getting it accepted is another matter.
@Doron Rice When dealing with HomePath (Fannie) or HomeSteps (Freddie) in our area they ALWAYS counter our offer with an offer that includes a 10% of the purchase price EMD. I am in Connectcut though, not New Jersey so I am not sure what the norm is there.
Do you have an agent? If not, maybe consider finding an investor friendly one in your area. They can be a big help when dealing with the non-conventional things that come up when purchasing REOs.
They gave you some good advice. Just because the property is an asset taken back by the bank doesn't always mean its a total junker. That said why would they accept less than the current asking price?
I was an real estate asset manager. However, in my situation I was mislead by my employer into thinking they had the capability to sell mortgage notes for Chase Manhattan Mortgage Corporation. After 2.5 years I found out after receiving several payoffs, and consummating several note sales/short sales that it was an assumed practice (by collection agency) after Chase bought out Advanta.
At any rate the story goes on more than one could imagine. However, as a real estate asset owned property and you wanting to pay less be sure to pinpoint the imperfections of their assets. Most people if they are going to buy a place or even rent want to pay to live somewhere nice.
So does it need windows, doors, siding, an enclosed carport to garage, drive way, updated kitchen or bath, basement fixed, roof fixed, Any repairs and costs if you ask me should be itemized. While some could consider this not their issue the bank will have more holding costs if they don't negotiate. So try to be precise. People can say what they want I've negotiated down to $5,000 for a non-performing assets.
@Michael Noto what is EMD?
You can offer whatever you wish, however the typically REO seller can only accept a certain amount off list price which varies from seller to seller. The shorter time it has been listed, the less they will take off list price. Homes with high days on market tend to have much more wiggle room but by no means pennies on the dollar. The ideal offer for REO is cash, no contingencies, no inspections, 2 week close.
Price can certainly be negotiable with REO properties, but it also depends on how competitive the market is.
Additional, to the extent that your offer has other superior 'non-price' factors such as 'all-cash' (no financing contingency), large earnest money deposit (EMD), waive inspection (if you are comfortable with that) and possibly a quick close, sometimes you can swing the tide in your favor. But, it is very situation specific.
On one of our REO purchases a while back, at the closing table we were informed by the listing agent that we were actually outbid to the tune of $4,000, but because we submitted an all-cash offer (and the other, higher offer had a financing contingency), the bank went with our offer - the bank was very motivated to close the transaction.
My first property was a REO on homepath this January. I bid 11K less, didn't hear anything for a week. My Realtor called they said offer was to low, I Bid 5K more they accepted right away. They normally do price drops every 30 days or so. Never hurts to try, I got lucky!
@Brian Hall EMD = earnest money deposit
Like everything in real estate it just depends. Sometimes the banks put the price out there ridiculously low looking for multiple offers. Other times they put the price at what they think is a fair price for the state of the property. Worst is when they set the price just below market as if the house was in good condition.
I have two offers out on houses that were priced well below where they should have been. After my initial offer on both I was asked for my final and best offer. I am under contract on a house that I got for 20% off the asking price. I've also bid on houses that the bank has stood firm on their asking price.
As always run your numbers and bid appropriately. If your numbers tell you that you need to pay no more than $10k below asking then that's your max bid. The banks don't take anything personally its a business for them too. Good luck.
I used financing from Amergy.
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