Offering on a bank owned property from the MLS

11 Replies

I'm interested in a listed property. The price is substantially lower than the neighborhood but it needs significant work. It is a small house - under 800 sq feet. I'm planning on subtracting the costs from the list price and starting my offer there. Will they go for it? Some of it? None of it?

The property is represented by an agent who specializes in bank-owned deals. How much flexibility do they have? The property has been on the market for over 100 days

List Price 55999
Floor joists (basement/1st level)are improperly notched, sagging, and unlevel. Replacement of all damaged joists. New subfloor. New finished floor. 8750
Full gut and finish - 1st floor bathroom. All new fixtures. 5000
Replace improper basement ductwork 3225
A/C coil and condenser 3200
Stairway into basement - bring up to code 2250
Washer/Gas Dryer (stacked) 1800
Paint throughout 1500
Transfer taxes 1200
New carpet - stairs and both bedrooms 1000
Gas water heater 800
new fridge 800
Exterior paint 800
Demo/creation of fridge location 725
Replace wood rot along roof line and cap with metal 700
Roof coating 700
new gas stove 600
Trim repair, doors for both closets, door for 2nd bedroom 500
Window blinds throughout 300
Minor siding repair - rear 200
New screens 150
Total costs 34200
Offer ALL CASH 21799

@Max T. What is the ARV and for how long is it on the market? I doubt the bank will go for 39% of the asking price, more to it if the listing is fairly newer, plus this is a REO and they are known to hold on the price often.

You should base your offer on the ARV, not on the asking price.

The last offer we made on a REO they straight out rejected it at 21% off asking price, but accepted at 85% off. This was on a property that was on the market for a bit over 100 days and the price already dropped 30% of initial.

Updated almost 6 years ago

That 85% off was supposed to be 15% off

Originally posted by @Florian N. :

@Max T. What is the ARV and for how long is it on the market? I doubt the bank will go for 39% of the asking price, more to it if the listing is fairly newer, plus this is a REO and they are known to hold on the price often.

You should base your offer on the ARV, not on the asking price.

The last offer we made on a REO they straight out rejected it at 21% off asking price, but accepted at 85% off. This was on a property that was on the market for a bit over 100 days and the price already dropped 30% of initial.

 Correct on all accounts.

Most important, why do you care, before you offer, if your offer will be accepted?  Just analyze the property like @florian says, and base your offer on that.

Never base an offer on what you think you need to offer to get the property.  Base it only on what you need to offer in order for you to make money...now, not 10 years down the road.  If you make that offer, and it isn't accepted, oh well.  The best deals you make are the ones you don't make sometimes...as in the offers you get where you lose money.

Good points Joe Villeneuve and Florian N. . At a conservative ARV of 80k, and using the 70% rule my offer turns out to be right on. Hopefully they go for it!

My offer was rejected. Listing agent says an over 20k higher than mine was also rejected. It's just not worth it! That is why it has been sitting on the market so long.

@Max T. ,

Did you send with your offer documentation showing why the offer is so much reduced from their asking price? It might still be rejected. However, if the bank sees you know your stuff and you've done your homework, they may counter with a number you can live with - then again, they not. It always helps to stand out from the crowd, though.

@David Dachtera I did but I'm not sure my offer made it past the listing agent's desk. My agent showed me his emailed response, "Too low. Offer in the 40k range was just rejected." My thoughts are that the listing agent didn't bother sending my offer to the bank.

Originally posted by @Max T. :

@David Dachtera I did but I'm not sure my offer made it past the listing agent's desk. My agent showed me his emailed response, "Too low. Offer in the 40k range was just rejected." My thoughts are that the listing agent didn't bother sending my offer to the bank.

That would be a violation of the agent's license. You should call 'em on it. 

I have seen some REO's sit on the market for over a year. Some banks seem to think that the property is going to miraculously improve over time as it sits vacant. If only that were the case, our jobs would be so much easier...offer a higher value, and just wait for the house to turn into a gem!

If you can find out who the REO asset owner is, contact them, especially since we are getting close to the end of the year, see how motivated they are to move the property.

Try again after 180 days, but consider a slightly higher offer, if the numbers work.