Foreclosure: How did you get around the List Price?

Question

Mike H. · Answer

I'm not sure I'm following some of the advice that was given above. If its an REO, then you can't write up your offer as a short sale.  Those two things are completely different.

If its an REO, that means that the bank owns the house. You are negotiating with the bank.

If its a short sale, that means the homeowner still owns the home but they are trying to sell the house for less than they owe. The homeowner needs to approve the offer. And then the bank does too.

So I guess the one thing I'd ask @Wisner D. is why are you having to look up the contact info for the house? Is the house owned by the bank and just not listed on MLS yet?

Does the homeowner still own the house and is trying to do a short sale but not listing it on MLS?

I'm just trying to figure out how you are finding these houses and why you aren't going directly thru a realtor to put an offer in.

In terms of getting the discounts. The key is to find houses that need a lot of work and that have been sitting on the market for awhile.  If you're making the offer after a week or so of the house being on the market, you are not going to see much in terms of discounts.

Now if you can find some houses that have been sitting for a couple of months, then your odds of getting the seller to agree to a discount are much much better.

But be careful. There is typically a reason its been sitting.....

And don't be afraid to insult on your offers.

I am closing on a house next monday that I put in a low ball offer. It was the right number for where I'm getting my deals. But I don't typically see that kind of discounting other than hud deals.

The house was initially listed in August for 130k. It was an estate sale.   Probably worth about 150k. But it needed about 25k in rehab. Its a 3/2 with good space and some nice hardwood floors in the bedrooms. But both bathrooms needed to be gutted and I was going to frame out a fourth bedroom in the downstairs family room (kind of section off for that already and the extra bedroom helps the rent).

At 130k, it was basically over retail. Made no sense.

So I ddn't even bother to take a look. Two months later they dropped it to 120k. Now I want to go see it. I figure they're discounting it so they're not getting any reasonable offers and now they may be more likely to deal.

When I go take a look, I was a little surprised by the amount of rehab the thing needed. They're just not even close. I had my realtor put in an offer of 80k. I said thats where I need it to be. 3 weeks to close. No contingencies. No inspections.

No response. I assumed it was dead. Then my realtor comes back all excited. The countered at 90k. do you want to take it? NO.  80k is the best I can do. It just needs too much work.  So back with 80k she went.

Normally, I would add here though, that I try to leave a little wiggle room so I can come up some on a counter. But on this one, I just didn't want to do it. You'd be surprised how often that first counter comes back after dropping 1 or 2k, that if you counter back and come up $500 or 1k, they will counter back again and drop by 5 or 6k.  I don't know what it is, but I'm seeing it more and more now that I started countering their first counters with a slight increase. I used to just say my number was my number and that was it.  But coming back to them with a minor bump really seems to be getting results for me lately.

So now I do it on every one. :-)

But back to this one. I didn't hear back and assumed it was dead. My realtor, all the while, had been working the listing agent. She told them that it needed a lot of work. And they got the seller to come down to 80k. Offer accepted.

150k to 155k house ARV. Purchase 80k. Rehab estimate 24k. I'm all in at 104k on a house worth 150k so I'm just under my 70% ARV that my hard money lender needs.

Rent, as a 4bdrm, 2full bath, 2000 sq ft with a great yard and good size garage should be about 1450.  PITI on the 105k loan about 1k. Gross proft of 450/mo. And since my lender does 100% of the purchase plus rehab up to 70% ARV, I'll only be out of pocket about 5 or 6k on this deal. Sweet spot.

So, to me, thats one suggestion I have for getting the banks to come down. 1) Stick to offering on houses that have been sitting awhile.

2) If they come back with a counter, then give them a counter back but only about 1k higher. See where they come back at. Even if you're 10 to 15k off, you'd be surprised at how some of these banks work. I'm not sure why they do it that way. Maybe they see you're willing to negotiate and that you're also pretty locked in to your number so they figure it may be the right price? No idea. But its working surprisingly well for me these days.

I'm closing on 3 houses in the next 3 weeks and fourth by the end of next month. I'm not paying list price for anything right now.  Here are the numbers and the discounts I got:1) braidwood - auction. So that one doesn't really have a list price.2) lawn st, bradley - Initial list 53k. Dropped to 48k. I got it for 34k3) ediwn dr, bourbonnais - initial list 130, dropped to 120k, I got it for 80k4) anita dr, bourbonnais - initial list 150k, no drop but it hit 2 mos on market - I got it for 112k.

And just so you don't think that these all must need huge rehabs. The anita house only needs about 10k in rehab....... Flooring, paint and some bathroom updates. Its a 3 week rehab.....

Bill Florence · Answer

Circumventing the brokers (agents) to get to the lenders/sellers typically will not work because they contract with brokers to price and sell the properties. Maybe large companies, funds will buy properties in bulk from lenders but that is another topic. You could just work with a buyers agent and send listing agent offers. I think (not positive) seller agent should have an obligation to present the offer regardless of price. I have negotiated successfully doing that - offer low, wait, try again, wait - sometimes if the bank/lender/seller doesn't get a lot of activity and/or the property sits past their internal timelines (maybe 30,60,90+ days) they will come to the table. Best of luck.

Jeff B. · Answer

Apparently the REO is not willing to short sale the property - - save your time and effort,

write-up your offer as a short sale, "firm and final offer, offer expires on mm/dd/yy" and submit it - - you are then on there list of prospects.

Spend your time looking elsewhere and await there response on/before mm/dd/yy and there after you can make offers elsewhere.

Wayne Brooks · Answer

Well, of course you have to go thru the agent.  But you can offer whatever you want, just doesn't mean they will accept it.