Bidding strategy on REO

[Paul B.]

I'm seeing some attractively priced REO deals, and I'm thinking about dipping my toe in the water. But that sort of leads me to my question: Are these attractive prices set so low that they bring in a large number of buyers who will bid the property up? Or is that listing price the high-mark, meaning that an offer of 20-30% less has a chance to be accepted? I guess it depends on the property and the listing agent's strategy...

For example, I saw a house that was listed at $99,000. I knew this was too good to be true, and sure enough they had multiple offers, and the final price was north of $140,000, which was way too much for an investor to pay. Is this strategy the norm these days?

I have my eye on a quad that is listed at $139,000, but it's a marginal deal at that price. I'd feel better paying $100,000 -- $120,000 tops. So, what's the strategy here?

To put your second-best deal on the table at the onset, then when the "highest and best offers" call comes, put your true absolute highest price on the table? Or do you just put your best price on the table at the onset and stick to it? Seems like that might be a recipe for paying more than you need to.

(This is why I HATE buying listed property!)

Summary version of my question: Does REO property tend to sell for less than or more than its list price? (Gosh, that was shorter, wasn't it?)

[Jake Kucheck]

Paul,

Fielding the "highest and best" call and changing your strategy is a sucker's play. You have a price, stick to it.

What you will have far more success with is looking at REO that have been listed for quite some time. You will find there is far less competition on these, and there will be a far bigger discount to list price (because they are generally overpriced to begin with).

What this really means is that you should go over your target acquisition price when searching, but look for properties with a high DOM. Then, if you like one, start the negotiation. It's a lot easier to negotiate with an asset manager who has been wanting to dump the asset for months than one who is trying to respond to a plethora of offers, many of them likely cash.