Discount for Cash Offer on REO Properties?

Question

I'm interested in buying a few REO condos/townhouses in Florida using 100% cash.

But I'm curious... how aggressive of a discount (if any) should I include in the cash offer for these REO properties?

The banks probably see laughable low ball offers 1000s of times a day, so I want to be in the ballpark, but not have them write me off completely.

Any help would be appreciated, especially from an investor/owner occupant who has successfully purchased 1 or more Florida REO properties.

Thanks in advance!

Patrick Snyder · Answer

My experience has been similar; the good properties that are priced well go QUICKLY.  If you find one that looks like a winner and it's been on the market for 3-4 months, I would say make a low offer and see what happens.  There's nothing wrong with getting countered, but having your first offer accepted can be costly.

Robert Brown III · Answer

Fantasm,

The best place for REO'S is the MLS.... Find an investor friendly Realtor and see if you can look together for REO's or if they can send you a list every week, and keep you up to date on price changes, and days on market.

J Scott · Answer

This is what I see in my area...

For properties that have been on the market for less than a month, expect that you'd probably have to come in at about 90% of list price.  After 3-6 months on the market (or month or two after a price drop), you may be able to get down to 80% of list.

This assumes, of course, that the property isn't a good deal, in which case it may go the first day above list price...

Account Closed · Answer

Short answer is very little.   A lot of other factors play in (mainly seller).

What areas are you looking at in florida?

Jake Kucheck · Answer

In my market, APRE has pretty good "market share" on the REO inventory that "needs work".  They have an auto-reject if your offer is less than 80% of list, so I have clients that shotgun at 80% of list just to see what comes.  Every now and again their offer is considered, and always met with a H&B.  At which point, I try to have the phone conversation I mentioned in the other REO thread that everyone here is a part of.

Ed Beck · Answer

"They are typically only being paid $75 to $100 to perform a BPO, such a small fee usually has the agent cutting so many corners, they rarely perform enough due diligence to factor in the condition of the subject property compared to the comparables and I am willing to bet that none of them actually drive or look up the comps to check conditions, it is just not worth their time. As such, banks often send out their listings at prices too high."

As a listing agent, I am not doing a BPO for $100, I'm doing it for the listing, and continued listings for many years to come.  So, I'm not cutting corners, because if my BPO comes in too high, it sits on the market, with no activity.  My client, the seller, the bank, wants to know why there hasn't been activity each month..."well, it's because I didn't take into consideration that there was no copper or boiler when I did my BPO, and I didn't research my comps"   That's not going to get me too many more listings from that client.  I send out accurate BPO's, with 'ballpark' repair figures (no, I'm not a contractor).  REO agents that do not send out accurate BPO's lose business.  To me.

Will Barnard · Answer

As for the BPO's, they may, or may not take condition into account. They are typically only being paid $75 to $100 to perform a BPO, such a small fee usually has the agent cutting so many corners, they rarely perform enough due diligence to factor in the condition of the subject property compared to the comparables and I am willing to bet that none of them actually drive or look up the comps to check conditions, it is just not worth their time. As such, banks often send out their listings at prices too high. This is one of many factors why the spreads are so thin and competition so fierce.

Ed Beck · Answer

Most banks are listing the property lower than the guy down the street to be competetive, so it is already somewhat 'discounted'.  Plus, condition is taken into account on the BPO and ultimately, the list price.  If the property doesn't recieve any offers in the first few weeks, it is usually reduced every couple of weeks until a contract is procured.  But too often investors 'wait it out' and miss it.  They don't consider low balls.  None of them do...'your offer has been submitted in writing and rejected'...I would say 20% below list is a good start for an offer, if you can end up somewhere in the middle.

Marian Smith · Answer

I am surprised at the answers here.  I assumed there were huge problems for banks owning condos in Florida.  Condo fees (holding costs) being one and financing for buyers being the other.  "Warrantable" condos, which I believe is the term for condos banks will loan money on because they are conforming loans, require owner occupant rates, vacancy rates, complex has to be completely built out, etc...  If the buyers have to pay cash, then the buyer pool shrinks considerably, I would assume. Maybe that is why the Fed is so insistant upon proping up Wall St.-- so investors can make money, cash out and buy Florida condos.

Chris G. · Answer

What are some of the REO websites you mention?

Discount for Cash Offer on REO Properties?

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