Philadelphia, PA · Member since 2014 · 129 posts · 29 votes
I recently got a property under contract for 140k and had 3 contractors quote me on how much it would be. Which was over 40k in rehab cost on average.The bank believed that the listing realtor undervalued the property and wanted the realtor that represented the property to show proof for the price listing being so low. I was prepared for battle and was actually going to submit my contractors quote substantiating the damage to go along with my bid but while in the process the bank used there own Brokers Price Opinion and as you may have guessed rejected my first offer and stated that they wanted as close to 180k as possible. The comps are in the 200's so the higher it gets my stomach turns over more and more at the potential skinny profit margin. In this instance should I still go ahead and finish up with the quotes my contractor or is it to late to try to play my style of negotiation? Shouldn't this melee have been left to the Realtor?
I e. Yes, we ALWAYS send in legit contractor estimates for Major repairs WITH the contract. It's harder to get them to come off a number after they have established it, without the repair estimates. No guarantee that they consider the repairs though. Justifying your price with repair estimates is on you, not the listing agent.
@Randall Kates It is nearly impossible to negotiate with banks. They are not like a typical seller who can be reasoned with. They use the BPO and formulas. The bad news is this method usually prices the property too high for an investor. The good news is, once in awhile, this method works in your favor and prices the property low.
In this case, it is too high and pretty useless to try to convince the bank to take less than they want. It may be a good exercise to continue with your estimates just so you start to get an idea of what it costs to rehab properties.
@Randall Kates I appreciate your determination. I don't know a lot about working with the banks (except giving them my money :/), but I think you should push forward and see where you come out with this. What is the worst that can happen... they deny your offer again? This is not professional advice... just mine.
Good Luck with whatever you decide.
@Larry Turowski I'm not sure how much experience you have had with the banks and offers to them, but I all the time am reading about how banks don't negotiate with investors. I personally would think that the banks would want to get what they could out of the properties, within reason of course (especially if the have had them for a while), and get them off their books. Don't the banks get penalized on repos? Again, I don't know much about banks and their held properties, just asking.
I e. Yes, we ALWAYS send in legit contractor estimates for Major repairs WITH the contract. It's harder to get them to come off a number after they have established it, without the repair estimates. No guarantee that they consider the repairs though. Justifying your price with repair estimates is on you, not the listing agent.
@Larry Turowski Appreciate the input some good is coming out of this as I get to sharpen my tools in the craft of real estate. @Samantha Lotti Great Advice and I'lll see this one through :) @Wayne Brooks Thanks for the clarification
@Larry Turowski I'm not sure how much experience you have had with the banks and offers to them, but I all the time am reading about how banks don't negotiate with investors. I personally would think that the banks would want to get what they could out of the properties, within reason of course (especially if the have had them for a while), and get them off their books. Don't the banks get penalized on repos? Again, I don't know much about banks and their held properties, just asking.
I've pursued lots of short sales and REO's. Yes, the bank will eventually wise up. Time on market will be factored into their formula, but that may take months and months--and in some cases even a year or more--before it affects the price they are willing to take.
I'll give you one anecdote. There was a house sitting on the market for $110K for a few months. It was a short sale. I came along--the only buyer at the table--and offered $90K. The bank then did their BPO, worked their formula, and countered for $160K! Yes, $50K or 45% higher than the listed price it wasn't selling at. Again, you are not dealing with a typical, rational seller when you are dealing with a bank. You are dealing with a formula. There is a human element in the BPO, but they often come in way too high.
On the other hand, I once bought a house from a bank for $25K, that was assessed at $110K (though worth about $90K after rehab), that need about $30K in work. That time the formula was wrong in my favor. It would have been a deal at $33K or more.
Very Cool that some work, but at the same time, crazy jump in price on your first scenario. So basically... you never know. :)
So I am curious about something else maybe you can help clear up. When I drive around and find empty houses or abandoned houses and some of them have the paperwork on the door that states that the property didn't sell at the courthouse, so the bank is now the owner.
There is no for sale sign on the property, so does that mean it is not listed with a Realtor? And if it's not listed with a Realtor, could a person pursue it from there... whether it be through a Realtor or straight to the bank. And, are these types of properties ever wholesaled to a fix n flip or buy n hold investor?
@Samantha Lotti First, a realtor is never necessary. But if the property isn't listed you'd have to find who at the bank is in charge of their REO property and talk with them. I've never done this. And generally I believe most banks have policies in place that may require the property be listed first. And they may have reasons for not listing it. Maybe they don't want to have more than X number of properties for sale at any given time. Maybe they can pretend they have an asset that is worth more on their books than it really is.