Jeri,
The bank REO managers have a *LONG* list of properties to manage and/or get sold, and its all laid out cold & dispassionately on spreadsheets. There are no emotional negotiations in this area of the game, however they may still be some room for price improvement.

You need to decide what your "walkaway number" is (as you ahve done, at $900k.)

Sure, you can offer a bit lower if you want to 'test' the true price acceptability... *AND* if they come back higher than your $900k walkaway number, you can re-counter at your number.

ULTIMATELY, however, realize that they've already figured "at what minimum price will this home move within a maximum allowable number of days out on the market".... and if YOU aren't offering them THEIR walkaway number, they won't even waste an extra 3 seconds before they move to the next demand of their attention on the spreadsheet.

Good luck on the home!!!
Dave Donhoff
Strategic Equity & Leverage Planner

OK You are saying we dont have to play games. We can offer our best, 900, and they will take it if it fits their numbers and leave it if id does not. Good to know. :-)

DH is already waffling he wants this house. Sigh I *really* dont want to go higher than 900

I just had another thought

Would it appeal to the REO manager if we offered to take the house "As-Is"???

I know this is often not a wise move for most folks, but DH has the experience and knowledge to handle anything that might come up. So, could we use this to our benefit???

I was under the impression that all bank sales ARE "as is."

Dave, Triciae?

talley_sue_nyc I was under the impression that all bank sales ARE "as is."

My ex-SIL bought a bank sale that was anything but "as is". By the time she was done with them, they had put on a new roof and lowered the price thousands of dollars (she paid $50K on a $100K street!). She received one of the best deals I have ever seen. This was 10 years ago. I have no idea if a glut of REOs helps or hurts the negotiation process.

In your shoes I'd offer $900 and explicitly state that the offer does NOT have an expiration. Either the bank will eventually get a better offer or they will eventually accept yours.

Banks are not in the business of owning homes. They don't want to keep them. Offer your best offer and make all the other terms easy (they love a quick closing date). Don't throw in any road blocks. I too believe that all bank sales are as is. Bring a knowledgeable friend through with you and cross your fingers.
Jo

Jeri,
Banks *rarely* accept contingency offers stipulating repairs on REO properties. If there are significant repairs, they expect the buyer to discount the costs of those repairs into the price... they have.

USUALLY, however, when a property is REO, the bank has already had their repair contractors do a "once over" to make sure its in acceptable state of repair.

Best,
Dave Donhoff
Strategic Equity & Leverage Planner

Thanks for all the help.

I do know that there is termite damage mostly to the patio cover. I didnt ask the RE how she knew that but I was told it had to be repaired and the place has to be fumigated (or what ever they do for termites).

OK Be honest with me. Is 900 a "low ball offer"? Are we not being realistic here???

Jeri, nothing ventured, nothing gained. If you feel the house is worth $900K offer $900K. All that can happen is your offer is refused (or not responded to).

One thing that many people have much trouble with is continuing to think about what something_used_to be worth.

At one time that house_may_have been worth 1.2 but it obviously isn't now else it would have sold.

At one time the bank thought it was worth some percentage of 1.074 but no longer. Perhaps at .99 its priced to flush it from their books. Perhaps they are wrong ... again.

Playing with the percentages, they priced it at 12% above their LV (that number is hard to nail down sometimes for multiple reasons both higher or lower but lets use it).

Then they had to feed it but thats not your problem. They've reduced it 17.5% from origional ask and 8% from the alleged outstanding loan bal. which many folks will tell you is not possible to achive, yet there it is.

They will probably require "as is" stipulation but I'd still require in my bid, time and access for inspections.

Best of Luck!

We have no way of knowing whether your offer is a good one or not. It depends on how many other homes the bank has in that same locality. In 1990 one bank held 181 homes they had foreclosed on in one tract in Simi Valley, Ca. alone. Were they in a hurry to sell some of those? Were they more interested in selling the first 25 of those homes than they were the last 25? I think so. So it depends on whether the house you want is alone for sale on that block or amidst of forest of "for sale" signs.
Most REO bank homes are "as is" and you would be smart to have somebody knowledgeable inspect the house as some former owners do subtle but nasty damage. There is an article I just read in a corporate lawyers magazine about going after former owners for damage following foreclosure so I would guess its ocurring often.

OK, first...

Not every lender handles REOs the same. Countrywide with 90,000 REOs is going to be different from your local credit union that has 4-5 REOs in inventory.

Lenders do like contracts without any contingencies. However, they rarely receive any. Most have several including financing, inspection, & a few repairs.

Since each property is unique it's impossible for me to tell you what Countrywide is likely to do on this particular house that I've never seen. As a work-out officer though I can tell you that, yes, they have spreadsheets. However, they are not written in stone like the Ten Commandments. REO listing prices are moving targets & every lender in the country is now very aware of that fact.

Any institution I've ever worked for gave me what's known as a "lending limit". In other words, I could approve or reject deals up to that limit. The experience of the loan officer & the individual instituion both play a role in determining what an officer's limits are.

Usually...portfolios are divided up so most loans within a particular lender's portfolio fall within their approved limits. Now always though. So, if a contingency offer or one less than asking price should come in on a property outside the lender's limit...he/she would have to take the offer to either their department head...or, the dreaded 'Committee'.

On each REO, the institution sets what's known as a 'Loan Loss Reserve' which is NOT THE SAME AS THE ASKING PRICE. If accepting your offer increases that amount...higher approval will be required...usually 'Committee' (ugh!).

It is this 'Loan Loss Reserve' number that drives the contract. You, unfortunately, have no way of knowing what that number is.

How are prices set??? Here's how...

The lender, by accounting standards & regulations, is SUPPOSED to have an appraisal that is LESS than 6 months old. That appraised amount becomes the listing amount. Now, again unfortunately, many lenders are using appraisals that exceed the 6 months. And, as we know, prices are falling in most areas across the country.

I come back to each lender handles this situation different. There really is NO one correct answer on how to negotiate on an REO. Here are some things that may make it easier:

1.) Find out the foreclosure date. The longer they've had it in inventory the better for you.
2.) What was the foreclosed mortgage amount?
3.) When was the mortgage signed...is it 2 years old or 17 years old?
4.) Is the property in an area that's experiencing significant price declines?
5.) What is the inventory level for the area?
6.) Are there a lot of other REOs nearby?

Then, you're on your own.

My recommendation would be to offer $885K & be ready to move to $900K. I would ask for a few repairs IF they are major.

Some lenders are outsourcing their REOs. This is a real wild card for a potential purchaser. There are many things that drive a vendor & they may, or may not, be compatible with those of the lender. That's about all I should say on this matter.

Bottom line is, yes, you can expect the lender to negotiate. But, it's that 'Loan Loss Reserve' that's going to determine whether they accept your offer, or not. Now, a lender is SUPPOSED to write-down a loan to the appraised price (which is also probably the list price)...but, there's a lot of REOs out there that are not written down appropriately. Neither I nor you know if the house you're interested in is one of them? :( This is the 'mark to market' issue you've been hearing on the evening news. It's very ugly out there right now...very ugly.

Good luck. I'll try to answer specific questions if I can.

/tricia

Wow

Thanks everyone! :-)

Im already feeling that "got to have it how much higher can we go" desire that fueled so many before me to buy more than they should have.

We would *love* to get this house but I keep telling myself that if we do not another one will come a long.

We will submit an offer for 885 and we have a pre-approval letter to go with it so well see where it takes us. :-)

Best of luck to you, jeri!

Please don't stretch yourself too thin. There are lots of "perfect" houses out there...

/tricia

Good luck!
Come back and let us know how it goes!

LOL! I just got back from submitting an offer on a bank owned home. We went full asking price BUT asked for 6% back in closing costs....I really want this house, too. We have had so many deals go wrong for one reason or another. I think we might live with my family forever if this one doesn't go through. I can't take the stress of it all!

Best of Luck to you guys!

Today is the 27th... what happened???