What should I offer on a bank owned house?I am looking at a house that is bank owned. They have it listed for 99.5K however i looked it up and it was forclosed for 55K. My dad thinks i should offer 65K but i think with legal fees, and commisions and such that is not going to fly. My gut says to ask for 75 to 80k with closing cost and expect they may... | |
The bank probably spent anywhere from $25-30k to foreclose on the property in terms of legal, marketing and house prep fees. So, they're probably going to want more than the $55k which was the loan amount at the time of default.
If you offer the $55k - banks are desperate right now and are trying to recapture R.E. capital with as little expense out-of-pocket as possible. However, they may also want to recoup a chunk of the out-of-pocket expense incurred to foreclose, especially if they feel the house will sell for more.
If you engage a realtor - this will only increase the out-of-pocket expense created by commissions and fees - don't engage a realtor if you want to maximize your potential profits.
As a Cert. General R.E. Appraiser - I can tell you this - home prices are heading south across most of the major metropolition areas (MMAs). Based on recent "inside" banking reports I've recently reviewed, 30 of the 90+ MMAs are now reporting real-property values as "severely declining" and at least 45 of the other MMAs as declining. Property values based on the trend analysis I've recently completed in my market areas in So. Cal. show that values will drop another 25% to 35% over the next 1-2 years. We haven't seen the bottom yet - we're still only at the tip of the iceburg.
That said, leverage the desperation. Do not become emotionally attached to your purchase. Treat this as a business venture and tender the lowest possible offer - there will be some takers - this I will guarantee...
Quick rebuttal: It is true - I am from CA and I also happen to be located in one of the hardest hit areas in So. Cal. - the Inland Empire. However, the banks are getting hit at the national level and I've taken note that liquidation decisions have not been based entirely on local markets. Chances are very likely that the bank - especially in a stable market - would be willing to accept less. If you offer the lowest possible price, you may be outbid by another interested party (should it come to multiple interested parties) but, in all likelihood - if the bank truly wants to sell the property, they'll counter if you are the only interested party. They may even offer to do the loan for you. If your gut says to offer more and you find this to be an acceptable price and you can a) afford the loan based on terms (based on the offered FIXED rate loan or based on the MAXIMUM adjustable rate ceiling) - and b) you plan on living in this home for an extended period of time (probably to the tune of 10+ years) then, by all means, purchase the property.
Otherwise - don't.
Frankly, some of the folks here are misleading you. Banks are NOT interested in giving away a property for substantially less than it is worth. I've seen lenders hold on to properties for over six months, waiting for the proper offer to appear.
I'm not sure where Dennis does his appraisal work, but in MY area, I've seen foreclosures selling for close to and even ABOVE the listing price. Much depends on the condition of the market you are in. Don't be misled into thinking that banks treat all such offers the same. They are guided by the condition of the market in which the particular property is located, and react accordingly.
I agree with jj, the worst thing a bank is going to say is no. If they do, you have a better understanding of what they are willing to entertain. If they counter then you go from there. In any case I hope you have good representation as banks are not in your corner in this transaction.
I would offer the $55,000 and most likely depending on how desperate they are the bank will either accept or give you a counter offer. You have nothing to lose to start out low its part of negotiating and make sure you have an experienced Realtor to negotiate for you. If you have your loan already approved with at least 10% down payment you will have better negotiating power.
I was once told by an xperienced R.E. Professional that if you don't insult the other party with your 1st offer, you have offered too much!! This theory has worked out well for me in many financial transactions. R.E. and non R.E.
