Home : Blogs : Israel Barden : Israel's Big Bear Blog

REO Urban Legends

Bloody Mary

It seems like everybody has a story about a cousin or brother in law or long lost Uncle who offered half of the asking price on a foreclosure and got it. It has almost reached urban legend status in this market. I have bad news for people that believe this story. There are no giant alligators in the sewer. If you say Bloody Mary three times in front of a mirror, she will not appear. Even more terrifying, there are no bank owned properties in Big Bear that you can buy for half of the list price.

As a matter of fact, writing lowball offers is a sure way of losing out on a property you might really like. When an asset manager sees an offer that is over 10-15% low, they automatically put that offer into the crank file. Usually, they don't even bother countering an offer that low. When they do counter, it is usually for $100.00 off of the listing price. The only thing that happens when you write a really low offer is you lose all your credibility. Instead of coming off as a serious, viable buyer who is looking for a good deal, you come off as a shyster trying pick the bones of an unfortunate soul.

When a bank prices an REO property, they don't just pick a random number. They don't price it off of what the remaining loan is. They actually have Realtors give them price opinions on current market value. Then, they price the home at a fair market price. Usually, this a very good deal. Just because there is only $50,000 owed on $200,000 property, does not mean the bank will take $100,000 for it. They will sell you the property for a good, fair price. If you come in at $125,000, they will not even acknowledge you. If you come in at $150,000, they will counter at $199,000. If you come in at $175,000, they will probably give you a real counter to work with.

I am not saying that it is impossible to get a great deal. It is highly possible. You just have to reevaluate what a great deal is. If a home last sold for $350,000, and you buy it for $250,000, you are getting a great deal. You just need to be realistic. Plus, while you are dickering around with lowball offers, the odds are very good that someone who understands what is going on will come in with a respectable offer, and you will lose out. If you think it is a good deal, it is certain that somebody else will too. I feel the best strategy is too give the bank the opportunity to say " Yes."

Posted by Israel Barden on 11/13/2009 04:07 PM

Comments (26)

REO, Bank Owned Property in the ActiveRain Channel

big bear bank owned, big bear reos, reo information, reos, bank owned advice

This post has been included in California Information San Bernardino County, CA Information
Post is included in group: Silent Majority
Post is included in group: REALTOR LIFE
Post is included in group: Coldwell Banker Group
Post is included in group: Big Bear Real Estate Group
Post is included in group: Almost Anything Goes

26 Comments on REO Urban Legends

NOV

I have found that the best time to get lowball offers accepted is

(1) towards the end of a quarter or end of a year. If you can close by December 31 sometimes they will sell for a super discount off of list price.

(2) if a property has been listed for more than 90 days. I just sold a listed property last month. The house was a true mess - bad roof, black mold, really nasty. Listed at $49,900 sold for $27,500.

NOV

This is a really good post. So true and lots of good information. Thanks!

Israel:

There is a lot of misinformation out there about the kinds of deals that people can actually get on foreclosure properties. This is probably due to some late night infomercials. Banks are not going to give these homes away and buyers need to be guided on exactly what is reasonable to offer on a foreclosed property based on everything else that is available and everything that has sold in the area.

I had someone call me the other day and said a friend of theirs purchased a gorgeous new home in a gated community for 26K. I asked if the property had Chinese Drywall. "oh no...their house is perfect. Can you find me one just like it?"

Heck...I wish I could find ME one just like it....

Many REO properties in the Tucson area actually sell for much more then the asking price. I have put in many purchase offers for different buyers as much as 10 or 15% over asking and have lost out.

http://rlecinski.longrealty.com

520-834-4663

Israel, I am seeing this on Short Sales too. People ask 1.2 the already market value post. If sellers or banks could give them away they would stand on the side of the road and say, FREE.

If they like the house, make a good offer and move on.

Actually in Ann Arbor most of our foreclosueres have a bidding war and go way over asking price.

Yes, we have a 50c on the dollar story going around here also. Most REOs are priced so they have bidding wars, and the rest aren't let go for much below asking. There are exceptions, I suppose, but those are not homes you'd really want to call home.

So many Buyers think they will be successful in purchasing a "sweet" REO property at 25-50% off the list price. Think again! Most of these are priced-right from the "git-go". And, often sell for more than list to boot.

Great blog Israel! I just ran into a buyer in our Ahwatukee market (Phoenix, Arizona) the other day and they were shocked that we had multiple offers on it. They had heard from a coworker that they could throw any price they wanted at the bank and they might take it.

It was my REO listing and we had many, many offers on it. I think it depends on what part of the country/area you're shopping in. Our inventory is actually constrained here, so many times the old end of the quarter deals aren't happening. We actually have some backlogged demand in popular areas. Since the banks tend to price at market value, or below, the properties don't last!

In our market most of the REO homes are under priced and they receive multiple offers in the first few days. Occassionaly we will see a home stay on the market for 30 days in which case a lower offer would be appropriate. The only time I would encourage a low ball offer is when the home is in significant need of repair (like fire damage) as these homes are often mispriced.

Starting in February in our market, all the decent bank owned listings have had mini-autions as they receive multiple offers in two or three days, and alwways sell for premiums. I had a client bid on a HUD home that was listed at $45,000. It sold (not to him) at $60,500.

Glad you posted this. I'm reblogging. Too many people hear stories about others buying foreclosures that are in decent shape at a very low price and think they can do it too.

Great post with a lot of good pointers for potential buyers. I'm just wondering about your title. Not every buyer knows the term REO, they know it as foreclosure. Just a thought.....

Very good post & true in our market too - banks are just not giving homes away! Drives me nuts to hear one radio commercial with a list of sample deals a buyer can expect - you know the " Three year old home, 2400 square feet, 3 bedroom, brick siding on a half acre for $8000"... Maybe in some of the still quite depressed market areas - but totally NOT happening here! I just start doing an MLSA search with those criteria - hmmm 0 results - & keep working my way up in price until there is finally a listing to show the buyer who just doesn't believe there's no free lunch - or house.

So true. Those low ball buyers usually have to lose a few before they realize they have to have a good offer sometimes full price to be the winning bid. Great graphics you should repost on halloween.

Thank you for all the great responses. Some great points being made about good bank owned properties selling for over list price. The last five bank owned properties I sold, all had multiple offers and all went for over full price.

Urban legends . . . great point!! I think next time a client wants to offer, based on the legend, I'll pull out my OUIJA board, and ask the spirits what price to write it up at. Then I ask it a "Yes/No" question (will it be accepted?)

Good advice. Many many buyers think "foreclosure" or bank-owned = STEAL. Not true.

I am just glad we managed to avoid this mess this time around. Sometimes, it gets so deep that it takes wings to stay above it!

Israel, It's amazing the stories that circulate. The buying public is in for a rude awakening when they think they can get a home in good condition for pennies on the dollar.

In our market in the Twin Cities there is real demand for properties under $200K. I wrote 6 offers for one client until we got one accepted because everything was in multiples that drove the price $20-$30K over asking price, and over her limit.

On the other hand, there are times when I have sold the impossible dream for under $50,000. Last winter I got some specataluar deals for clients. They are few and far between right now because foreclosure inventory has shrunk. I recently wrote an offer on a nice rambler $18000 over asking. We were the winning offer out of ten.

Seems like there are three markets; foreclosures, short sales, and retail. Shaping buyer expectations saves us time, energy and grief in the long run. I tell my buyers that the media is always behind the curve of what is happening because the reports they get are at least a month or two old. Here we are in November and they are telling us what happened in September. We know already.

We work in the asset manager position for some smaller banks. I can tell you honestly that when an offer comes in at 50% of asking price, we don't even respond. Please don't waste my time because I don't have any extra time.

Many of our REOs are selling over listing price with multiple offers.

You offer good advice. The only time I could see making a very low offer is when the property has been on the market for a while and/or it is not in lendable condition, and the buyer can pay cash.

However, often if it's not in lendable condition, the bank will have already set the price with that as part of the consideration.

By the way, that picture is going to leave me with nightmares. There's a reason I don't watch horror movies : )

NOV

Oh, isnt' it frustrating that the myths take on more life than the truths, because we want to believe...so just click your heels and say three times...

NOV

Seems like everyone has someone that knows someone also. But I question the facts each time. Bunch of bunk usually.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?