The Tricks and Traps of Buying bank owned REO properties - Part 5

Real Estate Agent with Sand Dollar Realty Group, Inc. BK627826

In previous articles in this series, I discussed how banks handle an upcoming R.E.O. property prior to the foreclosure auction, how banks determine prices for their R.E.O.'s, and what specific properties you should target for the greatest deals.  In the last 2 articles of this series, I will be discussing negotiation strategies for getting the best deals on bank owned REO's. 

The Tricks and Traps of Buying bank owned REO properties - Part 1

The Tricks and Traps of Buying bank owned REO properties - Part 2

The Tricks and Traps of Buying bank owned REO properties - Part 3

The Tricks and Traps of Buying bank owned REO properties - Part 4

  (Huge 5/3 Altamonte Springs pool home that we will be listing as an REO.)

If you reference back to Part 3 of this series, you can find information on the critical time frames during the life of an REO foreclosure listing.  The key thing to remember is that banks typically do not entertain lowball offers during the first 30 days, but they become increasingly more open to lowball offers as the listing ages.  This is especially the case as the listing reaches 90 days or longer on the market.  Once 90 days pass, the listing Realtor, the asset manager, and the bank itself often get very motivated to see the property sold.  This does not necessarily mean that they will take a lowball offer, but they will definitely become a lot more negotiable.  The longer the property stays listed, the more motivated the bank tends to get.

How can you tell when an REO foreclosure listing is going to expire?  The time frames are fairly simple.  For residential properties, typically 95% of the time the seller will initially list the property for 90 days and then extend the listing on an ongoing basis for additional 30 day periods.  If the bank does not get reasonable offers during the extension time, they will often let the listing expire and then re-list with another Realtor. 

Another key time frame to keep in mind when negotiating with banks is the monthly calendar.  When you approach the end of a fiscal-year's quarter (i.e. March 31, June 30, September 30, December 31) or the end of the calendar tax year, the bank will often be more motivated to sell their inventory.  If a bank can get a non-performing asset off its books for a quarterly or year-end report, they will sometimes make you a real deal.  Keep that in mind when putting a closing date in your offer.  Always try to close before the end of the month and definitely before the end of a quarter or calendar year.  I bought a nice 3/2/2 house at the end of 2007 that was listed in the M.L.S. at $150,000.  The bank accepted my $85,000 offer in part because I was willing to close on it before the end of the year. 

If you do get into negotiations on a bank owned property, never quit negotiating with them unless they reject your offer altogether.  Asset managers often have unpublished prices that they are willing to sell for regardless of what the property is actually listed at.  Last month I had a condo listed for $89,900.  The buyers originally offered $65,000 cash.  The sellers countered at $85,000.  The buyers were only willing to come up another $5,000 and told the seller $70,000.  The sellers countered again at $83,000.  The buyers came back with $70,500 as their final offer.  The sellers sat around on this counter-offer for about 3 days and then agreed to accept the $70,500.  If the buyers would have walked away early, they would have never known just how low the seller would have gone. 

Until next time ...


(Copyright © 2009. Sand Dollar Realty Group, Inc. All rights reserved.) Subscribe to my blog via RSS feed.

Rob Arnold - Your full service and investor friendly Realtor ® in Orlando and Central Florida.

ABR, CPL, CRB, CSP, GRI, Managing real estate broker, Notary Public

407-389-7318 / 1-877-389-7318 We Buy Houses Florida

We sell foreclosures, short sales, and bank owned REO properties throughout Central Florida. We sell and list Central Florida real estate and Orlando real estate. Free list of foreclosure and short sale houses available.

I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in most parts of Central & South Florida, the Space Coast, and the Treasure Coast including Orlando, Winter Park, Maitland, Ocoee, Winter Garden, Apopka, Altamonte Springs, Casselberry, Longwood, Winter Springs, Oviedo, Lake Mary, Sanford, Deltona, Debary, Deland, Mount Dora, Eustis, Clermont, Kissimmee, Winter Haven, Lakeland, Tampa, Sarasota, Bradenton, Miami-Dade, Fort Lauderdale, West Palm Beach, Port Saint Lucie, Melbourne, Daytona Beach, Ocala, Gainesville, Palatka, Jacksonville, Volusia, Brevard, and more.

Comments (5)

Dom Naidoo
Westside Properties - Venice, CA
Malibu to the Marina Real Estate


Awesome post. This is very helpful information to the consumer. Good job!

Jun 19, 2009 03:50 AM
Troy Jowers
Pogo Realty, LLC - New Orleans, LA
New Orleans Realtor

I'm just pluggin in to the series, but loving it so far. Thanks so much for sharing!

Jun 19, 2009 06:32 AM
Chris Oliver
Century 21, Preferred Properties - Reynolds Plantation, GA

This is a good professional asset and very informative for buyers.

Jun 21, 2009 02:34 PM
Joyce Jin

This posting is very useful to me

But I think in Texas, the situation is a little bit different.  Here in Texas Frisco area, 95% of forclosure properties have been sold in 3 - 4 days and there would be multiple offers in every single property.  So 90+ days period doesn't even apply.  I helped my client to bid 6 -7 properties and offered either full listing price or even $10,000 higher than the listing price, but never succeeded because there were always higher offers out there. 

I also hope you can write a tip on how to come up with the offer price in order for the bank to accept the offer.

Jun 25, 2009 07:54 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Joyce - Really all you can do in a hot market is submit your highest, best, and cleanest offer when the properties get listed.  In Central Florida from 2003-2005, our market was red hot as well but there were still a few REOs that didn't sell - typically they were the junkers that only an investor could buy for cash.  I realize it can be frustrating when the supply is low and the demand is high.  You can't control that - so focus on getting more listings so yours can sell with multiple offers.

Jun 26, 2009 02:51 AM