When thinking about what to offer on a foreclosure, you might be tempted to low ball. Sometimes this works out well. Sometimes this may not the be the best strategy for buying a home. Low balling is a strategy that works but sometimes a property could be lost to low balling. The longer the property has been on the market, the better chances of a deal going your way. These properties tend to be a drag on the bank and they would like to unload them as soon as possible. They are listed at a higher price first, with the intent of the bank getting back some of what they’re owed. After a while, the bank realizes that the market will not bear a sale at that price and will begin to reduce the price. There are pros and cons in the art of low balling. Obviously you get a home for an excellent price. The cons are that someone might see the same value as you and may swoop in with a higher offer. This happens all the time. Another negative is the negotiating time. Because of going back and forth on price, the chances increase that someone will come in and make an offer on the property (bidding war). You could be verbally under contract with a bank and have your deal fall apart because a better offer came in while you (lost time) were busy negotiating over a few thousand dollars. If it hasn’t executed a contract (signatures) with you, the bank will always take the better offer, leading to a possible bidding war. You may up in a multiple offer situation. The bank will request the highest and best offer at this point. You won’t know what the highest offer currently is (and the bank will not tell you for obvious reasons). Multiple offers happen if the property is fresh on the market, in a hot location and in good condition. My recommendation is to check market sales in the neighborhood for that particular property. Figure out the after repair value of the home. This can be done by viewing the property with your contractor. Once you have an idea of the market values and the after repair value, you will have a price in your mind that you can live with. Ignore everything else at this point and make that your final and best offer based on that number. If you lose the bid, at least you’ll know it wasn’t because you could have offered more. Use this strategy especially on really desirable homes that just came on the market. Make your best offer and assume it will be final. This way on the day the bank gets several offers, you’ve already outbid your competition because they’re thinking with a low ball mentality. A lot of times the bank will take the higher offer instead of asking for highest and final! Remember negotiating price on a foreclosure is like walking a fine line. Keep your offer reasonable based on the property (condition, the market, after repair value, etc) and you will end up winning the best properties!
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert
In 2017 it is now a seller's market. However, some sellers price their homes irrationally too high. Therefore, a seeming lowball offer may actually be a reasonable market value offer.
Nov 18, 2017 08:18 AM
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