What to Offer on a Bank Owned Home Expecting Multiple Offers

By
Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

The Northern Virginia sales market has been dealing with an abundance of buyers all seemingly competing for bank owned homes.  REOs (as bank owned homes are called) are far preferrable to short sales to buyers who would simply like an answer to the question, "Was my offer accepted?" 

So in our market, REOs are dominating. All the buyers are lined up to make an offer.  I'm not kidding when I tell you that I visited an REO last weekend that was just listed.  I met a buyer's agent on her way out as I was on my way in.  On my way out, there were two buyer's agents in line with their clients, just waiting to see this home.

When my buyer's asked, "What do we offer?"...I had to give them the answer that no one likes to hear. 

OFFER THE HIGHEST AMOUNT YOU ARE WILLING TO PAY FOR THE HOUSE.

But wait a minute! Isn't it a buyer's market?  Aren't buyers and the banks supposed to NEGOTIATE?  Sure.  If you are the only offer on an REO and no one else is planning on writing an offer.  But in Prince William County, our available inventory is shrinking to the point where we have tipped to a seller's advantage.  Mutiple offers are coming back.  Prices have stabilized.  So here's what you do when you find an REO that you want.

OFFER THE HIGHEST AMOUNT YOU ARE WILLING TO PAY FOR THE HOUSE.

There is not a second chance when buyers are throwing offers at a bank, like people throw beads at each other during Mardi Gras.  If you want to know you gave it the absolute best chance for success, figure out what the highest amount you are willing to pay, and make that your offer.  If you get the house, OUTSTANDING.  If you don't, then you know it was out of your budget.

Simple advice, but it's true.  I hate to see buyers not follow this advice, offer a lower number than they are actually willing to pay, and then agonize over whether they would have gotten the home if only they had offered that extra $5,000 in sales price, or used their own savings instead of asking for closing cost assitance from the bank.

Put your best foot forward when offering on REOs and you'll have a much greater chance of success.

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Rainmaker
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Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Chris Ann - While in theory I agree with you.  However, if I were a Realtor, I would still do my homework and advise my client to offer a fair market priced based on recent comps.  I would never advise my clients to pay more for the home than what it was worth, regardless of how many offers are being made on the home.

If that home does not appraise for the value that is needed for the buyers loan to be approved and fund then that house will likely be BOM.

Feb 28, 2009 02:52 AM #1
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Donne:  If the appraisal comes in low, then the banks are forced to lower their price.  No buyer I'm meeting has the cash to bridge that gap...and the banks know it.  The problem in our market is that buyers are still in a lowball mentality.  We give them fair market value, but it may be $75K above a list price...and they don't want to believe that is true.  That's because listing agents are pricing, in about 50% of the cases, to incite a bidding war.

Obviously, appraised value becomes an issue.  But you have two things that can happen.  The property appraises for the highest offer, or more...and the buyers have purchased at market value.  OR, the property appraises below the highest offer and the bank lowers the sales price (which they do about 99%of the time) or the buyers pursue another property after getting released from their contract. 

Feb 28, 2009 02:59 AM #2
Rainmaker
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JL Boney, III
Coldwell Banker - Columbia, SC
Columbia, SC Real Estate

Many of the REO's here are getting multiple offers as well. Some as many as five and six offers.

Feb 28, 2009 03:00 AM #3
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

JL:  It's madness.  And buyers that are still in lowball, or let's negotiate mode, are going to be left in the dust every time.  Offer what you can and let the appraisal sort it out.  By now, appraisers are truly appraising at market value.  If it comes in beneath the sales price, then greedy bank has to lower their price and the buyer still wins.

Feb 28, 2009 03:02 AM #4
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

I completely agree with your sentence to offer the highest amount Chris Ann. Afterall you are in a bidding situation. Does the buyer expect the other higher bidders to drop out? Don't waste their time or you the agent's time. It just doesn't make sense.

Feb 28, 2009 03:14 AM #5
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Gary:  Mutiple offers and REOs are not the friendliest game in town, but right now, it's one of the ONLY games in town.  Know how to play or enjoy driving around town endlessly, wondering why your buyers can get an offer accepted.

Feb 28, 2009 03:16 AM #6
Rainmaker
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Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

Excxellent advice.  When I have a buyer who seems to be hesitating on offering the price I think it is going to take to get the house, I ask them, "at what point would you be kicking yourself if you are outbid?  If you find out the buyer paid $xxx, how would you feel?"  "Ooh, not good. I'd be upset with myself."  "How about $xxxx?"  I wouldn't care at that price.  The answer, then, is somewhere in between!  It usually works.

Mar 02, 2009 07:28 AM #7
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Susan:  What a great way to put it!  I'll have to remember that next time I'm faced with the situation.

Mar 02, 2009 07:58 AM #8
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Chris Ann Cleland

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