Percent of Asking for REOs

[Fishhead_IHB]

Hi All,



Its been a while since I posted but I have a question. The wife and I renting but are starting to consider purchasing a home for numerous reasons (more than just dollars and cents). We will only do so if the numbers line up. I think that there are a few homes popping up in our neighborhood that can be had at rent parity (yes, I know that rents probably will go down). Most seem to be short sales or REOs. I won't deal with a short sale but I would be willing to throw a low-ball offer for the REO of our dreams. We're looking in the Laguna Niguel / SJC area. Thus, my question -



What percentage of asking price seems to be the magic number to get an acceptance? From my research it appears that banks are looking at getting 93 - 96 % of a relatively well priced home (based on current market prices at the time its listed). There are definitely still plenty of WTF priced REOs out there but some are starting to come on at more reasonable levels. They tend to go within a few weeks. What is it taking to get the contract?



Thanks,



FH

 

[biscuitninja_IHB]

I don't know, it just all depends. I bought a bank owned at 60% off. But I came with cash and purchased the property outright. It also helps when you know all the people involved and are able to "help" them expidite the process.



But my rule of thumb has always been no less than 10% off what the price has been. If you get some smart people you might make a case for them to sell it at a reduced price if it has been on the market for a while.



-bix

 

[Maltese_IHB]

How do you go about getting to know the "inside guy" with the bank? Is it by befriending a realtor listing an REO, or someone internal at the bank? We considered an offer on an REO, but they were already holding an offer 5% off and we were not willing to pay nearly that much.

 

[awgee_IHB]

I would think there is not magic number or any particular percentage. Won't the lender just sell to the highest bidder?

 

[freedomCM_IHB]

In Costa Mesa, the REOs have been going at asking price over the past 4 months data that I just perused.



In better neighborhoods, it looks like 95% to 110%, selling quickly. In lesser areas, 60% to 125%, which I think reflects the quality(poor) of the realtor's initial pricing.



But all are clustered really tightly around 100%.

 

[stepping_up_IHB]

The banks, just like other sellers, also want to ensure that the deal will go through and that it will go through quickly. We've bought two REO's and two things we have done to make us look more attractive to the bank are:



1). Shorten the contingency for inspection to 7 days. If you have your inspector all lined up, this is pretty easy

2). Shorten the escrow to 30 days or less. Again, this is very easy if you have your financing all worked out before hand.



All banks require a pre-approval letter to be submitted along with the offer before they will consider it. If you haven't done this already, it's the first thing to get in your hands. The lender will tell you what you need to provide for final approval, one of which is an accepted offer, but everything else you can get together before you settle on the house. At a minimum you will need your last two years of tax returns, two months of bank statements, including investment accounts and retirement accounts and if you are employed, last two pay stubs and W2's from the last two years.



Also, add $6K more to what you are willing to offer, but ask for $6K back towards closing costs. If they come back with the multiple counter offer, you can keep your offer the same or remove or lessen the amount you are asking back towards closing.



There really aren't big differences between individual banks, rather the difference is in the individual asset manager assigned to the property. Some are great and just want to get the place sold fast, others are clueless.



Lastly, are you sure you want to write off a short sale? I'm seeing more and more of them going through. If the bank has already approved the short sale, then there's a really good chance it's going to sell rather than be foreclosed.