Many buyers right now think that they have to write low ball offers on foreclosed properties to get a great deal. This can be self-defeating as the majority of foreclosed listings are priced to move already. When preparing an offer keep in mind the following basics:
- What is your MAO or Maximum Allowable Offer? The list price of the property should have no bearing at all on you calculations.
- If you can buy the house at your MAO then it is by definition a good deal. Can you make it a better deal by buying for less? Of course, but that is just icing on the cake.
- What constitutes a ‘low ball’ offer? In our experience as listing and selling agents of REO properties, anything less than 80% of list is a low ball offer.
In the past we found that the longer a property is on the market, the more likely it is a ‘weak’ or ‘low ball’ offer will be considered. However, this truism is changing as banks and investors become more motivated to minimize their losses with a quick sale. Countywide Mortgage’s current pricing policy is a good example.
Brad, I, and The Mid Ohio REO Team, list and sell foreclosed properties for Countrywide through various asset management companies in the Springfield / Dayton, Ohio areas. Countrywide and other loan servicers and investors are far more attuned to the local market than in the past. They are paying more attention to what the local Realtors and appraisers opinions of value are which is reflected in the initial list prices.
Not only are we seeing better initial list prices, we are seeing price reductions come through as frequently as every two to three weeks versus up to 90 days in the past. Consequently, the banks are less likely to entertain low ball offers because they are receiving multiple reasonable offers with every price reduction. Most accepted offers are within 5% of full price if cash, and even closer to full price if financed. (Cash is indeed king right now due to the number of financed deals that are falling through.)
The message here is, know your market, know your trends and comparables, and stick to your numbers. If your numbers indicate a full price or better offer, make your highest and best offer up front. You will increase you chances of successfully negotiating a purchase.
What are you seeing? What are you hearing from you agents / Realtor partners? Share your experiences with the www.MyRealEstateLifeOnline.com community.
Chris McAllister
Chris, great post. We're
Chris, great post. We're seeing the same trends here in Seattle. Reasonable offers after price reductions in the 5% range. We're even seeing a lot of multiple offers now. Since the market is near the end of a bad swing it seems micro-markets are ever more important. Not long ago, when prices were going up, the list price seemed to affect pricing all over the county. Now that we're at the extreme other end of the market, pricing seems to be more hyper local.
I agree and see it as, know your neighborhood well. Study it's trends, know your stats, and stay within the community. Which makes me think we might be on our way back to a more normal market (if one can say that now days)... because 'location location location' seems to be a driving force again.
thanks...
René