There is a wide discrepancy amongst REO asset managers from bank to bank, and often from manager to manager inside the banks. Working with Bank Owned Homes has been interesting over the past years, but lately it’s been different.
Cash offer. Competing in multiple offer situation with non-cash, traditionally financed offer. We are low as described by listing broker, we hold firm knowing the challenges of a bank financed offer (not necessarily difficulty for borrowers to get loans), with regard to the condition of many bank owned homes, appraisal issues and general uncertainty amongst underwriters. Long-story-short: The bank accepts the financed offer over a spread of $3,800, citing a higher net.
Now a well written cash offer with minimal inspection time frames and a short close should be a shoe-in. However in this case, the asset manager handling this bank owned property was seeking a higher net, albeit a small one, but higher and with more risk.
What is the risk you ask?
First, let me say I have NOTHING against financed offers – I sell lots of homes with financing and interest rates are mind-blowingly amazing right now [is mind-blowingly a word?]. I’m attacking the logic.
A financed offer typically requires an appraisal, usually includes concessions from the seller with closing costs, and takes a traditional 30-60 days depending on the type of loan. A cash offer can be closed tomorrow.
How did it end?
We got the deal. After not two, but three offers fell apart with financing. We got our price, all cash and clean. It could have turned out differently. Months could have passed, the market could have changed and the property could then come back on the market. Needing a price change to adjust, the measly $3,800 would probably look pretty good over a $5,000 to $10,000 price drop they may have had to incur.
Financed offer, competing alone. Very near asking price. Not a competing offer in sight. Bank counters with earnest money in the 7% to 8% price range. Most in the area are accustomed to a 1% to 2% earnest money deposit, so a 7-8% blew us away.
The reasoning? You guessed it – we were a financed offer. The banks asset manager said “We’d rather lower the price and attract a cash offer than risk market time on a financed offer.”
Understandable, BUT <– and a really big ‘but’… pun partially intended…
If you consider the fact that no competing offers are on the table, the bank is not making a choice and merely has to weigh the opportunity cost of:
1) Taking HIGHER offer and risking it fall apart down the road and having to lower the price to sell OR
2) Just lowering the price now and throwing away a willing and able buyer.
Either way, our ninja-like negotiating skills (yes, our contracts are considered deadly weapons to banks), we managed to land both deals despite the lack of intellectual fortitude on behalf of the banks.
Do you need a Realtor with Ninja Like negotiating skills on bank owned homes? Call us, we’d love to help.
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