A common misconception with bank owned homes is that the bank is itching to get rid of them and will make great sacrifices [in price] to unload the burdened property. While they may be in an uncomfortable position with the asset, they are far from “motivated” beyond wanting to sell the property within their procedural timeline.
Depending on what statistics you look at, most REO properties sell around 35% lower than those that are non-REO/ Bank Owned. Most, at asking price, are pretty fair deals to begin with. Which is why, and I’ve said this before, 60% of list price offers do not work with Bank Owned Properties. Most properties are priced at a point where they will receive multiple offers already, not to mention at or above asking price in many cases.
Now I’m not saying you have to pay full price for an REO.
Most Bank Owned Homes come on the market at the high end of where they will sell. On a regimented scale, the bank systematically drops the price, this is usually every 25-35 days, most price drops are in the range of about 1-5% depending on the property.
Placing an offer 1-5% lower than asking price is a safe bet, most banks will counter 1-3 times so you always need to bracket your offer some, most of the time a bank will counter an offer just to see if the additional time will generate a multiple offer scenario where all parties are advised of multiple offers and are asked to submit their highest-and-best offer by a specified time, usually 2-3 days in the future (more time for more offers, pretty smart eh?).
I’ve seen investors lose GREAT deals over a simple $1,000 counter offer when the additional time for response generated a second offer and they ultimately lost out on the great property… all for a crummy $1,000 counteroffer. I’ll say it again:
If $1,000 to $5,000 makes or breaks the deal for you in a Real Estate Investment, it’s probably not a Real Estate investment.
Most people approach a Bank Owned Home like the owner is in complete distress, most of these banks have been bailed out by the Government or have been purchased by banks who have. Their motivations aren’t as strong as you’d like to believe. Additionally, if you do a comparative analysis on a property, most are priced pretty well.
I’m a capitalist too, I’ll never pay full price and I always want the best deal. Sometimes the best deal is actually securing the asset and not losing it over a few thousand bucks or an unrealistic offer.
Photo Credit: Mex Beady Eyes