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How to haggle with the bank

If you are purchasing property these days I’m sure that you have stumbled upon a REO or lender owned/ bank owned property in you’re searching.  Here are a few tips for placing an offer on a REO/Bank owned/ Lender owned property.

1. There are usually multiple offers on the table, this means the bank representative, usually called the asset manager will be looking at all the offers and decide on the highest and best offer for the bank.
2. The highest and best offer does not always mean the highest priced offer.  For example if you are financing the purchase through the bank who owns the home the bank will sometimes take a lower sale price offer because they will make more in interest on the loan than a low cash offer even if it can close faster.
3. The bank is not always in a hurry to close these properties on average 45 days is the usual time frame to close on a REO/ Bank owned property.  Make sure you talk to your agent and get a realistic time frame of how long it will take to close on the property you are interested in.
4. Most banks sell the property “as is” I would suggest making sure that you are willing to purchase the property in an as is condition before you place the offer.
5. If inspection items to come up I would ask the bank for a credit towards the purchase price or closing costs the asset manager/ bank representative does not want to spend any additional funds on the property to get it closed.
6. Also if you are asking for inspection items to be resolved make sure that you ask for a price reduction on an amend/extend instead of an inspection notice. Otherwise if you are financing the purchase your underwriter might ask to see the inspection report.  If there are items on the inspection report that the underwriter decides need to be fixed these items must be taken care of prior to closing on the property.
7.  Make sure you allow yourself plenty of time to do your inspections.  The bank does not have any records about the property since they never lived there so make sure you inspect every item in the property so you have as much information about the property as possible.  If major items come up on inspection I would recommend terminating the contract because the bank is not going to take care of those items they would much rather sell the property at a lower price to someone who is willing to buy it “as is”.
8. The most important item in making an offer on a REO/Bank owned property is you must be realistic in your offer.  The bank knows what the home is really worth most of the time they have a state appraiser look at the property before they put it on the market.  Also the bank has a certain amount of money that they need to get back from the sale of the property.  Just because it is another foreclosure does not mean that they are going to give the home away.
9. Make sure if you are buying a bank owned home you are working with a Realtor who has experience selling bank owned properties.  I would recommend having a buyer’s agent represent you.  A buyer’s agent will help you through the process of purchasing a home manage the sales process for you and help you avoid problems.
10. Be patient, I know I said it before but bank owned properties can take a while to close.  Make sure that you have plenty of time to move into your new home and you have a place to live before you move. This can be hard to coordinate so make sure you plan ahead and your might want to come up with a temporary residence if you are waiting on your new property to close. Also it is not a bad idea to have a backup home in mind just in case something major comes up on inspection.  Sometimes it can take several weeks to hear back about offers and inspection items.
11. Just because it is bank owned does not mean it is the best deal on the market. As I said before in a previous post bank owned homes are not always the best deal.  It is not always worth getting in a bidding war with several other offers.  After you do your homework and check the comparable sales history for a neighborhood make your offer based on fair market price and not your emotions.  Making an emotional purchase can cost you big money in the long run.
12. The best tip I can give you is to be informed make sure that you are diligent about inspecting the home.  Make sure that you are paying fair market value for the home, do not make an emotional purchase! Also be patient it just takes a while, so make sure you have a place to live and don’t get upset if the property does not close on time.

Don’t get burned, there are great deals out there but be a smart buyer and make sure that you are getting the best value on the market.

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This entry was posted on Thursday, July 17th, 2008 at 12:29 pm and is filed under Buyer's Corner, First Time Buyers, Market Conditions, REO and HUD Talk, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Scenic City Scoop - Chattanooga Tennessee Real Estate Blog said at July 22nd, 2008 at 2:47 pm

   Great information, we are trying to deal with a bank for over 30 days on a short sale. The certainly are not the easiest to work with. By the way, love the picture that is attached to this article. Keep the great information coming.

   David

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