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I'm not finding much success with offers on foreclosed properties. The present approach involves a good amount of due diligence; obtaining comps, thorough home inspections, etc. Deficiencies usually surface in the process and this is reflected in the offer. However, I don't think the seller is aware or cares to know about the condition of the property and is turned off with offers less than the asking price. So, I was thinking of changing tactics. Are there any pitfalls in offering an artificially higher price to get their attention and use the formal inspection process to negotiate a lower price, the one I really think the property is worth? I prefer to be more upfront but the approach I've been taking is clearly not working.
Nope. They typically sell foreclosure properties "as is" and don't care about inspections. Foreclosures are hard to buy. I buy REO's and go thru a very long process to finally obtain one. At any given time I am monitoring about 8 properties with specific strategies for each property. I never bid on HUD, Fannie Mae, VA properties because the bidding process is geared to owner/occupants....and actually I support that concept even tho there's corruption and deceit in that whole thing. If you go to Bidselect.com you can check bidding results and see that for any desirable properties the winning bid is most often over the asking price. You need a realtor who is experienced in selling foreclosure properties. Often you will do better buying a conventional home in the same neighborhood as foreclosures.
I'm not finding much success with offers on foreclosed properties. The present approach involves a good amount of due diligence; obtaining comps, thorough home inspections, etc. Deficiencies usually surface in the process and this is reflected in the offer. However, I don't think the seller is aware or cares to know about the condition of the property and is turned off with offers less than the asking price. So, I was thinking of changing tactics. Are there any pitfalls in offering an artificially higher price to get their attention and use the formal inspection process to negotiate a lower price, the one I really think the property is worth? I prefer to be more upfront but the approach I've been taking is clearly not working.
Maybe your approach is not working because you are trying to depend on unreliable methods to determine market value. Don't use Zillow.
I'm not finding much success with offers on foreclosed properties. The present approach involves a good amount of due diligence; obtaining comps, thorough home inspections, etc. Deficiencies usually surface in the process and this is reflected in the offer. However, I don't think the seller is aware or cares to know about the condition of the property and is turned off with offers less than the asking price. So, I was thinking of changing tactics. Are there any pitfalls in offering an artificially higher price to get their attention and use the formal inspection process to negotiate a lower price, the one I really think the property is worth? I prefer to be more upfront but the approach I've been taking is clearly not working.
Is the asking price already below the comps? If it's already below the comps, I can see why they're turned off with offer less than the asking price.
I looked at 2 foreclosures in the past month and both of the asking prices are at least 10% below comps. I made an offer on one of them at full asking price and they are supposedly accepting my offer, all I have to do now is sign the bank addendum to make it official. From what I could see, the house is missing washer and dryer, needs new windows, update bathrooms, other small things. Hopefully I'll be having inspection some time this week. If inspection comes back with some major defects with the house that I didn't catch during the tour of the house, then I'll ask the bank to either fix it or lower the price, if they refuse to do either, then I may walk away as it may not be a fair deal anymore.
Last edited by need_more_light; 06-20-2010 at 10:17 AM..
Reason: typo
Nope. They typically sell foreclosure properties "as is" and don't care about inspections. Foreclosures are hard to buy. I buy REO's and go thru a very long process to finally obtain one. At any given time I am monitoring about 8 properties with specific strategies for each property. I never bid on HUD, Fannie Mae, VA properties because the bidding process is geared to owner/occupants....and actually I support that concept even tho there's corruption and deceit in that whole thing. If you go to Bidselect.com you can check bidding results and see that for any desirable properties the winning bid is most often over the asking price. You need a realtor who is experienced in selling foreclosure properties. Often you will do better buying a conventional home in the same neighborhood as foreclosures.
I realize foreclosure properties are sold "as is" but can it be an effective strategy to offer a near asking price and after it's accepted begin to negotiate a lower price by pointing out the deficiencies during the inspection process?
Don't play games. Offer what you are willing to pay for the home, in it's current condition. Using inspections or offering more than you are willing to pay, hoping the price will come down with a home inspection or low appraisal is gambling.
Maybe your approach is not working because you are trying to depend on unreliable methods to determine market value. Don't use Zillow.
LOL, off the Zillow Momma-bear already. As I said before, Zillow is only one of many things used to evaluate a property and it's certainly not something that I rely upon. But this thread isn't about Zillow
Is the asking price already below the comps? If it's already below the asking price, I can see why they're turned off wither offer less than the asking price.
I looked at 2 foreclosures in the past month and both of the asking prices are at least 10% below comps. I made an offer on one of them at full asking price and they are supposedly accepting my offer, all I have to do now is sign the bank addendum to make it official. From what I could see, the house is missing washer and dryer, needs new windows, update bathrooms, other small things. Hopefully I'll be having inspection some time this week. If inspection comes back with some major defects with the house that I didn't catch during the tour of the house, then I'll ask the bank to either fix it or lower the price, if they refuse to do either, then I may walk away as it may not be a fair deal anymore.
Of the last two offers made, one was slightly (3%) less than the comps and the latest was dead on. Unfortunately, the asking prices in both cases were considerably higher - 10% higher on the first one and 30% higher on the second.
Don't play games. Offer what you are willing to pay for the home, in it's current condition. Using inspections or offering more than you are willing to pay, hoping the price will come down with a home inspection or low appraisal is gambling.
That would be my preference. But how can the bank be made aware of the deficiencies? There are so many players involved that any offer outside of the seller's guidelines is rejected without much scrutiny in the beginning of the process. The only offers the bank reviews as I understand it are those that meet a threshold price.
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