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After searching for a while now, my wife and I have found a specific foreclosure we're interested in putting in an offer on. It's been on the market for nearly a year with lots of showings but no interest; we suspect due to a "unique" floor plan (which we kinda like), some needed repairs and a kitchen that is so bizarre as to be almost unusable. It's in a rural location with few if any comps.
Initial price was $209k, dropped a few months ago to $189k and then again a couple weeks ago to $187k (after a new realtor took it over, previous contract expired).
Our question is, what is a reasonable price to offer? Should we offer a bit under what we're actually willing to pay and negotiate up, or just start with our top number? Any ideas/thoughts are appreciated.
It's too hard to give you advice not knowing what prices are doing in the neighborhood. Reassure yourself that the value is there, and if you really want the place, make an offer for what you are willing to pay. I'm not a fan of playing games and offering less than what it will take to make it mine. You can easily lose the property that way, too. (You can offer to pay an appraiser to do a desk appraisal for your purposes only). Undercutting it so soon after it's been "repriced" could be a mistake, since it could indicate that it has the market's attention. Make sure your offer is contingent upon the appraised value. (Any buyer's agent will make sure you are protected). The repairs shouldn't be a major consequence unless it's structural or safety related, and if they are, that could present a repair you may have to agree upon before closing (in the event the bank won't fix). If the appraisal comes in lower than your offer, there's every chance the seller will reduce the price, not wanting to mess around with it.
I use to think foreclosures were labor intensive until I started working the shortsale market.......which is labor intensive and explosive.
Thanks for the reply. Prices in the area are down around 20% in the last year and sales have stagnated after a brief up-tick a couple weeks back.
My thinking goes like this... in the time since it was listed, prices have fallen 20%. If the property was priced right a year ago, it would have sold then which means it should have come down at least the same amount now, putting it at around $168k. We would buy it for that. But the fact it hasn't dropped as much demonstrates to me a reluctance on the part of the bank to sell, which makes it hard to understand how to approach it. Am I being unreasonable?
If you think $168K is fair, then offer that and see what the bank says. They are not like a regular seller that might get offended by a low offer. More than likely they will counter and then you can negotiate from there. I can't imagine a bank being reluctant to sell, they just want a fair price for the property.
Keep in mind that if you are going to look to finance that purchase, the off floorplan and kitchen may be found a functional obsolescence by the appraiser which may negatively affect the value. If this is the case, a lender may be hesitant to lend on it.
If you really want that house you may want to have it appraised so you know what you are dealing with.
While there is nothing wrong with such an approach, there is not 'right' about it either...
Quote:
Originally Posted by Annemieke Roell
Keep in mind that if you are going to look to finance that purchase, the off floorplan and kitchen may be found a functional obsolescence by the appraiser which may negatively affect the value. If this is the case, a lender may be hesitant to lend on it.
If you really want that house you may want to have it appraised so you know what you are dealing with.
Odds are nearly 100% that the lender did NOT throw darts at a board to set the listing price. The use of "broker price opinions" is VERY standard in such situations.
In my experience the BPO is as good, if not better, than an appraiser when it comes to things like odd floor plans and bizarre kitchens.
In this market the value of buyer getting a pre-offer appraisal as a backstop against another appraisal from the lender coming back too low is just about nil. Just too much variability in both the kinds of firms getting appraisals assigned in this new 'through the looking glass" world AND too little solid comps for a unique properties.
In short, it would be a waste of time and money to pay for appraisal in this situation.
Last edited by chet everett; 10-05-2009 at 04:47 PM..
I understand a BPO was used to set the initial price, but are new ones done periodically to govern the bank's lowering or maintaining the listing price? If the property doesn't sell after a year, and the overall neighborhood value has decreased 20%, wouldn't the BPO also have to decline? And if BPOs govern the banks actions, why is it that some banks systematically decrease the price on properties (one I saw went down $5k every 3 weeks until it sold like clockwork) while others have little or no decreases, in the same neighborhood, after extended times on the market?
I know many want to believe it is a rational system, but I see human hands at work.
Odds are nearly 100% that the lender did NOT throw darts at a board to set the listing price. The use of "broker price opinions" is VERY standard in such situations.
In my experience the BPO is as good, if not better, than an appraiser when it comes to things like odd floor plans and bizarre kitchens.
In this market the value of buyer getting a pre-offer appraisal as a backstop against another appraisal from the lender coming back too low is just about nil. Just too much variability in both the kinds of firms getting appraisals assigned in this new 'through the looking glass" world AND too little solid comps for a unique properties.
In short, it would be a waste of time and money to pay for appraisal in this situation.
Obviously, a BPO is as good, if not better than an appraisal. After all, the property has been sitting on the market for almost a year.
When a house sits on the market for a long time, it is priced too high for the market, the condition of the property or any functional obsolescence, just to name a few.
Don't try to derive a fair price by using last yr's numbers and reducing it by a percentage. That's an inaccurate way to price a property. Look at properties that recently sold and also properties currently on the market to determine a fair price. Also, if your kitchen needs a complete renovation while the other comps's kitchens have already been upgraded, you need to factor in this cost to your price.
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While there is nothing wrong with such an approach, there is not 'right' about it either...
