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You are trying to get a deal. Foreclosure doesn't and never has meant the buyer gets a deal. It happens of course, but that means it just happened, not by design.
A foreclosure is just a number to the bank. They could care less what you want, need or desire. You're trying to figure out what they need and that is a mistake because unlike a regular seller, the bank's asset manager isn't really interested in the property, it is just an entry on a list.
Thinking you can add up costs for maintenance and taxes doesn't wash either. The bank is a business, not an individual owner and as such the bank writes down the debt taxes and all that. Again, you're applying a regular seller's motivations to a business and the two have nothing to do with each other.
If you think banks lose money on foreclosures, think again. They might not make money but they aren't getting hurt nearly as much as you think. Banks work on an overall balance sheet, again something the individual seller can't usually do. They lose on one, make on another and in the end, it is what the bottom lines reads and if you've noticesm banks are making record profits again. Take a house that was owned by someone for 5 or so years. What do you think happened to those payments? After the down payment reduced the exposure, the owner made payments for 5 years. Then they went into foreclosure. Big deal. The bank then sells near market value. After everything is added up the bank comes out pretty much ok. They wrote down the debt, got interest payments, wrote down any costs to sell the property, maybe got some other government incentives and then you come along and think they are hurting. Not a chance.
Back to your interest though. Make your best offer that will pass screening. Then do your inspections and then negotiate the price.
Remember, foreclosures to into contract at market price and sell based on condition. That means after you get into contract your opportunity to negotiate based on condition comes to you. If you think for a second you can wait out a bank, good luck with that.
Get your inspections and an appraisal. Use that info to negotiate down the sale price. Some things though are just on you. You want energy efficient windows? For $100,000? Please.
Aren't you forgetting something? You want to buy a high priced house on the cheap and then like the person who gets a deal on a Mercedes, you think that maintenance or upgrades are going to by priced for a Chevy?
Say you get the house. Then you do all the upgrades. Then around comes the tax assessor and you are easy pickings. In some locations, major upgrades trigger a re-assessment for tax purposes.
The bank could keep that house for a long time, then sell it as a scraper and write the whole thing down, something a regular home seller can't do. Maybe its time to reconsider your goals.
Mack Knife-
our tax assumption is based on the re-assessments the town recently went through in November. I have access to the database with all of this info. All antiques in town are priced btwn $83 -$115/120 per sq ft. The house we are interested in was also re-assessed and while the assessment did go down in October compared to what it was before, it's still priced significantly higher than all other antiques in town. I also happen to know that a much larger antique three houses down from the one we're interested in has undergone tons of upgrades/improvements in the last 2 years, and even built an outbuilding on their property.. their house was just re-assessed at $83 per sq ft, taxes are under $15k.
Anyway, in all honesty we're not trying to get a steal, we are just attempting to get the bank to look at this house realistically and price it accordingly. Like I said before, houses in this town do not sit, when they're priced correctly the competition to get a bid in is extreme. The realtor representing the bank has told us that there have been several other bids within the same price range (in the $6's) so it's not just me and my husband
$100k for energy efficient windows, yes. This is an antique house with well over 100 windows that can't be replaced, they have to be repaired.
I hadn't thought about bidding and then negotiating the price based on the appraisals and inspection.
Thanks for your post!
Last edited by Antiques411; 12-30-2012 at 09:41 AM..
I hadn't thought about bidding and then negotiating the price based on the appraisals and inspection.
Thanks for your post!
Be cautious with writing your initial offer this way. The last two REO's I closed just a couple of months ago, specifically stated that the buyer agreed to not renegotiate the price in the bank addendum.
Be cautious with writing your initial offer this way. The last two REO's I closed just a couple of months ago, specifically stated that the buyer agreed to not renegotiate the price in the bank addendum.
Even so, the buyer can have the inspections performed, an appraisal and contractor recommendation and submit them to the bank and renegotiate. Contracts are only valid as long as both parties agree to hold them as such. The entire market of commerce and contracts is in part based upon negotiating anything and everything, including contracts where both parties agree not the renegotiate.
Look at it this way, the bank, once faced with so much information it will have to disclose in the future, can renegotiate or face the consequences. Let me further clarify:
In this type of situation, the buyer doesn't renegotiate the price since that violates the initial offer that was accepted. Instead, the buyer renegotiates the addendum's clause that says the buyer will not renegotiate the price. Once that is renegotiated, then the buyer renegotiates the price. All the buyer is doing is processing step by step and taking care of step one before going to step two.
Oftentimes, even seasoned people fail to see the opportunity and take contracts as things case in stone. They are not. Most of the time, it is the unraveling of the barrier to renegotiating the price that comes first, and then the renegotiating of the price.
I am not saying that this approach is always successful and for sure, they key here is to not give away the buyer's ability to walk away of the contingencies for inspections aren't satisfied to buyer's conditions.
This puts the bank in the least favorable circumstance, play ball or get kicked out of the game. Yes, they can tell the buyer to pack up but then look what they are left with; a house that hasn't sold, a list of disclosures they are now stuck with for any future negotiation and the likelihood that the current offer is probably the best they will have.
Banks rarely respond to common sense but they do respond to being backed into a corner and shown the path of least resistance and one more item crossed off the asset managers list.
What I've put forth here takes some intestinal fortitude and some decent poker playing skills but there can be rewards.
In this type of situation, the buyer doesn't renegotiate the price since that violates the initial offer that was accepted. Instead, the buyer renegotiates the addendum's clause that says the buyer will not renegotiate the price. Once that is renegotiated, then the buyer renegotiates the price. All the buyer is doing is processing step by step and taking care of step one before going to step two.
While it's true that a buyer can try to renegotiate any contract, if the bank puts in a clause that it will not renegotiate a price after inspection/appraisal/whatever--and the buyer signs that contract--there's a good chance that the bank, indeed, will NOT renegotiate the price. It seems rather foolish for a buyer to spend good money on an inspection and on an appraisal if they're merely hoping that those costs will yield a lower, renegotiated, price. That's a risky and rather costly way to try to buy a house.
While it's true that a buyer can try to renegotiate any contract, if the bank puts in a clause that it will not renegotiate a price after inspection/appraisal/whatever--and the buyer signs that contract--there's a good chance that the bank, indeed, will NOT renegotiate the price. It seems rather foolish for a buyer to spend good money on an inspection and on an appraisal if they're merely hoping that those costs will yield a lower, renegotiated, price. That's a risky and rather costly way to try to buy a house.
There is always risk in buying a house. The OP already knows they have a lot of work to do in upgrades and repairs along with deferred maintenance.
Inspections are an accepted cost in buying. Inspections don't cost that much and contractor inspections are free for the asking - unless you ask a Realtor and then their friends do charge for the service. So the buyer risks maybe a $1000 for inspections? Compare that to the commissions made by the REAs and it pales.
I've heard this time and time again from REAs, the banks won't negotiate. What nonsense and typical because most REAs don't really want to do much work for these buys, they push the buyer to offer higher or buy a house with minimal negotiating needs on their part. Like I said, typical.
Banks are not stupid and when faced with facts that will forecast future problems in selling, often negotiate down.
That is why the common saying is that banks price at market and discount for condition. What I've ofund is that when a REA tells me that the banks don't negotiate down, it is usually because the REA hasn't yet tried or isn't properly equipped with the knowledge, skill and lacks the effort to get the job done. Time for a new REA, someone that wants to work.
Banks are a business and when approached as a business instead of an individual everything is negotiable.
REAs don't listen except on rare occasions when commissions come up. The buyer is very interested in the house. That means they are probably ok with some minimal inspection costs too. The job of the REA is to do as much as possible to make that happen instead of taking the easy way out.
When REAs start realizing they provide a service for others instead of their pockets, you'll see far more negotiations with banks. The reason REAs say the banks often don't negotiate is because the REAs often don't want to even try.
Sign here, here and here. Wait 30 days, chaching. Bye bye. About sums up the average experience.
Banks rarely respond to common sense but they do respond to being backed into a corner and shown the path of least resistance and one more item crossed off the asset managers list.
What I've put forth here takes some intestinal fortitude and some decent poker playing skills but there can be rewards.
Interesting strategy, we're strongly considering it. Thanks for this! We have plenty of time and no sale contingencies, nothing to lose... Well maybe $1,500 in the end but worth it, I think, to at least say we did everything we could and fought for this house. We'll still continue to look at other properties as they come on the market in 2013 (not all our eggs in one basket).
Even so, the buyer can have the inspections performed, an appraisal and contractor recommendation and submit them to the bank and renegotiate. Contracts are only valid as long as both parties agree to hold them as such. The entire market of commerce and contracts is in part based upon negotiating anything and everything, including contracts where both parties agree not the renegotiate.
You also risk the bank terminating the contract because you just did what you agreed not to do. I'd say 90% of bank addenda that I have seen state that the bank has the right to pull the contract at any time for any reason and will refund your earnest money if they do. You are offering advice on playing chess when you aren't aware of the rules. If there is a backup offer in play, then the buyer would be done.
The reason agents are saying, lately, that banks won't negotiate is because it is true. HUD has a strict formula that they use. Fannie and Freddie are holding firm on price in my area. They won't budge much off list in the past few months. Wells is holding firm here. Fannie is putting pressure on BPO agents to come in high on short sales in my area due to the improving market. Short sales and bank owned properties are no longer the awesome deals they used to be in my area.
While you might think the bank is left holding the bag and is in a problematic situation, many areas have recovered. Getting another offer isn't an issue. Just to give you an idea, in my city a fixer of a historic home, that sounds a lot like what the OP is wanting to buy, had four sale fails after inspections. Bank refused to drop the price and they got their asking price on the 5th buyer. Days on the market...533. Personally, I think the buyer paid too much but it is their money to waste.
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Is the bank solvent?
