One of my clients (let’s call him “Mike” because . . . uh . . . that’s his name) wrote to ask:
“Hi Bob, Question……How much lower than asking price have you seen REO’s <foreclosures> go for? I know there are a lot of determining factors. Say everything is in our favor, time on market , maybe bank has cashed in on insurance policy, etc. What is the lowest you have seen a property listed for 239k,or 229k go for?…….Mike”
You have to remember a few things.
(1) At what price did the REO first come on the marke,t and how long has it been at this current price?
(2) The bank is basing the asking price on Broker Price Opinions (BPOs). If BPOs come in at a certain price, the bank has rules about how much discount below that price it can accept.
(3) How severe is the pain? How much is the bank losing?
(4) How much house are we talking about? An 87% accepted price on a lower-end house might equal $18,000 discount (acceptable) but an 87% loss on a mid-range house might be $60,000 (not acceptable).
Here’s a recent scenario at Lake of the Pines:
A lower-end property goes on the market at $160,000, sits there getting stumpy little offers for a while. Bank reduces the asking price to $150,000. More low offers. Sits there, and sits there. Bank reduces the price to $140,000. This time an offer comes in at $120,000 with a request for $8000 in seller credits to buyer for “health and safety” repairs. Bank counters at $130,000 but gives the $8000 credit for an adjusted price of $122,000. Buyer accepts.
There’s your 87% discount off the asking price, a price that has already been reduced twice. It is actually a 76% offer on the original price, but it took months of sitting, a bunch of lowball offers, and two price reductions to get there.
Right out of the gate, first week on the market, the bank is probably not going to take less than 90-95% of the asking price.
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