How Much Should I Offer On A Foreclosure Listing?

One of the most common questions that I hear in the business of selling Chico foreclosures is, “How much should I offer?”

Buyers often think that if the property is a foreclosure (aka REO or bank-owned property) that the offer should automatically come in  low.  What they are really asking is, “How low of an offer can I get away with?”

It’s important to understand that the banks that own the foreclosures are like any “normal seller.”  Some sellers price their property really high in the beginning “just to see” if they can make a killing.  Other sellers price it low in order to create some competitive excitement and facilitate a quick sale.  Still others aim to price it very close to market value to ensure that it sells within a reasonable time period at the highest price possible.

Banks are no different, in that they have a pricing strategy.
  They typically get at least 2 different opinions of value from Chico Realtors, and many take the extra step of ordering an appraisal prior to settling on a list price.  Once they have determined fair market value, the asset manager then prices the property according to their company’s policy.  Some companies seem to take the fair market value and mark it up like 20%.  They refuse to seriously consider lower offers, and by the time it actually sells 6 months later, they sell it for less than they could have originally, because the market had continued to decline. Conversely, I work for one company that routinely prices their properties just under market value in order to procure a buyer within 7 days.

Don’t assume, just because the property is bank owned, that you should automatically write a low offer!!

As a buyer, you need to work with your chosen Realtor to carefully assess the property and consider the comps in order to determine what the fair market value might be.  The property may very well be under priced!  I see buyers miss out on fabulous deals by tossing out low offers with little insight as to the true value, or consideration of how much time the property has had on the market.  I can assure you, there are many savvy buyers and investors out there offering full price or more on properties.  Yes!  They are offering above asking price even in this market of declining values.  Why?  They did their homework, and are capable of recognizing a good deal when they see one.

Of course the flip side is that a bank will sometimes take a low offer.  I most commonly see lower offers being accepted after several low offers have come in, and it becomes apparent to the seller that they have missed the mark on their initial price.  Occasionally a clean, all cash offer will be accepted lower than asking price.  It’s often worth it to the seller to settle at a lower price if they don’t have to wait 30 days or more to see their money.  However, I think it’s an unfortunate misconception that many buyers with cash perceive their cash offer to be more appealing than it really is.

Cash in lieu of financing is not normally going to save a buyer a crazy amount of money.

Again, the best bet is to partner with a local Realtor who specializes in Chico foreclosures, and is astute at determining property value.  Do your homework and find a Realtor who is closing a lot of deals, and with whom you share a mutual respect and trust.  Pay close attention to the asking and selling prices of homes in the price range you want to purchase.

The more knowledgeable you become, and the more savvy your Realtor is, the better the odds that your offer will be competitive enough to win without overpaying for the property.

Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
Tomato University Graduate Real Estate Tomato

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