When negotiating with banks regarding their REO properties, it can be helpful to the buyer to understand the foreclosure process so that the buyer may facilitate a successful closing of a bank owned property. We discuss this process at length with potential buyers.

Most often, from buyers, there is a perception that banks are going to give properties away for pennies on the dollar, just the opposite; banks have a responsibility to their stockholders to make money on their investments. A foreclosure home becomes part of the asset portfolio of the bank. It is not in their best interest to sell their properties to the first bidder at any amount.

In this market, and the market is always changing, once a bank has foreclosed on a property it is transferred to an asset management company who hires a real estate broker  who is hired to secure it, price it, repair it and many other details that then become the responsibility of the broker. An understanding of the broker responsibility to the bank is also explained to the potential buyers.

Asset management companies do not have the ability to accept an unreasonably low offer and cannot drop the price as quickly as the public perceives they can, a low offer is not acceptable. Within 30 days, most asset companies can accept a percentage of the asking price without getting approval from the bank. If this does not happen, they will reevaluate the price and adjust it every 30 days. Adjustments are always made by the most recent sold comps and rarely anything else.

Successful Negotiations

Offer price should be realistic and cognitive of how the process works.
Net percentages are important to the banks.
Earnest money of 1% is usually required and shows good faith by the buyer.
Concessions are usually expected by the bank and they will always pay commissions, this is not negotiable for them, as they are already contracted to pay them.
Inspections are always recommended as a part of any home sale, especially Bank owned home should be inspected, as the bank has never lived there and doesn’t always know what is behind the walls.

Real Estate Hot Sheets are generated by us and sent to our clients by email or via us mail. Our lists consist of over 20 banks that have current REO properties. If you are in the market for a home and/or have some interest in “bank owned homes”, we are excited about your opportunity to negotiate the best possible price, realistically and confidently.