It may take several attempts to successfully negotiate a bank-owned property purchase with the bank.
Bank-owned properties, which are properties foreclosed upon by lending institutions, are often listed online for resale by the banks and brokers.
To negotiate the sale of a bank-owned property, you will need to know where to find them, their true market value and what price to first offer for its purchase.
Instructions
1. Find bank-owned properties. Just as if you were buying an automobile or another large-ticket, durable-goods item, look for the best deal. You'll want to find several properties and be prepared to rescind your offer.
You can find bank-owned properties by visiting the websites of major banking institutions and local credit unions, as well as Fannie Mae and Freddie Mac's websites. Online listings for bank-owned properties typically disclose the address, number of bedrooms and bathrooms, square footage, and other amenities. Once you have found several bank-owned properties, visit each of them, and if possible, tour them. This will help you to assess their overall condition and any repairs that may need to be made.
2. Determine the market value of the property. Once you have identified potential purchase properties, estimate their market value. This can be done by looking online at your local tax collector's office or property appraiser's office and finding recently sold properties that are similar in floor plan and square footage. Take the selling prices and add them together, dividing by the number of properties---this will yield the average market value. Take the average and divide it by the livable square footage in the properties you are considering and that will give you the market value of each home.
In the alternative, consult a real estate agent or broker and ask for assistance in determining the value and buying an REO property. Keep in mind if you enlist the services of a real estate broker, they will charge a fee based on the sales price.
3. Contact the lender and make an offer. With the market value on-hand, reduce the listed sales price by up to 40 percent and then contact the lender to make a purchase offer. Bank-owned properties can sell for up to 40 percent off their true market value, but most sell at 10 to 20 percent of their value, according to a 2008 study conducted by Campbell Communications---a company that conducts professional surveys. Moreover, the same study found that lenders take up to nine weeks to accept or decline an offer on bank-owned and short-sale properties.
4. Be prepared to resubmit an amended purchase offer. It can take several attempts to have the lender accept a purchase offer for a bank-owned property. Typically, lenders will refuse offers at, or below, 50 percent of the market value of the property, and will not make concessions to cover repair or replacements costs. Lenders are more likely to accept an offer that is without contingencies, meaning there are no requests by the buyer to make allowances for repairs or final financing approval.
If a lender declines an offer that is 40 percent below market value, resubmit an amended purchase offer of 30-to-35 percent below market value. Repeat as necessary until the lender accepts the offer.
Tags: market value, purchase offer, bank-owned properties, bank-owned property, square footage
