Factor repair costs into negotiations.
A property owned by the bank is usually a foreclosed property that did not sell at auction. The property is then referred to as "Real Estate Owned" or REO. If you are purchasing an REO property, you may expect to get the property for pennies on the dollar. This isn't always the case, since the bank has a fiduciary responsibility to get the most money for any asset. However, banks do need to consider the amount of money they have tied up in REOs and their lendable reserve. As such, you can negotiate price and terms in some cases.
Instructions
1. Request all pertinent information from the bank listing or REO agent. While most properties are offered "as is," there may still be inspection reports available. Also ask how offers should be delivered, the time for acceptance and any work orders the bank has agreed to perform.
2. Review the property with a competent home inspector before making an offer. While there will be time to do all the inspections you want once the process begins, knowing what you are getting into will give you better negotiation room.
3. Take pictures of all damage and work that needs to be done to the home that reduces its marketability.
4. Make an offer below what you feel the home is worth. If the REO price is $500,000 but the home needs $200,000 of repairs, offer $250,000. Include your preapproval letter and a biography about your qualifications as a buyer to expedite the process.
5. Wait for the counteroffer. Provide the bank with your pictures and notations of work that needs to be done to justify your lower-price position. When you receive the counteroffer, make your own counteroffer that falls between your original offer and the bank's counter.
6. Agree to the price. Then request a reduction on closing costs, financing rates if applicable or down payment requirements. If the bank sees you as a viable buyer, it may choose to negotiate past its "firm price" quotes to close the deal and get the REO off its books.
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