Bidding Wars: What should you offer on foreclosures?

Posted by Erion Shehaj in ForeclosureFriday, Homebuyer Guide, Real Estate News, Real Estate Tips on Friday, July 10, 2009 | no responses

If you have done so much as casually browse for Houston Homes lately, you know the current market offers a bank owned property selection the likes of which we have not seen in the recent past. From the ultra affordable neglected, to “I can’t believe this is a foreclosure” recent constructions, there’s a flavor out there for every taste. Say you started seriously looking at making at move at one of these homes, do you know what your offer should be? Is it a good idea to lowball, pay asking or give them even more? I’m pretty sure you want to pay the least amount possible, but don’t want to lose the deal either. In this post, we try to give you an idea on how to strike the right price balance.

There are four main factors that will affect the size of your offer:

Days on Market

Generally, banks will be less flexible on price during the first days on the market that are characterized by a high volume of potential buyers visiting the newcomer on the block. So if the property is fresh off the foreclosure boat you are likely to pay close to asking price if you want your bid to cross the finish line first

Offer Terms

Price is not everything in real estate – Banks will strongly consider your ability to get financing as conditioned by the size of your down payment, credit standing etc. Better yet, if you offer these institutions a cash deal, often they’ll pick your offer even if it is a bit lower than its financed counterparts. The reason for this preferential treatment is that cash deals close much faster and are generally more reliable than deals depending on the approval of a mortgage.

Equity

The level of price distress has a lot of say in what your offer should say. If you’re looking at a beauty with an asking price of $80,000 but a market value of $100,000, your offer should be closer to or over asking due to the great built in equity you will be getting by purchasing below market. Instead, when the asking is close to retail, you can be more aggressive in negotiating it down.

Price Range/Competition

Higher price ranges ($200k+) tend to have fewer suitors whereas competition is fierce in the $80k-$110k range. You can negotiate more in the higher price points while you are likely to pay at or over asking for the lower price points. Depending on where you’re fishing you should pick an appropriate hook to be successful.

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Weekly Foreclosure Deals

East Houston Foreclosure, 3 bedroom, 2 bathroom, 2 car garage, built in 2006, 1871 sq ft located in Sam Houston and Wallisville. Recent Construction in relatively good shape