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Redfin Real Estate Forums :
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reo haggling
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Re: reo haggling
[ Edited ]
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Susan
Contributor
Posts: 29
Registered: 12-30-2007
Message 2 of 3
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Hello dberti,
REO's! That's "Real Estate Owned", to the uninitiated. This is what banks call the properties they have taken back in foreclosure and that they now "own".
REO's are really, in many ways, simpler than other transactions. The bank has listed the property on the MLS through a listing agent, just like an ordinary seller would, and they have set the price somewhere in the realm of the going market value.
Your offer will be much the same as an ordinary offer, with just a few key differences.
1) First of all, you will probably want to give the bank a little longer to respond to your offer. Remember, it's probably an asset manager who will look at and respond to your offer, not just a couple at their kitchen table. He/she may have to run it past a number of other people to get a final okay, and they probably have dozens, maybe even hundreds of them to process, so you'll need to allow them a longer response time. Your Redfin agent will find out from the listing agent just how long they think you should give them. Probably no more than a few extra days to a week, though.
2) Although there are no "fees" that you will have to pay because it is bank owned (their costs will have been factored into their asking price), you should be aware that most banks will not pay some of the things customarily paid by sellers in the transaction. This WILL vary with different banks, so definitely have your agent talk to the listing agent it, but typically:
A) Banks will usually NOT pay for ANY inspections or ANY repairs, termite or otherwise (They won't even put in things to make the property "habitable" such as sinks, toilets, faucets and stoves, should they be missing - This may be a problem for your appraisal/lender - so be sure to check),
B) Most banks WILL NOT not pay for a Home Warranty,
C) Some/most banks WILL NOT pay for HOA transfer or doc fees,
D) They WILL generally pay for customary county and city transfer taxes, where applicable,
E) Most WILL pay for the natural hazard disclosure,
F) Many WILL NOT pay for title and escrow fees (although in most counties in the Bay Area, these costs are customarily the responsibility of the buyer anyway. Only Santa Clara County puts these costs on the seller.)
So, when you make your offer, it is good to consider that you will be taking on all or most of these costs (especially repairs) and set your price accordingly.
In terms of "haggling", I have found them to be much the same as any seller. Although you may need to give them a few days to a week for responses, they generally will respond much like any other seller - They may totally ignore a really lowball offer (say, anything over 10% below asking), they will most certainly counter offer for a higher price if your offer is low but at least reasonably reasonable, and they may jump up and down and send you roses (probably not, though; they are necessarily cheap) if you offer them right around the asking price. Large down payments, short closes and contingency periods can all help strengthen your offer, too.
As for them coming back to you and trying to get you to pay MORE than they asked ... Well, anything can happen in negotiating, but that seems to me to be highly unlikely. Some circumstances under which it might happen ... You offered them the asking price, then asked them for credits for closing costs or for repairs. They might say, well, sure we'll give you X dollars for closing costs if you raise the price you pay by X dollars. Another reason they might ask for more ... If there are multiple offers, the price WILL almost certainly go up. This is still happening in many pockets of the Bay Area - parts of Oakland, Berkeley, San Francisco, Silicon Valley and the Peninsula. Some listing agents will purposely price a home on the low end of the market to generate multiple offers. But if yours is the only offer, you certainly have no reason to raise your price ABOVE the asking price and I doubt anyone will try to get you to do so. (Then again, contrary to popular belief, they are not required to accept any offer, even if it is at or above asking price.)
One last note about REO's - Since no one from the bank actually "knows" the property like a seller would, they are not required to fill out the disclosure documents that you would otherwise be receiving with lots of good information about the house, repairs, problems, etc. You should still receive all the same disclosures, but they may line out some parts, since they can't answer any of it. So your inspections are all the more important. I would always recommend getting inspections, even if they won't pay for any repairs. You want to know what you're getting into.
All in all, I've found REO transactions to be very pleasant (unlike Short Sales, which are very hard on buyers to say the least). They are typically straight forward and the banks are generally fair about pricing. They run a little longer, only in the offer process, then the transaction itself can be a normal 30 days or shorter (they are happy to get it closed and off their books as soon as you are able). There are no additional "fees" to you, only the things the banks will not pay (as detailed above).
So, go for it! We're here to help you! Hope this helped already!
Susan
Re-posted by Janelle to fix/edit line spacing issue. No text was harmed in the process. That's all Susan, baby!
Message Edited by JanelleS on 03-04-2008 01:01 PM
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03-04-2008 11:56 AM
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