Here’s 3 key factors to consider when negotiating offers on a foreclosure.
I’ve based this on an example of a condo listed for sale in Tampa, Fl at $149,900. By the way, the unit originally sold for $269,000 back in 2005.
- In this case the bank has already priced it at the lowest price per sq ft for sold units at $122.00. per sq ft.
- How long is the bank planning on waiting for other offers to come in?
- Are there currently other offers on the table?
Driving factors and why you may want to consider offering more:
I just recevied this email from another agent here in our firm. He’s been working with a client for a couple months and it seems the buyer’s expectations are not inline with our market. “Sean has been frustrated by not being able to buy a foreclosure for less than asking price.” He’s given up and has not requested any further information” Looks like Sean has some competition.
.A foreclosure (REO) can close in 30 days or less. That makes it even more enticing because some people can’t wait months for a short sale. The bottom line is that they are willing to pay more instead of paying $1,200 in rent for another 6 months while they are waiting for a short sale. Makes sense.
What’s causing the bidding war? The Tampa Real Estate market’s inventory is down to 5 months, from 22 months 5 years. (You can download the latest housing report here). There’s not much to choose from, especially in the lower-end price ranges, and in desirable areas like South Tampa, where most of my clients are looking to buy at the moment.
Tips on how to deal with multiple offers:
The mentality of buyers when they know another offer exists is something you have to consider. As a general rule in this price range I would suggest bidding about 1K more than what I think someone else will offer. I can only speak from my experience as a Relator. If there are multiple offers most people would go up 5K on a 150K asking price. So an offer of 156K may get you the winning bid. Now, if everyone is thinking like me, why not add another $500.00 to be on the safe side?
We will never know what the other offers are, their financing terms, when the buyer wants to close and so on. My guess is that the bank would like to get it off the books by the end of the year. If someone is financing that most likely won’t happen, so a cash offer may be a more aggressive approach.
Ask yourself how badly do I want the buy this home? A few thousand dollars in the end isn’t going to make much of a difference obviously.
Remember, anyone looking in your price range is thinking the same strategy as you, crunching the numbers and looking at the comparable sales.
Feel free to take my opinion for what it’s worth:) oh, and if you don’t already have a Real Estate Agent that can guide you I’m happy to help.