How much should I bid on an REO home?
In today’s market when I show homes to buyers more than 50% of the time there are short sales or REO’s (bank owned homes). The question that arises about 99 % of the time is “How much should I bid on an REO home?
There are a few variables to consider before I actually answer that question.
- The first response I give and so should any agent in the business is “let’s check the comparables (comps) for that area. This way we can see what others of like value have sold for. Key word here is “sold” for. Your bank is only going to lend you the money to buy a home based on the value or going rate at the time.
- Besides the average price of the “solds” another very important factor to look at is the average of what the house sold for vs what the list price was at. That way we can see how hot that pocket of homes is selling for right now vs another area 5 miles away in another part of Santa Clarita that might not be as hot. To me this is very important. If homes are selling for 95% of list price to sold price then we shouldn’t go in at 80% and not even get a counter offer. We stand a better chance at 92% .
- Length of time on the market – a rule of thumb is, the longer it sits on the market the more flexibility there should be in the price. On the flip side, a brand new listing should have less flexibility.
- On a regular or standard sale you can go in with a punch list and a letter of why you are offering the lower price in hopes the seller will understand and be flexible with the price. With a bank owned sale the bank doesn’t care about that. Most banks if not all will give you very little or nothing in the way of concessions. They are looking solely on the comps.