Profile picture for Marco_b03

How low should we go on our first offer?

We are looking at placing a bid on a house in Traverse City, MI.  The house is bank owned and is listed at $214,000.  We can only get approved for $160,000 and we have $10K down.  Is an offer of $160,000 too low?  What are the chances the bank will take the offer compared to an individual?  The home is in an upscale subdivision where all the other houses for sale are $250$-350K.  Any info will help!  Thanks!
  • November 08 2009 - Traverse City
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Answers (7)

Profile picture for the_country_hick
Go as low as you dare. You have little to lose. If teh bank will not accept your offer you can try again.
Remember, a house is not something to be looked at emotionally. It is to be looked at financially. Do not financially hurt yourself because of what anyone tells you.
Stay within your financial reality. NEVER offer more than you feel comfortable with.
  • November 08 2009
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I would begin by looking at the history on this property as well as the condition of not only the home but also the real estate market in the area.

As you explain in your paragraph you indicate the home is being sold 22.18% below market if we were to give the home a market price of $275,000 using the price range you give $250,000 - $350,000. Now you are asking if the bank would accept an offer 41.8% lower than market value? I dont think your offer of $160,000 is completely unreasonable, I just made an offer on a REO in my area with a market value of $375,000 that was accepted at $239,995 or about 36% below market. The key is knowing your market. What is the absorption rate of upscale homes in your area?  Enlist the assistance of a well qualified Realtor with REO experience in your area. Furthermore keep in mind the worst a bank can do respecting your offer is say No! 

If you feel strong about this offer go for it..Hope you get it. 

  • November 08 2009
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real estate is local, and as has already been mentioned, you really do need to secure the services and assistance of a local Realtor (Buyer's Agent). 

The very first bit of information you should ascertain is a list of the recently Sold (comps) homes in the immediate vicinity of the property you're interested in.  That should give you a value range for the property.

After that, you the input and advice of your Buyer's Agent regarding the pricing strategy in your local market, as well as all of the other terms and conditions to be in the contract.  As Jason said, it's not about price alone.  it is a VERY complex process.

Best of luck to you!
  • November 08 2009
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Sandra thanks for also adding additional pertinent info
however, lol, you don't necessarily need to ask someone to click on the thumbs up lol

  • November 08 2009
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Marco,

Here's "Tips for Buying an REO Home From the Bank" which is part of a free online primer about real estate that you should refer to.

Locate and work with a local agent to help you craft an appropriate offer for this home or another that fills your bill. Choosing that agent is critical to success as you'll conclude after reading a bit about the process. Keep interviewing until you receive clear and complete answers to your questions.

Off hand it sounds as though your proposed offer would NOT receive consideration, it is substantially off the asking price, perhaps out of line with market reality. That's a guess that your agent will be able to expand on.
  • November 08 2009
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Buying forclosed homes is a very risky process. Honestly, I advise my first-time-buyers to stay away from it.

In your case, you seem to not have a buyer-agent (you should, it's free, and (s)he is helping YOU), so you must be extra careful.  The amount of the offer is the last of your concerns.  Have you investigated the title? Heve you inspected the home?

If you offer very low, the bank may take it, but just hold on to your offer in wait of a better one.  You will be tied to this property, without guarantees, until the day of closing.  Most banks impose thier own "non-binding" contracts, and there is nothing you can do about it.

This is too risky to try to do alone, especially if you're a first-time-buyer.  If you'd like me to recoment a local buyers' agent for you just let me know.

(pls click on the thumbs-up icon if this answer was helpful to any reader)
  • November 08 2009
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What does your agent suggest you bid at? Bank though not in the business of transacting real estate, they are also not in the business of giving aways homes if they don't have to. If the home is in an upscale/ highly desired area then bidding too low means that some one else is going to bid correctly and take the home that you wanted. There are also a number of additional factors that will determine if they will take a lower number (your agent again should be guiding you at this point).
-how long has it been on the market
-what competition does  it have
-what condition is it in
-what terms is the bank looking for
and the list goes on

in short though don't bid to low hoping to get "the ultimate deal" because you may not get anything at all
  • November 08 2009
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