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I want to buy a foreclosure but the bank seems to be asking for much more than they foreclosed on.

There are two different properties my wife and I like(we are first time home buyers), and each has the same predicament.  I know the amount the homes were foreclosed for.  The banks are asking a significant amount more than what they foreclosed upon. 1 home foreclosed for 60k and is listed in the 170's, and the other was closed for 105k and listed at 135k. both have excellent location and need minor work.  Should I offer the amount they were foreclosed on or closer to asking price? Also, will banks ever help with any of the closing?
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January 14 2009 - Memphis
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Answers (7)

You should have an agent do a market analysis on the area so he or she can inform you on the best market value for the properties in question. Then don't be afraid to come in lower than what the bank is asking. Days on market and current offers on the properties make an impact on what the bank will take. No matter what the bank got them for they are going to try to get as close to market value as they can. Remember to ask for 3% in closing. Banks are accepting that left and right. If you have any more questions feel free to ask.

Brian
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January 21 2009
Profile picture for wetdawgs
Sometimes the previous owners actually had equity in the house and it still foreclosed.   Therefore,the amount that was owed on the house is not a good ruler for determine the value of the house.

You can make an offer at any price, of course, but they won't accept something they consider foolish.      Therefore, figure out fair market value if you are seriously interested and then make your offer from that value.

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January 21 2009
You can always make an offer on any property. The bank just like a seller will decided what they are going to take. The bank is going to try to get the best price for the home. If you put in a really low offer they may sit on your offer and wait and see if they get a higher offer. If you like the home and you know what they are going for ( a recent sold) home, then give them an offer on what you are willing to pay for the home. Be ready if you bid to low to lose it to someone else. The banks are the same as a seller. They will get the best price for the home. It has nothing to do with what they paid or what was owed on the home. They are pricing them on current market value in the condition of that home. They price them to sell. They want them sold. But what they paid has nothing to do with what they are selling them for. So good luck I hope you get the home of your dreams. As far as your closing cost. Again they might pay your closing cost it would be considered in the whole offer. They will put the numbers to it and make the decision.
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January 21 2009
Interesting.  My guess is that the first house you talk about may be a second mortgage doing the foreclosing.  In which case they also had to pay off the first.  Otherwise as stated by others, their price is usually based on the fair market value.  Under cutting the competition a bit to get offers is also normal. 

As a long time REO (bank owned) listing agent I can tell you most lenders are prepared to pay 3% closing costs.  Most will not go 6%.  And they will not do prepaids.  True closing costs only.  So many times their contracts will read "will pay up to X% for closing costs".  If your closing costs are less, they pay the lower.

Remember that what they have into a property has nothing to do with the value.  You need to determine that yourself and then make an offer comfortable for you.  One thing.  Most buyers (and their agents) make a serious mistake when negotiating.  They don't justify their offers.  Show why you are offering what you are offering.  The lenders are much more responsive to facts and numbers.  Remember that they have to justify the sale to their shareholders if challenged/audited.

Make sense?

Steele V. Propp
Foreclosure Specialist
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January 21 2009
Don't let that stop you from making an offer.  Don't forget that besides the auction price they have hefty legal and carrying cost to try and recoup.  Look at fair market value of the property and determine what you are willing to pay based upon that and any repairs that need to be done.

Here is a recent blog post Whats all the hoopla about Short Sales and Foreclosures
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January 19 2009
In my experience there is nothing to lose in this market. The bank doesn't want to hold onto these properties but want to break even. For instance this is what I would recommend for the 170K property. Go back with 130K and ask for them to give you 6% concessions (6% of the selling price for closing costs, fees etc..which is the maximum amount)which in this case would be around $7,800, probably more than enough to cover the closing costs. That is how they would cover your out of pocket expenses with the exception of downpayment. If you are doing FHA then this could cover the MIP funding and closing costs. Push them and see what their pain threshold is.

I would be happy to help you further just let me know and good luck!!!
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January 14 2009
The banks always do an apprasil on the property to see what the selling price should be.  Then they usually put them on the market at what they consider far market value.   The the banks incur cost far above what the old loan amount was ( back payments, taxes, insurance, forclosure cost, cost of sale, and more) and so if they can sell it for more than the old loan amount it helps them not loose as much.
That dosen't stop you from offering less but they will only go down so much under apprasied value

Good Luck
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January 14 2009
 
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