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bank/real estate owned sale dont want to offer too much

classic delema
bank/real estate owned sale dont want to offer too much but dontbut dont want to lose out eather. Ive been told to start with 45% - 55% of the "fair market value" the house is listed at 350,000. a similar but better kept house in the same area sold for 365,000 two months before. this being an after forclosure sale, and the house would need some work would it be too low to offer 250,000?
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February 06 2010 - Richmond
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Best Answer
yy101,

When you purchase a REO, a bank owned home, as a buyer you'll receive only a Special Warranty Deed from the bank - it means that the bank warrants a clear title to the property only during the time that house was in the bank's posession. There are might be liens on that property and you will not even know about it - this is why purchasing a Title Insurance on REOs is highly recommended.

In the traditional sale, the seller gives you a General Warranty Deed which warrants clear title, free of liens "to the begining of dirt" or forever.

In addition to that, since you are purchasing the property "as is" there might be repairs and delayed maintenance issues, which will increase the cost to you, the purchaser.

Thus, do NOT feel bad about submitting a low offer to the bank - because you might be inheriting many potential problems. It should NOT be your problem that the lender took a risk and gave a loan to a person who was not able to keep or maintain the house - this is the lender's problem, not yours!

If you were to purchase at a regular price and yet inherit all those title and maintenance problems.... why not purchase from a seller who will deliver a beautiful home with no maintenance problems, well landscaped, and with a clear tile???

Make sure that the REO home is worth to you in the long run and the risk you are taking on.   
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February 06 2010
One final thing. If it doesn't work out and you end up purchasng a home that is not n foreclosure, buy title insurance. A general Warranty Deed dating back to the beginnng of "dirt" is no guarantee that a later claim will not arise. It happens all the time. Always buy title insurance.
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February 08 2010
Contact a local agent for their opinion after viewing the home and providing you with recent sales data to backup their opinion.  Some foreclosures are over priced others are under priced.
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February 07 2010
Great post by James and Vivianne.

yy101, you should also have a formula that you use when making offers. Everything should be considered from repairs, to holding costs, as well as what I call cost of investment- which partly includes closing costs, utlities, realtor fees etc.

I have an interactive spreadsheet on my website you are welcomed to.

Additionally, have you thought of purchasing directly from homeowners- perhaps using a short sale option? This way, you will know about your title going in and you risk a litle bit less of your own cash up front.
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February 06 2010
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Thank you James, wow 568 contributions. its people like you that make Zillow work. again thank you
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February 06 2010
hi yy101, to my mind, offer as low as you dare....and hope for a quick counter offer to establish a good feel for where the bank wants to be. A key part of your offer should be that you are qualified by a great lender and include your lender letter in your offer. Your loan officer should also be able to help you see the range of payments based not only on your initial offer, but also higher offers to help you prepare for your upper limit.
Good luck whatever you decide! Jim
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February 06 2010
 
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