Successfully Negotiating on Bank-Owned Foreclosed Properties

When dealing with foreclosed properties that are bank-owned, many potential buyers wonder whether they can low-ball the asking price. Often, the asking price is the lowest the bank will accept, but sometimes offering 10-15% below the asking price can still get a response from the bank.

The Bank’s Asking Price and Negotiation Tactics

The asking price for a bank-owned property that was foreclosed and did not sell at auction, like the one priced at $57,000, is a strategic teaser meant to draw interest from buyers and start a bidding war. While this price is a starting point, it is often the lowest the bank will accept. If you offered just 2-3 times this asking price, you would likely receive no response from the bank. However, offering 10-15% below the asking price (around $6,000-$8,500) might still get a response, but you should expect a slow response from the bank.

The Buying Process: A Challenge

Working with bank-owned properties can be a complex and challenging process. Banks are not generally willing to negotiate, and the home-buying process can be slow and frustrating. They can be slow to respond to offers and requests for information throughout the purchase process, making it difficult for buyers. Therefore, it is essential to be prepared for a lack of responsiveness and slow processing times.

Addressing the Property Condition

A foreclosed home often requires a lot of repair work, and the bank typically will not perform these repairs. This can be a significant challenge if you have a loan with conditions, such as an FHA loan, which may not approve your application due to the property’s condition. However, if you are willing to navigate through these challenges, you can find a great deal. In some cases, if you can do a significant amount of the repair work yourself, you can secure an even better deal.

Understanding Bank Laws and Constraints

The laws that govern banks can significantly impact how they dispose of foreclosed properties. If the bank is heavily regulated, their hands may be tied, and they may be obligated to refund the previous borrower’s funds if the property sells for above what they are owed plus their costs. Additionally, they may be obligated to sell for fair market value rather than undersell to someone who can turn a profit easily or profit excessively from the foreclosure. It is crucial to seek independent legal advice before entering into negotiations to understand the exact obligations and constraints the bank is operating under.

Conclusion

While it may seem challenging to negotiate with a bank-owned property, understanding the asking price and the bank's tactics can help you improve your chances. Always be aware of the possible constraints and workarounds, and consider consulting with legal professionals to ensure you are fully informed before making any offers.