Negotiating the Price of a Bank-Owned Home

Banks often are in a hurry to sell foreclosed properties.

Bank-owned homes are those that have been foreclosed on by the lenders who initially approved the mortgage to the previous homeowners. Once a homeowner is unable to make home payments, the bank seizes the home and is forced to find a way to liquidate the property to recoup as much of its investment as possible. Bank-owned homes often sell at a discount; however, it is important to know how to negotiate with the banks to get the best possible price.

Instructions

1. Enter the buying process cognizant of the situation the seller is in. Banks are in the businesses of lending money and managing financial accounts. They are not in the business of selling real estate. The last thing a bank wants when it makes a home loan is to later have to foreclose on that home and sell it. Furthermore, banks typically are in a hurry to sell homes they have foreclosed on, because the home represents money that is tied up in real estate and could be used for other investments. Therefore, banks often are in a position that makes them very willing to negotiate.

2. Do your due diligence. Banks rarely spend a great deal of time, if any, fixing up a home before selling it. Furthermore, homeowners on the verge of losing their home to their bank are not likely to take especially good care of it. For these reasons, there may be many faults with the home. Knowing precisely what condition the home is in is very important when negotiating its value.

3. Hire a Realtor with experience buying foreclosed homes. While having a Realtor adds an extra cost, her ability to negotiate with banks can save more money than she costs to hire. While a bank may feel confident attempting to intimidate an average homebuyer in negotiations, it will be much less confident attempting the same with a professional who purchases homes for a living.

4. Make your offer. With your Realtor, build your case for why you think the bank's price is too high. Point to faults in the home and document those faults with photos. Even if a bank says its asking price is not negotiable, remember again that the bank is in a rush to sell the house.

References

• RealtyTrac: Checklist for Buying a Bank-Owned REO Property
• Real Estate ABC: REO -- Buying Bank-Owned Real Estate