How Much to Bid on a Bank-Owned Foreclosure

There are a number of factors to consider when bidding on a bank-owned foreclosure.

Foreclosed homes and other distressed properties sometimes offer an opportunity for a buyer to own real estate for less than market value. However, not all foreclosures are bargain priced. There is no set percentage to bid on bank-owned properties, but many sell for about 10 percent less than the asking price. To determine what to bid on a bank-owned foreclosure, buyers must take a number of steps to determine the property's value and how flexible the bank might be on pricing.

Hiring an Agent

A real estate agent experienced in foreclosures can help you in buying a bank-owned property. Many agents with foreclosure experience have relationships with banks and can help the buyer pick off properties as they enter the market. Experienced agents may also know what offer a bank will be willing to accept.

Local Market Conditions

A buyer's real estate agent can provide a variety of useful information on comparable properties including selling prices and time on the market. Buyers can use the selling prices of comparable properties to determine market value of the foreclosure. The length of time that comparable properties take to sell may be an indication of how willing a bank is to negotiate. Banks will be more willing to negotiate when properties are selling slowly. In some markets, banks receive multiple offers in a short period and may be able to sell a foreclosure for more than the asking price.

Foreclosure Condition

Banks typically sell their foreclosures "as is," meaning the condition isn't guaranteed and no repairs will be made. While banks do take the condition of the home into consideration when setting a price, the price might not take into account the full cost of repairs. Buyers should have an inspection of the property performed before closing the deal. If serious repairs are noted, buyers should attempt to negotiate a lower price or walk away from the deal.

Avoid Low Offers

The are a number of downsides to making lowball offers. While banks may still make a counteroffer, they might simply ignore an extremely low bid. Real estate agents may also lose interest in working with buyers who only want to make offers that are very unlikely to be accepted.

References

• Bankrate.com: Buying Bank-owned Property; Steve McLinden; November 30, 2008
• "Kiplinger"; How to Buy a Foreclosure; Amy Bickers; June 2008
• Bankrate.com: Is It Safe to Buy a Foreclosure?; Holden Lewis; November 2010