Foreclosure Price – How did the bank come up with that?
Ever wonder how the bank came up with a foreclosure price? Stick with me here and I’ll show you what most banks do to price a home.
Step 1 to the Foreclosure Price
When a home is taken back by the bank as a foreclosure and all of the legal steps have been completed for the bank to sell the home, the bank assigns the property to an asset manager – this is step one to setting the foreclosure price and can take weeks to months to complete. This person is very often an outside vendor and not an employee of the bank.
Foreclosure Price – Step 2
Typically the second step to coming up with the foreclosure price is that the asset manager contacts 2 or 3 real estate agents and 1 real estate appraiser. These parties are hired to prepare a detailed analysis showing the value of the property in its current condition. They look at recent similar sales and then deduct for what it will cost to repair the home. When all of the reports have been received, if there are discrepancies in their suggested foreclosure price, the asset manager may call in another party to resolve the dispute, and once resolved, they set the actual foreclosure price.
There you go, now you know how banks come up with a foreclosure price.
Is The Foreclosure Price Negotiable?
Because they have had so many sets of eyes review and agree to the foreclosure price, the bank typically is not very negotiable.
Now this will probably come as a surprise, because so many people have heard about their neighbor’s cousin’s uncle who got a foreclosure home for 50 cents on the dollar.
Next time you hear a similar story, ask this question. Is that 50% off the list price or is the 50% off of what it sold for in 2006. I have another video in this series that discusses this in detail.
I can assure you that that buyer who says they bought the home for 50 cents on the dollar probably paid 90% or more of the list price. Very very rarely does a bank sell a home for less than 90% of the current listed foreclosure price.
One last thing, the foreclosure house that is in good condition, will sell, with multiple offers, and if there’s a bidding war, some times above the listed foreclosure price, within days of the listing or within days of a price reduction.
So, before making an offer on a foreclosure home, ask your agent to look at the most recent 10 foreclosure sales and calculate the average sale price as a percentage of listed foreclosure price in your area.