Negotiating strategy for bank repossessed properties

Hi all,

I am a first home buyer looking to buy a joint PPOR with potential to become IP in the future.

First and foremost, thanks to the regular contributers to this forum which make it an invaluable resource.

I have my eye on a property for which the listed price is towards the higher end of my borrowing capacity which looks like I could move in now then subdivide into front/rear in the future without knocking down the current house (yet to check for encumbrances/easements, subject council approval yada yada). When contacting the agent to arrange viewing I was informed that it is a bank repossessed property that has been vacant for several months but supposedly on the market for only 4 weeks or so. I'm going to the open this weekend and my main thoughts/questions are as follows.

1. My current understanding is that foreclosed houses usually go to auction in order for the banks to get close to market price and also to allay the potential perception that they have sold quickly below market to recoup their losses, which would be against the best interests of the owner. If so, why have they opted for private treaty sale in this instance and if the listed price is not met will they ultimately go to auction?

2. I presume the bank is looking to sell quickly and I was wondering how this would affect price negotiation with the agent. Are they more likely to accept a lower offer due to their desire to offload the property quickly or will the price be inflated by buyers having the perception of "getting a bargain" (even though the foreclosure was not disclosed in the public listing)? Or is there no room for negotiation in these instances? Looking at property comps for the area I believe the market value is around 5 - 10% lower than listed price but I am far from an expert.

3. I understand that if the bank accepts the offer the house is to be sold as-is and they may write up their own contract with additional stipulations. Will there be opportunity to renegotiate the price down after self funding the B&p etc. if something comes up given that they will not be doing any repairs?

Any advice or thoughts would be golden, and any general strategies for negotiating with the agent in these circumstances would be greatly appreciated!

 

1. Why does it matter? And probably not.
2. Nope.
3. Almost certainly not.

You're probably overthinking it imo.

The bank will want a big number, with as minimal conditions as possible (probably on their own contract paperwork with special terms).

 

I’d still think of trying low balling them . As you say most mortgagee sales go to auction , so it’s unusual .

Some owners get offended by low ball offers and then play hard ball , but I can’t imagine the bank taking offence to one .

if on the other hand , it’s a Very good deal and there are other buyers circling , you might want to act more quickly .

cliff

 

I have found that they won't negotiate much on these sort of deals. They have a take it or leave it attitude and even getting a response from them is pretty rare.

 

Thanks for the replies.

Based on the feedback it sounds like the way to go would be to cop the cost of a B&P before providing an initial offer if the bank is not going to want to negotiate on the contract.
Similarly it sounds like a soft lowball may be possible with some incentives like unconditional financing and short settlement period. My concern would be if there are other buyers circling they may put in an offer without doing due diligence before I can even get a B&p arranged - I guess I would just have to stick to my valuation minus an estimate of repair costs if that was the case.

 

sounds like this is a new experience for you, you have to distance yourself from the idea that the owner is a person with emotions, they will have a certain price they want to get or will accept initially, if there is huge interest and multiple high offers they will take them, have very little interest and they may/will drop their expectations,

im not even sure that they would accept a BP condition or be very reluctant to

years ago, I lowballed and managed to get it because apparently at the auction, there were only 2 people, the agent and a rep, and zero bidders, (i was on the phone)

 

Very new indeed. I am purely, as a thought exercise, speculating on how the dynamics of negotiation may be different for a property that is bank-owned vs conventional vendor and whether there is a way to leverage it to one's own advantage. Nevertheless, I generally agree with your sentiment that it is important not to lose sight of conventional wisdom with regards to free market economics and act accordingly.

 

Especially when you're starting out, I would focus your time on figuring out how much the actual property is worth, rather than negotiation speculation (which is something that you have limited control over anyway).