Hawaii Home Foreclosures – Lowball Offers and How to Make Them, Part 4
The tricks to lowball offers:
- Don’t miss out on a good opportunity—Unless you have a good reason “why” a property should sell for pennies on the dollar, then don’t lowball. REO properties are already “ON SALE” and the bank is following a strategic plan regarding the listed price and marketing of every REO. Chances are, if you are ready to make an offer on an REO, so are 4 other families. On average, my REO properties move quickly from list to contract in 16 days. Don’t mess around with lowball offers if you have your heart set on a specific property. You will lose! There are times when you can and should make lowball offers, which we will discuss.
- Be smart, know your market—Investigate by viewing properties in the price range and location of your chosen REO. Due diligence can be a lot of work, but it is also an effective way to get the answers needed to make an informed offer, or acquire the information you need to pass and move on to your second choice.
- Know when to make lowball offers and investigate different scenarios—Has the property been on the market over 100 days? Why? Perhaps it has been in and out of escrow. Why? Maybe it is simply because the last buyers failed to approve for their loan, or it is possible there is another problem. The listing agent is not always privy to situations on their properties until the first inspection. Any situation can present itself as a great opportunity to pay less if you have cash on hand.
In any case, if you can find a good and honest reason the property deserves a lowball offer, have your agent write a compelling email to the listing agent that explains the reason you are making such a low offer. For example, perhaps you were at a meeting last week with the Department of Water and they have decided to raise water rates by 100% in the area where this property is located.
If this is the case, you can be assured there will be an article in the newspaper. Scan the article and send it with the email to the listing agent. Hopefully, said agent will back you up and make a case for you with the asset manager. Maybe the property is located on Molokai where there is more than a 25% unemployment rate which considerably reduces the potential buyer pool of local residents.
Target properties that have been on the market over 100 days. Target properties that are not marketed well, only one photo on the MLS, no open houses. Target properties that do not show well, because most buyers do not have an imagination when it comes to fixing problems or performing rehabs. For more information on Hawaii home foreclosures, view my previous blogs.
Go forth and conquer!
Our offices are working upwards of 30 pre-foreclosures (properties not listed in the MLS) at any given time. To protect homeowners or tenants currently still living in bank owned properties, and because of MLS rules, we are unable to give out addresses of our unlisted pre-foreclosures.
However, as bank owned properties are able to be listed on the MLS, and if you answer a few questions below, we can contact you first when a property of your dreams is about to be listed. Also, be sure to check out my gallery on Maui Short Sales.
Please call or send me this information:
- Assets you desire in a property. ( i.e. acreage with a house and cottage, condo, 3 bed/2 bath, swimming pool, vacation rental on the golf course, etc.)
- Pre-approval letter or proof of cash. I would be happy to send you names of loan officers, so that you can be pre-approved and ready to make an offer.
- Preferred location (i.e. W. Maui, S. Maui, or an actual town such as Haiku, Kapalua, Kihei, Wailea, or a zip code).
- Phone number, name, and email address.
Kathleen Wilson, SSCP – Short Sale Certified Professional – Five Star Institute, RECP – REO Certified Professional – Five Star Institute and SFR – Short Sale Foreclosure Resource.
Gary Bland, RS
March 29, 2011
Kathleen, You are so right about this BLOG. I also face this with many clients who think that offer half and see what happens. It never works and we have to offer something that makes logical sense for all not just a low ball offer that will never get accepted. Everyone wants a good deal and both of us know what property had sold for in the peak times. REO are so far below what the peak era had been. I know that not all REO are Best Deals just priced so much better.
Gary Bland, RS
March 29, 2011
Kathleen, You are so right about this BLOG. I also face this with many clients who think that offer half and see what happens. It never works and we have to offer something that makes logical sense for all not just a low ball offer that will never get accepted. Everyone wants a good deal and both of us know what property had sold for in the peak times. REO are so far below what the peak era had been. I know that not all REO are Best Deals just priced so much better.
Tara Kelly, RS
March 29, 2011
Kathleen, great information. You are right on!! In many cases here on the Big Island the REO property goes in a bidding war and usually sells for more than the list price. In most cases REO properties are already a good DEAL and will sell fast.
Tara Kelly, RS
March 29, 2011
Kathleen, great information. You are right on!! In many cases here on the Big Island the REO property goes in a bidding war and usually sells for more than the list price. In most cases REO properties are already a good DEAL and will sell fast.
Hawaii Home Foreclosures – Making the Offer, Part 3 « Hawaii Real Estate Market
March 29, 2011
[…] If Listed Over 100 Days—When making offers on properties listed over 100 days you may consider 2% less. Normally, the bank will lower the listed price every 30 days or every time it falls out of Escrow depending on different variables. (See my blog, Hawaii Home Foreclosures – Lowball Offers and How to Make Them, Part 4.) […]
Hawaii Home Foreclosures – Making the Offer, Part 3 « Hawaii Real Estate Market
March 29, 2011
[…] If Listed Over 100 Days—When making offers on properties listed over 100 days you may consider 2% less. Normally, the bank will lower the listed price every 30 days or every time it falls out of Escrow depending on different variables. (See my blog, Hawaii Home Foreclosures – Lowball Offers and How to Make Them, Part 4.) […]
Jeremy Stice
March 29, 2011
Kathleen,
You are spot on here. In 2009, I represented 12 buyers on foreclosure properties in Maui- in 5 of these 12 scenarios we were up against anywhere from 5-20 competing buyers on each of the specific properties. I was able to help 4 of the 5 buyers secure the property of their choice- in all instances they were at or above full asking price. Nevertheless, a couple of these properties appraised between 15-20% higher than our contract price-talk about a Screaming Deal.
Over this past weekend I have been helping another buyer negotiate on a very well priced REO home in Wailuku, we are very close to putting it together with the bank and once again this will be over full asking price.
Motivated buyers really need to ask themselves ” What is this home worth to me?” Sometimes you have to put the asking price on the back burner because my experience has been that you are going to kick yourself much harder if you don’t get these great deals rather than if some real estate “expert” thinks you overpaid by 5%. More often than not, the real estate portfolios of these “experts” is slim to none.
Great post and great series Kathleen.
Jeremy Stice
March 29, 2011
Kathleen,
You are spot on here. In 2009, I represented 12 buyers on foreclosure properties in Maui- in 5 of these 12 scenarios we were up against anywhere from 5-20 competing buyers on each of the specific properties. I was able to help 4 of the 5 buyers secure the property of their choice- in all instances they were at or above full asking price. Nevertheless, a couple of these properties appraised between 15-20% higher than our contract price-talk about a Screaming Deal.
Over this past weekend I have been helping another buyer negotiate on a very well priced REO home in Wailuku, we are very close to putting it together with the bank and once again this will be over full asking price.
Motivated buyers really need to ask themselves ” What is this home worth to me?” Sometimes you have to put the asking price on the back burner because my experience has been that you are going to kick yourself much harder if you don’t get these great deals rather than if some real estate “expert” thinks you overpaid by 5%. More often than not, the real estate portfolios of these “experts” is slim to none.
Great post and great series Kathleen.
Kathleen Wilson, RS
March 29, 2011
@Gary: Absolutely right when you say “not all REO properties are the best deals.” Case and Point: A colleague had a REO property listed 410 days, bank would not adjust price to market value. In fact, a note in the remarks said … “Bank will not take less!” Meantime, market fell at least another 10% and it finally sold, $170k less than original list price, high $300k’s. This is a rare case but I am sure the bank followed its original marketing plan to the “T”. It took over a year to get there!
Kathleen Wilson, RS
March 29, 2011
@Gary: Absolutely right when you say “not all REO properties are the best deals.” Case and Point: A colleague had a REO property listed 410 days, bank would not adjust price to market value. In fact, a note in the remarks said … “Bank will not take less!” Meantime, market fell at least another 10% and it finally sold, $170k less than original list price, high $300k’s. This is a rare case but I am sure the bank followed its original marketing plan to the “T”. It took over a year to get there!
Kathleen Wilson, RS
March 29, 2011
@Tara: I don’t like admitting it but Bidding Wars are exciting for the Listing Agent, with the outcome being, always a sold property. I know it is difficult for the Buyer’s Agent because of the element of “not knowing” the outcome, I’ve been there too. But truly, buyers can get caught up in the frenzy of a Bidding War and pay too much if they have a gambling soul … I’ve seen them go for a property at any cost. It becomes about “winning” and they forget their true intension. That’s when they better hope they have a good agent like yourself, who will reel them back to earth and plunk them back into their budgets. I always make sure that I discuss Bidding Wars with a buyer right out of the gate, so they can see themselves in action and are aware of the consequences.
Kathleen Wilson, RS
March 29, 2011
@Tara: I don’t like admitting it but Bidding Wars are exciting for the Listing Agent, with the outcome being, always a sold property. I know it is difficult for the Buyer’s Agent because of the element of “not knowing” the outcome, I’ve been there too. But truly, buyers can get caught up in the frenzy of a Bidding War and pay too much if they have a gambling soul … I’ve seen them go for a property at any cost. It becomes about “winning” and they forget their true intension. That’s when they better hope they have a good agent like yourself, who will reel them back to earth and plunk them back into their budgets. I always make sure that I discuss Bidding Wars with a buyer right out of the gate, so they can see themselves in action and are aware of the consequences.
Kathleen Wilson, RS
March 29, 2011
@Jeremy: Good Point when you say – “Motivated buyers really need to ask themselves ” What is this home worth to me?”
Look at the real estate agent from our office who set out to buy his family a REO property … he paid $50k over list price because he asked himself the very question you have posed … And, he knew the answer because he did CMAs and saw the potential for rental income and future property value! It is a no-brainer for us agents … Yet, in my experience I have noticed, even though I share your concept with a Buyer, sadly, they may not truly grok it until they lose out on a property they had their hearts set on, by offering too low.
Kathleen Wilson, RS
March 29, 2011
@Jeremy: Good Point when you say – “Motivated buyers really need to ask themselves ” What is this home worth to me?”
Look at the real estate agent from our office who set out to buy his family a REO property … he paid $50k over list price because he asked himself the very question you have posed … And, he knew the answer because he did CMAs and saw the potential for rental income and future property value! It is a no-brainer for us agents … Yet, in my experience I have noticed, even though I share your concept with a Buyer, sadly, they may not truly grok it until they lose out on a property they had their hearts set on, by offering too low.