Re: Help! Bank want FMV for REO - Posted by Millie I.
Posted by Millie I. on October 27, 1998 at 23:41:22:
Banks will always start high and try to get every cent back plus a little profit if possible, especially if the property is in good condition.
If the original owner paid a low down payment, and lost the house a couple years later, there is hardly any equity accumulated on the house. By the time they are foreclosed, they may be a few months behind in payments and late penalties. Then there are the legal costs for foreclosure, etc. that could easily run up a $15K to $25K bill. In short, a REO could have an asking price above the fair market value. I’ve seen it myself. They do that sometimes even when the property is trashed. Most of the time the decision makers never saw the property. They decide on the asking price based on how much the bank has to recoup from the property, and what the comps tell them they can get for a house of similiar size.
Almost every REO I encounter start near FMV, if they don’t sell in 3 months, they usually start to drop the price gradually. Be patient and play the watching game. They may come down to the price you want, OR, another buyer may jump in and steal it from you before the price ever get to your desired range.
Watch and wait is the key, but you have to jump in right away if it ever comes within your range, there may be 50 other investor watching too. A cash investor has a better edge than one that requires the seller to wait for a loan to be processed. Be pre-qualified at least if you can’t do cash deals.