Lynn, will the bank accept a lower offer price if I offer them cash? Penny said to me as she looked at a Freddie Mac property foreclosure in Utah.
No. I replied. They view borrowed money the same as the money they would receive from a cash buyer.
Penny is like most of us. She has never purchased real estate that has been foreclosed on. But, like most of us, she has seen the infomercials that offer to sell us lists of foreclosed summit county real estate that you can buy for pennies on the dollar.
The thing is that banks aren't in the business of losing money. They have a fiduciary responsibility to recover as much money as they can for their investors. And, if you own a stock or bond based mutual fund one of those owners could very well be you!
Real Estate has been hit hard in many parts of the United States. But, for example in Salt Lake & Summit Counties have not had the large losses that some other locations have had.
So how do you get a good deal on a foreclosure when you're a small real estate investor? Well, you need to take time to watch the market and understand the real estate you're looking for. It's real important to be patient and discriminating!
A bank will get 2-3 brokers price opinions before putting a foreclosure on the market. They want to sell the real estate they own at market price. In a market that's fluctuating nobody really knows what the market price is so they do their best to price it at what they believe the market price to be. Then if it doesn't sell, they will do a price reduction after about 30 days.
The amount of the price reduction will be based on the amount of traffic they've had walking through the real estate and if they are getting any offers. They will then repeat this process for the next 60 days or so and hope that they are getting closer to the market price. If they haven't reached the market price by then they will usually become more aggressive in their price reductions and make them in shorter increments if they feel it is necessary.
What is necessary for you to know about real estate foreclosure is that as the price decreases the more buyers there are that become interested in it and follow it. That means that you need to be ready to strike when it gets near what you are willing to pay!
I've followed this strategy with hundreds of Clients and it has always paid off! Just remember to add patience and market knowledge with your foreclosed real estate search, and you'll have greater success!
Lynn Butterfield is a highly sought after in Utah Real Estate. He represents Coldwell Banker with the Economic Development Corporation of Utah & MountainWest Capital Network, he mentors early stage companies with other professionals at the Wayne Brown Institute and is a member of the Utah Association of Realtors Legislative Committee. Find out more about Lynn and Real Estate in Utah at http://www.salt-lake-county-utah-real-estate.com/