need help making offer- quick!!

[beachgirlsc]

(This may not be the right forum, so I'm going to post here & under "buying" in case I've gotten it wrong!)
I'm a first-time homebuyer and I'm supposed to be meeting with my agent this afternoon to write an offer on an REO property that I looked at last week. I've had my agent and the listing agent give me one opinion & 2 bankers give me another opinion & I'm feeling lost! So here goes:

The property is in GA and was purchased by the original buyer in 2004 for $210,000, apparently as part of a development he was starting on an existing road. I'm not sure exactly when the bank took possession, but it has been on the market for over 240 days, and the current asking price is $120,000. There are 7 similarly empty houses, all in foreclosure, on this street.

Most houses here seem to take a while to sell...around 90 days from what I've seen- no market crash here & most buyers seem to hold out for near-asking price. (have been searching for 6 months now)

I don't have a lot to spend, and I have been approved for a 203k loan which specifies that I spend at least $5000 of the total loan amount on rehab (will actually total an extra 8k with inspections, contingencies, etc.). My agent & the listing agent think that $110,00 would be a good "starting point" and should be my initial offer.

The bank people (one mortgage specialist from a company I called anonymously- hated to do that but I feel so stupid!) (one manager from the reo division of another bank) suggested that I start at 90 or $100,000.

I DON'T want to lose this one, but I CAN'T afford more than $117,000 TOTAL. The less I pay, the more I can afford to do to improve the home, and I HAVE to do some work to satisfy the terms of the 203k.

If I offer too little could the bank just not respond? If that happened, what would I do? Is it just OVER, or do I look like a moron jacking my offer up 10 grand at a time? (I'd gladly look like a moron to save $10,000, mind you...)

I can't keep hanging on like this- I have to move out of the rental I'm in as it's being sold so I need to make a move asap. I can't rent easily because I have 2 large dogs and a cat.

HOW MUCH SHOULD I OFFER FOR THIS HOUSE??
thanks in advance for any help provided.

[judyo]

If you want to take the chance of making too low an offer at $90,000 or $100,000 then tell your agent that is what you want to offer. The bank doesn't have to respond but IMO they will at least counter offer if they don't have anything better.

If another buyer comes along with a better offer before they accept yours then they don't have to come back to you. This is a decision you need to make for yourself.

[AaronSOLD]

The big thing I've seen with REO is that the response times from the bank can be pretty bad. Seems like the easiest way to get a quick response is to have a shorter timeframe for closing. Whomever is at the bank reviewing offers is going to pay more attention to the one closing in 30 days than the one in 60.

Each bank has different rules as to how they determine the price they will accept.

[beachgirlsc]

Thank you both! I made the offer at 105 figuring it was well in my range but not so low that they won't answer (I hope!) ...if we can't come to an agreeable middle ground, then that's life... I'll keep looking! It occurred to me that the biggest reason I didn't want to make a low offer was that I didn't want to insult anyone, but the bottom line is...the bottom line! I can't pay more than I can pay, so if they won't meet me in the middle then I just can't do it. If they're insulted by the fact that I don't have more money, then that's their problem, not mine!

I did specify a 30-day closing date- would have made it less but my agent said I may need the 30, and if we're ready sooner that's great but if not, I'm going to be glad I had the whole 30!

All I have left is inspections & appraisals, so if we can settle on a price I should be finished up in well under the 30 days (small town, no wait time to get people out there).

I doubt if it's been sitting there without a buyer for 8 months that anyone will pop up and buy it out from under me in a week, but that's the chance you take! The offer specified a response time of only a couple days...was that a mistake? I don't think my agent deals with these too often- maybe with an reo it should have been longer?

Thank you so much for your help...I'll keep you posted! (ummm... if anything happens!!)

[AaronSOLD]

Any urgency you can provide to the offer is probably helpful with a bank, at least from my experience. I've seen banks take 1-2 weeks to respond... even with a quick close... so you may need to extend that date. It's an art rather than a science.

Good luck!

[beachgirlsc]

Thanks Aaron...Wow, so much for a slow response- made the offer at noon today & got their counter just now (4 pm)!

So asking was 120, I offered 105 & they countered 116...going to have to think about where to go from here, but if anyone has suggestions based on what is "typical" it would be helpful.

Gotta go crunch the ol' budget & see exactly where I can afford to end up!

thank you!

[AaronSOLD]

There is no real "typical" since each situation can vary greatly. At the end of the day it really comes down to are you willing to pay what they are asking? If you want the house bad enough, a few thousand in the grand scheme of things isn't really that much.

Your money, your house... go with YOUR gut :-)

[Portland Real Estate Guy]

75% of value and below is good to keep in mind.

[reolister]

If it were me, I wouldn't go up more than they came down. Play a little hard-ball, and don't max out your offer too soon in the game. As an agent who works mainly as an REO listing agent, I also recommend negotiating a bit more than 30 days to close, since you are doing an FHA loan. Judging on recent personal experience, FHA loans are the biggest PITA in the world, and they don't always close on time. I don't think they are a bad program or anything like that, but as a listing agent - PITA!!

Keep in mind that many banks will want you to sign their addendum to the contract, which over-rides the local contract your buyer's agent had you sign when you made the offer. The bank's addendum usually has wording about a 'per diem' - which means that you would have to pay a certain dollar amount per day until closing if you can't close by the contract closing date. In my personal experience, it's usually $100 per day. You of course can do whatever you feel comfortable with, but if I were buying an REO with an FHA loan, I would try to get a closing date 6 weeks out instead of 4. You should discuss this with your agent. No legal advice intended, just sharing my personal experience and opinions.

[judyo]

Not sure how Portland Real Estate Guy dug this old post up but this place might have been bought and already put back on the market as this was originally posted in 2006! Check post dates before answering.