Posted by Dawn Griffin
Negotiating With Banks on Foreclosures
Below is an example of a note I just sent along with an offer. To be honest I am not sure if this works or not, but this is what I have been sending along with offers to purchase when my clients write contracts on foreclosures. Often I feel like these explanations fall on deaf ears and I am never really sure if the listing agent passes them on. However, our contract was ultimately accepted for $10,000 higher than the offer that accompanied this note. The seller (bank) came down 15k from their list price after the property had been on the market for 19 days.
Dear Listing Agent:
Please present this note along with all MLS printouts to your asset manager and please ask that it be forwarded to his/her manager as well. This should accompany our most recent offer of $xxx,xxx with a closing of July 23rd.
Explanation of Included Data
Item 1: Searching the MLS for the address XYZ Street reveals that this home was listed several times since 2002 and was unsuccessful at selling at market value every time. Please note that the most recent expired listing was in 11/2003. At that time the home was in superior condition and was unable to sell for $339,900.
Item 2: This is a map search of the Subdivision including all SOLD properties from the present to June 2000. The highest sold price for this subdivision was $349,900 in 2008.
Items 3-9 Include CMAs of the immediate neighborhoods. (Exact boundaries of map search were included here). Below are the results of the average days on market, price per square foot and % of list price to sale price
2004-2005: 66 CDOM $166.74 96.34%
2005-2006: 111CDOM $182.70 92.66%
2006-2007: 132CDOM $170.83 88.26%
2007-2008: 107CDOM $166.56 92.48%
2008-2009: 66CDOM $153.88 88.64%
2009-2010: 57CDOM $147.36 89.73%
Note that for 2009-2010 there are two versions of the CMA. One version eliminates 12345 Lane which sold for 115% of list price. This is obviously an exception.
Summary:
XYZ Street failed to sell for $339,900 in a good market when it was in superior condition. To get this home back in the condition it was in in 2003 (when it failed to sell) this home will need between 50-70K of updates. At the buyers’ current offer price of $xxx,000 if they invest $70,000 in renovations they will be into this property for $340,000. The highest sold price for any house in this subdivision in the last ten years was for $349,900.
In the current market (within the last year and with the area mapped) homes are selling for approximately 89% of list price with in an average of 40 days on market. 89% of current list price would be $262, 105. The buyers’ current offer is 3% higher than that. Please ask the bank if they would like to sell the home now for 91% of asking price or wait 3 more weeks and sell for no more than 89%.
It is true that this home has only been on the market for 19 days and has already received an offer. However, I am sure based on the feedback you have received from other showings a low offer was no surprise. The systems are nearly as old as the house. The kitchen and all the baths need to be completely updated. Every room needs cosmetic attention in terms of wall repair and paint and all of the floors need to be torn out and re-installed. The rear exterior roof is caving and has caused interior water damage. Most of the windows and skylights need updating. And the condition of the pool is unknown.
This is not priced for an investor and is therefore only marketed to a limited pool of buyers. There are not many buyers in this price range that are willing or financially capable of taking on such a huge renovation. With national forecasts stating that the St Louis County market has not yet hit bottom, the historical MLS data showing that home values in this area have steadily decreased since 2005 and the likelihood that this buyer will have to relocate within 5 years, this will likely be the best offer put forth by any buyer.
Thank you for your consideration and please let me know if you have any questions
