Are Banks Negotiable? Buying Short Sales and Foreclosed Real Estate

The answer to this question is an unequivocal ……it depends.

The old school of thought was if you were buying a property that was contingent upon the banks approval, such as a short sale or foreclosure you pretty much had to take it as you found it. In other words, “caveat emptor“. Investigate the property as fully as you can with professional inspectors, but after you have an agreed upon contract, the chances of a bank addressing any repair issues or irregularities were pretty nil.

Let’s just say that today it is in the banks best interest to maintain the lines of communication and keep the buyer involved in the transaction. You may find banks more willing to be “customer friendly” these days.

Consider the following scenario. Who or what is holding onto hundreds of repossessed properties? The banks, right. And why is their inventory so high? Because their are too few buyers for the number of properties available. So, who has the momentum in the purchase transaction? For my money the buyers do.

I would much rather be a ready, willing and able buyer, who has good credit, a down payment and the ability to purchase a home than I would a clearing house for distressed properties whose inventory is growing daily. You don’t need a blue suit and a pastel tie and the look of indigestion on your face to feel like Donald Trump, you got the power, man! However, do you know how to use it? Hitting a golf ball 325 yards will do no good unless you keep it in play.

Real Estate Negotiation

To negotiate effectively with lenders it helps to know the history of the property you want to purchase. Here are the things you need to know:

1. How long has the property been for sale? – if it is a short sale, you can probably bet the current owners haven’t made a recent payment. Maybe they haven’t made several payments. Non performing assets increase the reserves they banks have to pay. They could be eager to sell it.
2. Determine the price history – again, if it has been on the market a while, the bank is having a difficult time keeping the nose steady as the market continues its descent.
3. Any offers or previous escrows? – If the property has been in escrow and is now back on the market; the bank may be learning an expensive lesson. I have seen several properties where the current price is less than the first offer that was refused. If this is the case, the best the bank may hope for is a belly landing.

There is one more condition, this is the Trump Card (not the blue suit and pastel tie guy) and can clinch your negotiation and resulting purchase.

However, I am not going to reveal that one now. Maybe I will save it for a future post or the clients I work with. After all, other real estate agents read my post and I do sometimes have to negotiate with them.