Foreclosed Homes in Florida Priced Too High

This is the second in a series of three. For my comments on foreclosed homes priced Too Low - Click Here

Maybe the first bit of advice for foreclosed homes priced Too High is . . . walk away. But there are other options. Some banks will price a property too high because they want to be able to account for it on their books at an artificially inflated price. Other banks do this because they do not want to sell these properties and incur the expenses that go along with selling a property where they may wind up with 10 cents on the dollar of the original loan. It is a complicated process and Washington is at the heart of it by allowing so many exceptions and very little regulation of the banking industry when it comes to these loans. In any event, Buyer Beware applies here, but I would also add Buyer Opportunity.

Do Your Homework - Once again, this is the most critical step. You cannot do this alone because you do not have the access to records that a sharp real estate agent does. You may have access to the tax records of the area so you can look up what the property was sold for previously, but you don't have all of the additional facts real estate agents have through the MLS system historical data. So my first bit of advice is to hire a sharp, full-time real estate agent . . . that has experience with foreclosures.

Make An Offer - Now that you feel comfortable with the price you want to offer, be sure put together a well drafted offer that the bank can seriously consider. This means, above all else, provide as much information and detail as possible. If you have a lazy agent or one that does not really understand the legal issues of drafting an offer . . . get another agent or don't waste your time submitting an offer.

Financing - Your most powerful lowball offer is one that requires no financing. I have often seen banks accept 10-20% less than best offers because the lowball was a sure thing. If they accept a higher offer that has a financing contingency, the bank risks the deal falling apart if the buyer's financing does not come through.

When a deal falls apart, it just cost the bank time and money in dealing with the offer. And now they must put the home back on the market. In declining markets, this means putting the home back on the market at a lower price. So not only did they lose time and money during the contract period, but when they do eventually sell the home it will be at a lower price. If the next potential buyer also failed to get his financing approved, the process repeats. This can get very expensive for a bank.

Ducks in a Row - If you are like most buyers, you do require financing. If you have your "ducks in a row" you will be fine. I recommend all of my buyers get pre-approved through a reputable mortgage broker. I cannot stress that enough. If you are using a friend to get you a worthless pre-approval letter, you are wasting your time . . . and you are only fooling yourself. If you would like to use the mortgage broker we recommend for our clients, please email me Mike@FloridaHomes.pro and I will reply with the contact info.

With a solid pre-approval letter in place, you have two choices to make. One, you can submit your offer contingent upon final approval of your financing. Two, you can entice the seller with a significant down payment and no contingency for final approval. The second option is very risky. If you do not receive final approval of your financing, you lose your contract deposit. However, sellers will look at these offers as stronger because you are putting your money where your mouth is. By the way, there are ways around losing your deposit, but I must save that or another article.

Submit the Offer - You finally have a very clean and very detailed contract. You also have a rock solid pre-approval letter. You want to submit both. When you select a closing date, try to make it less than 45 days and at least 5 business days before the end of the month. If there is a close decision, banks will be more willing to accept an offer if they can get a property off their books before the month closes.

After the Offer - If your offer is rejected, at least your name is in the hat should the seller decide to lower the price. If the listing agent is on the ball, they will contact you when the price is lowered. Better yet, your agent should have this listing on an auto-watch where the MLS system will notify your agent as soon as the price is changed.

Next - I will be writing about Priced Just Right. I will also be writing about the importance of Cash v. Financing offers and Good v. Bad Pre-Approval Letters.

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