Buying Bank Owned Homes for Cash

I can tell within about 60 seconds of speaking to a Buyer, whether they have been listening to Real Estate investing gurus or watching TV news articles about how to buy foreclosed properties cheaply. Usually the “educated” buyer will begin using the phrases, “I have cash and cash is king”, “banks want to move these properties”, “fifty cents on the dollar” tip me off to what usually ends up being a failed offer.

A few weeks ago I received a call from an interested buyer that wanted to view a foreclosed property that I had just listed. After meeting the buyer at the property, he started dropping some of the aforementioned phrases. The buyer went on to explain to me that he knew banks want to get rid of their inventory and he had cash and wanted to offer $25k less than the $75 asking. After spending considerable time attempting to re-educate the Buyer, I relented and wrote their $50k cash is king offer.

Within a few days of this property being listed we had multiple offers, as is the case on nearly every REO listing. The bank sent all offers back for highest and best. Most of the offers were improved, except for “Cash is king” buyer. This buyer learned the lesson, that cash may be king but only with offer amounts that have some parity. I can say from multiple experiences that Banks are not going to take a 1/3 haircut for cash.

Here are some observations that I have observed:

  • A cash offer will not trump even a conventional mortgage with a superior offer amount. Cash is only king if the offer amounts are nearly equal.
  • When it is said that banks are selling their properties for fifty cents on the dollar, it means that they are selling the property for.50 on the dollar from their previous values. Banks will not entertain”low ball” offers on a property that has only been on market for 5 days.
  • Banks, in my market, are competitively pricing their properties at or below market value.
  • Banks are patient and will wait to get the closest offer to market value.
  • When you choose Scott Petersen and The Petersen Team to handle your Canton/Plymouth real estate needs, you choose a Realtors who is not just an expert, but someone who cares about you and your family. Buying or selling a home can be a very exciting and yet stressful. We will work to achieve your objectives, bringing our years of expertise and hard work. In this difficult market, we are proven producers selling in the multi-million dollar range year after year.

    We are very familiar with todays market and handle Short Sales, REO, Bank Owned, and all types of real estate in Wayne County, Oakland County, Livingston County, and Washetenaw County we specialize in Canton, Plymouth, Northville, Livonia and Novi.

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