Typically the banks are looking for a percentage of the BPO value as the realistic price. Fine if the BPO is in line, not so great when you get a bad BPO returned. As a buyer agent I would think about this especially if the home your buyer is interested in is priced way under market value. If you have an investor that wants to steal a deal as it were and ride it out hoping for positive results then I think that is okay coming in low. But if you have a buyer that would like to occupy and the list price is way off the market value it is best to consider getting the offer in line. I suggest an offer around 92-95% of market value has a better chance of being accepted. The reason is that at a 95% offer and after most concessions and commissions it will bring the NET to the bank in the 86-88% range and that should work well. But even as I post this these numbers a sliding down a bit.
So if your buyer/occupant wants to test the waters with a low offer that is their option. If I were their buyer agent I would like to know they would come up as needed to seal the deal based on any sticking points. After all we are not in the business of writing offers for the mere practice of it. Often a doesn’t typically counter back the offers on price the way you would think. If the offer is unrealistic they just deny it more often than not. This is another area where the competence of the listing agent or negotiator is important. A decent negotiator/listing agent after getting a ‘no’ will push back trying to get something everyone can work with. At times this might mean escalating the issue past the loss mitigator currently working the file. Too many agents hear ‘No’, ask why to the initial loss mitigator only to hit a wall. They hit the wall because that loss mitigator often has no authority to go beyond the guidelines in front of them. I am seeing this start to change a little now for the better but not across the board yet. In reference to something like a counter the bank(s) might come back with limitations to the initial offer. For example stating that the most in closing cost fees they will pay is 3%. So if your buyer asked for 3% concessions any additional fees above that the bank is stating they don’t want to pay. This one is scary because if the listing agent doesn’t read that letter correctly and truly understand what they are asking you could go all the way through closing to find out the amount to the bank was wrong based on their paying more than agreed in the approval letter.
Typical counters from the first:
- Commissions (of course)(but don’t do it)
- Total closing costs including the seller concession request
- Amount they will give to the 2nd lien, if one exists
- Paying property taxes
- Paying outstanding HOA fees or for resale documents
- Paying recording or other miscellaneous settlement company fees.Typical counters from the second:
- How much they will accept to release the lien—Often more than the 1st will pay
- Commissions again—This one is just stupid to me as it does not affect their bottom line as any reduction in commissions would be paid to the 1st.In response to these counters the money needed to meet whatever is finally negotiated can come from a few areas
- The buyer—Increasing the sales price—Reducing closing cost concession requests
- The seller—Bringing money to the table to make of the difference—Selecting to sign a promissory note as needed to appease one or both of the banks. Not typically an attractive options to the seller and sometimes not something the bank might want (strange, I know).
- The Realtors – But hopefully you do not allow this to be an option!