Negotiating REO's
When dealing with an REO, I'm trying to figure out what different contingencies are worth to a bank while writing a contract.
example:
would $50k with financing contingencies be worth $45k cash offer?
Would $50k offer close in 30 days be worth $48k close in 7 days.
What are inspection contingencies worth?
I could go down the list of contingencies, but I'll let anyone jump in with the contingencies that actually matter to the offer price.
Tom
Well, these matters in my experience are really dependent on the local market.
In my experience the only thing that matters is the dollar amount, since the norm today is that banks are recieving almost 100% cash offers (in good markets), there is little incentive for them to even consider your offer because they will be looking at two other offers more seriously, which will be one for $50,000 (cash) and another for ($51,000) cash. You're most likely smart enough to figure out which offer will be accepted. You can also see your offer won't even matter unless it is for $52,000 (cash).
Now if your investment area is the exception and you are in a market where the banks are doing business like all the gurus books say all banks all over the country are acting which is they will be begging you to take those REOs off their hands at whatever they can desperately get for them (yeah right!) then things are different.
What I'm trying to tell you is that most likely if you put in a contingency you aren't going to be considered, REOs are a sellers market, the banks are not desperate, even though "They aren't in the business of owning realestate, they are in the business of loaning money." they don't seem to care because there are litterally thousands of us investors who have read the book about REOs and are competing with each other for them.
I don't understand your point or your worries. You upped your offer by $1000 and upped your earnest money by $500 and you have issues? You wonder if you moved too fast? You're losing sleep over this? Would you rest better if you only upped it $800, would $200 make that much of a difference? A more typical scenario would be making an offer of $25,000 and not hearing a thing from the bank and someone else buying it for $65,000. The difference between an offer being accepted over $1000 is not worth worrying about, it is a subject to celebrate.
Be very happy you are in a market where that is possible.
I think each seller will value things differently. Your best bet is to ask them directly...for example, is the asking price the most important consideration or a quick close. Each seller will have different needs/priorities.
With banks, they are not going to want to deal with contingencies...so do everything you can to remove these prior to your offer. They will mainly be concerned with price and additional holding costs until closing.
What you should understand is that there are factors that effect a sellers liking of your offer that are pretty much set across the board. #1 being the offering price, the rest is all up in the air depending on your market.
In a sellers market - every offer on REOs is cash with no contingencies and a fast close. If you put in a finance offer it probably won't be considered, because there is somebody else with an offer the next day without one.
In a buyers market - who knows what you can get away with. A lower priced offer with a fast close will hold more weight because as we all know an offer that will close today is much better than an offer that might close in 6 weeks.
If you want detailed answers to specific questions in regard to your markets and your banks REO strategies you are going to have to ask somebody who deals with your banks. You're wanting extremely specific answers that nobody could possibly answer because we don't deal with banks in your back yard. With time you will get to know what works and what doesn't. The good news is that your market is closer to a buyers market, so even if you test the waters too strongly and the bank pulls back from your counter the chances are good you can come back a week later and try again, each time getting to know what does and doesn't work. In a strong sellers market you would never have that luxury, the house would be sold and you would only be getting one shot at it.
But as I said, you are worrying about the wrong things. It's like being a 3 handicapped golfer and asking how to get to a 2.7 handicap, everybody who is a 25 handicap looks at you and mutters to go screw yourself under their breath. Count your blessings and take advantage of the buyers market you are in.