Negotiating An Offer For A Bank Owned Property

During the market crash, many home owners simply walked away from their homes because the values had fallen and they owed more than their homes were worth. In the current Santa Cruz County real estate market homeowners go into foreclosure for multiple other reasons. Once homeowners stop making 3 consecutive payments the lender will start foreclosure proceedings. Homeowners who go into default may be caused for one of the following reasons:
  • Laid-off, fired or quit job
  • Inability to continue working due to medical conditions
  • Excessive debt and mounting bill obligations
  • Squabbles with co-owner, divorce
  • Job transfer to another state

negotiating steps

Follow these steps to make your bank owned property offer shine above all the rest, be the winning offer, and close the sales transaction here are a few tips to help you throughout the process. It's not unusual for some REO foreclosures in Santa Cruz County, AZ to receive multiple offers. Sometimes the bank simply accepts the best offer at inception. Otherwise, the bank will ask the buyers to resubmit what is called "Highest and Final" offer.


  • Get preapproved in advanced with a local lender and determine what type of loan you can obtain. 
  • Since REO's are sold in AS-IS condition you need to determine if the home will qualify for a loan.

purchase price

  • Request for the property's REO foreclosure history and review the amount of loans that were once secured to the property.
  • Request a Comparable Market Analysis of active, pending, and closed sales. Identify only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.
  • To determine how much you would like to offer.
  • Bear in mind, when REO's properties are priced within market value, seller will rarely agree to accept an offer for less than 1% - 3% of listing price.
  • If you need to negotiate for seller to pay your closing costs you will then need to increase the purchase price so the fees can be paid by seller at time of closing.
  • If you are up against competing offers, assume buyers will offer more than list price.
  • If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.Banks like all cash offers.
  • If you are obtaining financing, then you may need to increase the price on your offer to be considered and pay for your closing costs.

home repairs

If the home needs a lender required repair, ask for a repair allowance for a specific dollar amount at time of the offer stage. However, some sellers will not agree to do so at the offer stage. Consequently, renegotiate in the following circumstances: 
  • If there are problems found during a home inspection, renegotiate after your offer has been accepted.
  • In general, banks will pay for the on-site waste water treatment facility (septic) inspection report but not for any repairs or transfer fees. Negotiate with seller at the offer stage and renegotiate if repairs are discovered during inspection.
  • Renegotiate if lender required repairs have been identified in the appraisal and/or underwriting.

inspection period

  • Do not extend inspection period past 10 days, you will be deemed more of a serious buyer. 
  • If you are aware of multiple offers, consider to offer less inspection days to make it more appealing to seller.

home warranty

  • Decline to obtain a home warranty on purchase contract and obtain the home warranty on your own. 
  • If possibly, have all or a portion of the home warranty be paid through pre-negotiated seller's concessions.


  • If you offer over list price, bear in mind that the appraisal will need to substantiate that price.
  • If you find yourself dealing with a low appraisal, you have the option to cancel transaction or renegotiate purchase price, closing costs, and repair allowance.
  • Bear in mind, the bank will most likely run into this problem with the next buyer who obtains financing.