I am considering buying a house owned by a bank that has been on the market for quite awhile. The house needs a lot of work. Without going into a lot of detail - I have enough to pay 100% cash - does that give me more or less bargaining power with the bank? The house needs a lot of work and if I could get the house for much cheaper then the extra money could go to fixing it up. (The house is being sold for about half of what it is appraised.) Please give me any info you can on this. Thanks.
A cash transaction means nothing to the seller, they'll get their money from a mortgage company if you aren't the one providing it.
paying cash reduces your negotiating power since the lender makes more money on the financing charges and interest. its in your favor to do so to save these charges. you may want to finance for a few years with a balloon note at the end. you still have cash for repairs and the option of extending the payments if needed.
The house is being sold for about half of what it is appraised. defines the real issue. Offer what you like. My guess is they won't move too far off the asking price when it is already this far below appraisal.
Your 'cash offer' will give you NOTHING in terms of a price reduction. Your offer will be more attractive to the selling bank because you will not need to wait for full mortgage approval, but that doesn't mean it will budge off of its asking price. You may get a few thousand off, but that is about the extent of any reduction.
Is the appraised value your talking about from before or after the repairs are made on the house? Paying cash will give you a lot of bargaining room, I would also think about putting a pretty good deposit down on the house and offering them a closing time of say 2-3 weeks. Banks don't usually tend to come down on their houses that much, we usually see them come about 10% at a time here in Florida, but that does not mean that they wont. The longer the house has been on the market, the better chance you have of getting a better deal. I would offer about 75-80% of what its listed at and expect them to give me a counter offer on the price. Start as soon as possible though as there are probably other investors out there who might be thinking the same thing! Good luck Edit:.To sunrise above: its not very often the bank who is selling the home is also the bank who would write a loan for the home for an end user. Only maybe about 5% of the time does that even come into place. The bank wants to get rid of the home, they are not in the business of holding onto homes. What lowers your barganing power is financing a home. Then maybe after 5-6-7 weeks of the buyer trying to get their loan approved, it falls out and the bank is back to square one.
