Banks Are Taking Far Less Than Yesterday

We just purchased our 2nd foreclosed property from the bank this year, done some additional research, and determined banks are really anxious to offload their inventory. Their anxiety is so high they are willing to offload them for just about anything (within reason) which spells a very profitable investment.

To add to this, lending guidelines are still pretty tight. While they have loosened up a little bit, the economy (for the avg Joe, not the media) continues to worsen. This means less money in people's bank accounts. The $8k 1st time homebuyer credit helps confidence, but it doesn't give homebuyers the money *today* to put down on a property. What's happening? These banks are desperate to offload inventory, they are accepting offers, but many of the "prequalified" buyers are falling through and not able to purchase.

This type of situation really puts the bank into dire straights. The bank was expecting the property sold by X date, and the buyer fell through. The house goes back on the MLS, typically at a heavy discount, and really the bank will take just about anything for it at this point.

To illustrate the point, I'm changing names to protect the guilty. ;) The Smiths are prequalified and have put in a full price $180k offer on 123 Smith St. The bank see's dollar signs and accepts and believes because they are "prequalified" they will follow through. 15 days into escrow, the Smiths find out the loan is a full point higher than they expected, and back out. The bank has lost nearly a full month at this point and has to relist the property. They NEED to sell it now. They drop the price 9% and offer 3% closing assistance. A 12% reduction in a matter of 30 days. Any investor with the dollars to put down can snatch this property up at a heavy discount.

Granted every situation is different, and some lenders will re-list at the original price; however, I'm willing to bet that more often than not they will take an offer 10-15% lower than their asking price in situations like this. Keep an eye out on the MLS for re-listings to spot these. They are a gold mine.

Of course once you have it, be sure to keep it on track and positive cash flow so it doesn't end up back at the bank again. I recommend using property management software to track closely the finances of each property. Make sure you are receiving a decent return on your down payment (8% minimum, ideally 12% or higher). And if you are renting, be absolutely certain to screen your tenants carefully. Nothing can make a positive cash-flow property turn negative quicker than bad tenants.