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A bank/government owned aka REO property comes onto the MLS.   You call your Dream Home Realtor and head out to take a look at the home.

You think it could use some work but otherwise a decent possibility and in the end you decide that you want to make an offer.  Let’s assume that the home is currently listed at $225,000.

What price should you make an offer at?  Some believe that since it is bank/government owned property, might as well make a low offer on the property.  You decide to offer $191,250 or 15% less than current list price.

What do you think, will the contract be accepted?

To answer that question, I looked at Nov. 19, 2015-Nov. 19, 2016 sales for properties that were listed as REO on the MLS.  This does NOT include HUD homes or short sales as this is listed as a separate category from REO on our MLS.  I looked at SFH not including modular or manufactured homes in the areas of Fruita and Grand Junction.

There were 95 matching sales using the search parameters from above.  Using these, here are the findings:
When I say List Price below, that would be the current list price of when it went under contract. 
Original List Price: the 1st price the REO comes on the market at

*Average Sold Price to List price: 99.12%
*Median Sold Price to List Price when it went under contract: 98.28%
*Only 7.4% of the sold REO homes had a sales price of less than 10%+ of the list price
*Biggest difference from Sales Price to List Price: 82.13%
*Outside of the 82.13% sale, no other REO sale sold for less than 87% of current list price
*76.6% sold for 95%+ of the current list price
*~50% of REO sold properties eventually had some sort of price drop off their Original List Price
*Avg sales price versus Original List Price: 92.30%
*Median Sales Price vs Original List Price: 93.05%

While the stats above do not predict what will actually happen with the house you are looking at, the stats can be used to come up with a decent probability guesstimate.

You could apply the various %’s above, such as, there is a 76.6% chance that the offer accepted will be within 0-5% of the current list price. Same applies for others, currently, there is only a 7.4% chance that the accepted offer would come in at less than 10% of list based off of REO sales in the past year.

For our example, we decided to offer 15% less than list price.  Based off of sales over the past year, only 1/95 sold for 13%+ off their current list price.   So, fire away with the offer, but be prepared that the chance of getting an accepted offer of 15% off of list price seems very very low if last year’s sales stats are a guide.  If your offer of $191,250 was the most you think the home is worth, it doesn’t hurt to offer a contract and see what happens but again, numbers say that this will probably not work out and now your best bet is to sit back, monitor the price and hope the price drops to a point where your $191,250 offer is within the realm of the above numbers.

Want to know what current properties are listed on the MLS.  E-mail me and I can set you up with a REO, HUD and/or a short sale search so you can be updated as soon as a property hits the market.


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