Updated for 2016
The Orlando vacation home market has changed drastically in the last 5 years. There is less inventory on the market now than in the last five years, building starts are up and many of the Canadian and Brazilians investors have temporarily backed off due to exchange rates and currency issues. There are however, more domestic investors buying than there has ever been. Unlike in 2008-2011 when there was tons of bank owned inventory on the market, we don’t see as much of it anymore however when you do, there is a certain way to approach it and a specific mindset you should have. Immediately erase the idea that bank owned=good deal. That’s not always the case anymore! The banks are smart and they aren’t giving properties away for any less than anyone else. Here are five tips for you to be successful negotiating your bank owned investment property.
1. The Bank Says: “Show Me The Money!”
Are you paying cash or taking out a loan on your primary residence? Cash offers always hold more weight with the banks than offers contingent upon financing. If you’re buying a second home or vacation rental in Orlando, especially as a foreign national, then it’s best to liquidate any assets you may have first to free up the cash to buy because mortgages on second homes are not easy to get right now. This will also allow you to earn more of an income when renting out your piece of Orlando real estate. The only exception to this for vacation rentals is when paying cash puts you in a position to not be able to buy a home that produces a high income, in those situations in makes more sense for you to take a mortgage and get the home that produces a higher income and let the renters pay your mortgage off for you. It might mean that instead of a bank owned, you buy a new build home.
2. Multiple Offer Situations Still Happening
Take it from me, I do this everyday for a living and am way too busy for hype, almost all bank owned foreclosure properties in Davenport, Kissimmee and Clermont (zoned short term rental) under $250,000 have multiple offers on them. The last three bank owned properties in the Disney area I sold all went for over full asking price and it’s because it was already priced well to begin with. My clients were being outbid at full price and they weren’t willing to go over. So don’t be fooled by your cousin’s Uncle’s Sister’s Brother’s Wife when they are claiming you can pick up a foreclosure for 20% below market value in Florida.
3. Highest and Best Offer
Are you willing to pay full price or more because if you’re not there are usually about 10 other people who are and will and the bank knows this (don’t shoot the messenger, I’m just sharing what’s going on). You will most likely get outbid and have wasted your time trying to bargain with the bank. They don’t need to bargain with anyone in this market and it’s unfortunate but true. The bank is not going to counter offer on a low-ball offer either. What they do is collect 5-10 offers at a time, request that you send in your highest and best and they pick the best offer. Have your Realtor pull comps and if you see that the home is listed below or at the same price as the lowest comp in the neighborhood than consider it already a bargain. If the home has been on the market longer than 30 days, these rules may not still apply.
4. Prices are Still Going Up
I have watched the prices of properties in the Disney areas increase and the inventory decrease. This is a very good sign for sellers but what this means for buyers is that if you are waiting around for prices to drop you’re just a couple years too late. Prices in Kissimmee and Davenport hit rock bottom six years ago in 2010 and though I do not think they will drastically rise much more than they have anytime soon I do strongly believe that they will not be going down anymore. There is too much buyer activity right now and the Orlando economy is incredibly stable. So if you’ve been waiting to buy a foreclosure in Orlando 3-5 years ago was the time, but if you’re lucky enough to still find a juicy one that looks like a great deal, you may not want to wait.
5. Bank Addenda-Love It or Leave It
If your offer does get accepted by the bank (congratulations) you will be required to sign off on all of their addenda. You will definitely NOT be the one calling the shots so don’t waste your time trying to change or negotiate anything in the addenda. The bank will say, “If you don’t like what’s in our addenda than don’t sign it. We will move onto the next guy”. It is what it is. The banks generally don’t pay the title expenses despite the fact that county policy is for the seller to pay (it’s in their addenda) and they will require you to use their title company even if you’re paying.
The bank owned buying process is 5,000% better than the short sale process (so you can imagine what a nightmare a short sale can be) but it’s definitely a good idea to have a buyer’s agent representing you when purchasing bank owned property and not work directly with the selling agent because they strictly represent the bank and DO NOT have your best interests in mind. They will not cut you a better deal because you are working directly with their selling agent and they most certainly will not choose your offer with them over another that is with a buyers agent. They will take the best offer period. It’s in your best interest to work with a Disney area vacation rental Realtor who knows the area and how the banks work. It does not cost you money to have a buyers agent as the bank pays for this service.
We hope to earn the opportunity of helping you achieve your investment property goals this year. To set up a free, no obligation investment property consultation with us please use our scheduling tool or contact us directly at 866-422-6191 and if you have enjoyed this article please consider subscribing to our blog and stay updated on future information.