Q: I recently put in an offer of $125,000 on a foreclosed property that was listed for $140,000. My offer was countered at 140,000; I went back at $130,000 and asked for 6 percent toward closing. My agent stated that the bank’s final offer was $135,000 and 3 percent toward closing costs.

I declined the offer because, although the property was livable, it needed repairs. The master bath only had a commode — no sink or tub was installed. Two bedrooms needed ceilings put in, one other bath needed repairs and the basement had been framed, but no drywall.

There was no refrigerator and the other appliances are questionable. Although I submitted an as-is offer on this property, my loan officer said that I would be eligible for a 203(k) loan. My preapproval letter did not state a price because he said it would depend on the repairs that had to be made. My loan officer said that the property had to be inspected to determine what repairs had to be made.

I also got preapproved by the bank that owned the property. When I went to my agent’s office to collect my earnest deposit check, he informed me that the property had been reduced from $140,000 to $134,900. There were no other offers on the table. I did not offer another bid.

Can help me understand this reasoning? Can I trust that my Realtor informed the agent representing the bank of the repairs that had to be done to this property, and possible hidden repairs? Would you advise me to reissue my bid of $120,000 with 3 percent in closing costs?

A: I sense your frustration and appreciate your desire to understand the bank’s logic or reasoning behind their response to your offer. I want to start out by helping you approach your foray into the world of bank-owned properties with a basic mindset shift: banks are not people.

What I mean by that is that banks do not operate on the same urgency, logic, rationales or priorities as individual sellers do. While an individual seller often must sell their home in order to move on with their life, the bank does not. Banks do not have much, if any, urgency when it comes to selling the properties in their portfolios.

Frankly, the asset managers who make or communicate the bank’s pricing decisions and responses to offers like yours are charged with (a) getting properties sold, and (b) getting the highest price possible at the lowest investment to the bank, in terms of repairs, etc. These priorities color all of the bank’s decisions.

As a result, banks tend to price properties in accordance with what they feel is an as-is, fair market price for the property on the current, local real estate market. To do that, they actually have their own property-preservation specialists or real estate brokers detail any visible damage or obviously needed repairs to the property before they put homes on the market, and they price homes taking that damage into account.

I can almost guarantee you that the bank that owns the home in which you are interested feels that the list price already provided a discount for the repairs that were needed. While a good buyer’s broker/agent would still have that conversation with the listing agent, the fact is that both the listing agent and the decision-maker at the bank would have been well aware of the repairs needed long before your offer came in.

You might ask your agent to brief you on what the fair market value of the home would be, approximately, if it were in move-in condition. He or she can pull recent sales of similar homes in better condition to get you this information.

It is only fair that any condition-based discount you seek should be a deduction from the market value of the home, rather than the list price of the home. If, for example, your agent reveals that the home would actually be worth $150,000 in "fixed" condition, then you might instantly see that the bank’s counteroffer of $135,000 with a 3 percent closing cost credit deserves a second thought.

Now, you also seem a bit puzzled as to why the bank would drop the price to $134,900 rather than taking your offer. Once the asset manger has been authorized to go to that price, and you refused to take it, it is in the bank’s best interest to fully expose the home to other active buyers in the market at the reduced price.

Up to that point, it had only been exposed to buyers at $140,000. But there may be buyers who, say, are only searching for homes listed up to $135,000, and may have never seen that home at all. There may be another set of buyers out there who saw the property and liked it, but felt like they could only afford to do the work if they could get it for $135,000, so they didn’t even bother making an offer.

Now that the bank is willing to take that lower price for it, before it will take another 5 percent loss on the property by taking your $130,000, it will try to sell the property at the reduced list price for 30, 60 or even 90 days.

Given that: No, I would not advise you to go back at $120,000 or even $130,000 right now. My advice is to get an idea of what the actual fair market value of the home will be after repairs, and reconsider what sort of repair discount is fair — from the market value, not from the list price.

You might also want to go back in and view the property, taking your contractor with you, so you can be operating in a world of reality about what the repairs will actually cost. Once you have a rough idea of the repair costs, talk with your mortgage broker about what the loan amount would end up being on the 203(k) loan if you paid between $130,000 and $135,000 — factoring in repair costs — and what your downpayment, closing costs and monthly payment would be at that level.

Then, go back to the bank. Make the best offer you can make without regretting it either way. Make sure that you won’t regret coming in a couple of thousand dollars lower than $135,000, even if you lose the property. If you come in at $135,000, be as comfortable as you can that you won’t regret committing to the mortgage at that price if you do get it.

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