How Much Of An REO Discount Can You Get?

When searching for an REO, many buyers have an expectation of receiving a price discount of as much as 40 percent. But while REOs may be up to 40 percent cheaper than what the last owner paid for it, few banks are willing to shave that much off their asking price.  If you’re hoping to get a deeper discount on an REO, you need to understand that there are several factors that come into play before a bank will even consider reducing their price:

  1. Demand.  How many people want the property? If there are a group of buyers with cash or pre-approved financing, don’t expect much of a discount, if any.
  2. Life of the listing. How long has the property been on the market? If the property has been listed as an REO for a short period of time, the bank is less likely to offer a discount.
  3. Condition of the property.  Is the property damaged?  Is the property at risk of sustaining further damage because of the weather or other factors? If so, the bank may be willing to discount just to get the property off their hands.
  4. The number of properties held by the bank. Is the bank swamped with REO properties? Or, is this just one of a few they’re trying to unload? Banks struggling with a large number of houses may be willing to offer a buyer a discount.

Even after considering all of these factors, banks willing to discount their REOs usually stay within a 10 – 25 percent discount range, so plan accordingly.

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