Do banks negotiate on REO properties or is the list price firm?

Banks negotiate, but the timing matters. In the first 30 days, counters typically stay within 2–3% of list price. After 60–90 days on market, asset managers have more flexibility and will often go 8–12% below list without escalating to senior approval. Attach documentation — repair estimates, comp analysis — to any offer below 10% of list price.

Can I get a bigger discount by buying REO properties in bulk?

Yes, but the minimum thresholds are high. Most servicers won't discuss bulk pricing for fewer than 5–10 properties, and some institutional sellers require 25+ assets minimum. Discounts on bulk packages typically run 10–20% below individual BPO values, but you're taking the bad assets along with the decent ones. You need the capital and the operational capacity to manage a mixed-quality portfolio.

Why do some REO properties sell above list price?

When an REO is priced below market by a cautious asset manager — common when the bank uses a conservative BPO — retail buyers and investors both compete for it, driving multiple offers. A move-in-ready REO listed at 10% below market in a low-inventory neighborhood can easily receive offers above list within days of hitting the MLS. This is why assuming every REO is a deal without running your own numbers first is a mistake.

Does the foreclosure process affect how much discount I can get?

It does indirectly. In judicial foreclosure states like New York or New Jersey, the process takes 2–4 years, during which the property often sits vacant and deteriorates. By the time the bank takes title, repair costs are higher and the bank's motivation to sell increases, which can push discounts up. In non-judicial states like Texas or California, the timeline is 4–6 months, properties are in better shape, and banks price closer to market.

Are REO auction prices lower than MLS REO prices?

Not always. Online REO auctions through platforms like Auction.com set opening bids low but add a 5% buyer's premium at closing, which eats into the apparent discount. Properties that don't meet reserve (the bank's minimum acceptable price) don't sell, and that reserve is often close to the MLS list price anyway. Auctions move faster, but you need to inspect before bidding and factor in the premium or you'll overbid.

Bank REO Discount: How Much Can You Actually Expect?

Bank REO properties sell at discounts ranging from 5% to 40% below market value, but the actual number depends on the bank's carrying costs, local inventory, and how long the asset has been sitting on their books. Most investors walking into their first REO offer expect a 30% haircut as a given — it isn't. The median REO discount on single-family homes, based on CoreLogic data from recent sale cycles, runs closer to 10–15% in stable markets. You can do better, but you need to know what drives the number.

Why Banks Don't Just Give These Away

A bank carrying an REO property pays property taxes, insurance, utilities, and maintenance every month it holds the asset. On a $200,000 property, that can run $800–$1,200 per month in holding costs alone. That sounds like pressure on the bank to sell cheap — and it is, eventually. But banks also carry REO on their balance sheets at a specific book value, often tied to the original loan amount or an internal appraisal. Selling at a steep discount forces them to book a loss they'd rather defer. Asset managers have quarterly targets. They won't take a 35% hit in month two just because you asked nicely.

What Actually Drives a Bigger Discount

Condition is the single biggest lever. A property that needs a new roof, has deferred HVAC, or shows signs of vandalism after sitting vacant for 18 months will price further below market because the bank's BPO (broker price opinion) will already reflect those repair costs. If the BPO agent marks the property at $160,000 in as-is condition and the bank owes $180,000 on their books, they're already taking a loss — at that point, another $10,000 off isn't as painful.

Inventory concentration matters too. When a single servicer has 40 REO properties in one zip code, they start competing with themselves. In Phoenix during 2011–2012, some servicers were discounting bulk REO packages at 25–30% below individual BPO values just to clear the pipeline. That environment doesn't exist everywhere today, but it appears in pockets — rural markets, economically distressed metros, and areas hit by localized employer closures.

Time on market is your friend. An REO listed for under 30 days rarely takes a significant discount. The same property at 90+ days is a different conversation. Asset managers get pressure from their own supervisors when inventory ages.

Typical Discount Ranges by Property Type

Single-family homes in move-in condition: 5–12% below market. These sell fast and banks know it — they price accordingly.

Single-family homes needing moderate work ($15,000–$40,000 in repairs): 15–25% below market, because the buyer pool shrinks to investors and the bank's BPO already reflects deductions.

Condos: 8–18% below market. HOA complications and financing restrictions (Fannie Mae/Freddie Mac won't lend on certain condo projects) limit buyers, which softens the bank's leverage on price.

Multifamily REO (2–4 units): 10–20% below, highly variable. Vacancy at time of sale and local rent data drive the bank's pricing model more than physical condition alone.

Warning: Banks order BPOs, not full appraisals, to set REO list prices. BPOs can miss major defects — a BPO agent doing a drive-by or a 20-minute interior walk won't catch a failed septic system or knob-and-tube wiring behind the drywall. Your offer discount needs to account for what the BPO missed, not just what's on the seller's disclosure (which is usually blank — banks disclaim everything).

How to Calculate Your Target Discount

Start with ARV — after-repair value based on comps pulled within 0.5 miles and 90 days, not the Zestimate. Then build your cost stack: estimated repairs plus 15–20% contingency, your holding costs for the rehab period, closing costs on both ends (budget 2–3% to buy, 6–8% to sell), and your required profit margin. If you need 20% net profit to make the deal work and the all-in cost stack lands at $175,000 on a $210,000 ARV property, your maximum offer is $175,000 — which is a 16.7% discount off ARV. That's your floor. If the bank is listing at $195,000, you know the gap and can decide whether to open a conversation or walk.

For a detailed breakdown of how REO pricing works state by state, the resources at Tax Sale Ninja's state guides include market-specific data that affects your comp analysis and discount expectations.

When Banks Go Below 20%

Heavy discounts — 25% or more below market — appear under specific conditions: the property has title complications from the foreclosure, there's a known environmental issue (underground oil tank, mold remediation required), the foreclosure took place in a judicial state where the process dragged out 3+ years and the property deteriorated, or the bank is under regulatory pressure to reduce its REO inventory ratio. In 2023, several regional banks that had absorbed residential loan books from failed institutions (following the SVB and Signature Bank collapses) moved REO portfolios at 20–35% discounts through auction platforms like Auction.com and Ten-X to clear the books quickly. Those windows are narrow and competitive, but they happen.

Negotiating After the Initial Counter

Banks counter at or near list price in the first 30 days. Don't be discouraged. Submit your offer with a specific repair estimate attached — not a round number, but a line-item contractor quote or your own detailed scope. Asset managers respond better to documented reasoning than to arbitrary low offers. If you say "I'm offering $142,000 because the property needs $28,400 in documented repairs and the adjusted comp value is $158,000," that's harder to dismiss than "I'll give you $140,000, take it or leave it."

Banks also respond to clean offers. Cash or hard money with a 10-day close, no inspection contingency (after you've done your own walkthrough), and proof of funds on the same day you submit moves you ahead of financed buyers even if your price is lower. A $148,000 cash offer that closes in two weeks may beat a $155,000 financed offer that requires 45 days and carries appraisal risk.