Factoring Repairs Into REO Purchase

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?

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