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Making a REO/bank owned offer? - - here are some tips!

Found a REO / Bank Owned property that you want to make an offer on but not sure how to make the offer?

What you want: So you want everything fixed, termite Section 1, bank to pay all the escrow fees and on top of this pay a 6% closing cost credit towards the sale!! And to top this off you really don't plan on paying anywhere near the listing price for the property because it is a bank owned property and everybody knows these are all deals waiting to be closed - right?

Answer: In a word NO! Despite what you have heard on TV, what you have heard from someone trying to convince you that REOs are the way to go.... they don't work that easy.

Banks are simply not bitting! or are they?

Here are a few tips that I'd like to share that I think will help your offer be accepted.

Understand that your offer will probably be 1 of a mulitple of offers (so don't think just because you are paying with cash that you can low ball the offer and ask for the world)! Your offer will be submitted to the agent, the agent will submit to the Asset Manager and this is where the negotiating begins. It may take a few more days than what the standard CA purchase agreement states for a response to your offer will get back to you. So sit tight and be patience.

Understand that he bank is not looking to give you the deal of the year with this purchase. They have spent a lot of leg work getting BPOs and having agents check the market conditions and comparables to come up with the list price. Sure they know the list price is probably just slight higher than what the agent would like to see it list for and surely they know that the listing is probably at least $10,000 more than what it is worth if not more.... but this is the price that the Asset Manager has decided is the price that they are going to take -- so is it smart for you (if you really want the property) to offer a "low ball" offer and ask for repairs, credits and expect your offer to be accepted? Probably not smart.

Here are some things that will probably not changed about how REOs are sold:

AS IS (means little to no repairs will be done to the house by the bank)
Inspection time allowed: will probably be 7 or less days (this is why it is wise to do your inspections prior to making an offer)
Closing time: 30 days if financed and 20-30 days if cash (banks don't like to hold on in escrow for over 30 days - usually), but this does not mean you cannot ask for 45 days, but just know it might be countered. Depending on when COE will fall during that month.
Banks expect FULL offers (they will usually pay the escrow and owner title insurance and Transfer fees) - other requests may be countered
Banks do not like to give credit back (at least not over 3%); unless you offer full price and then account for the credit back. In other words do not offer less and then ask for 6% credit back!
Banks do not like contingencies. Just the word seems to invite a counter!
Banks will always use their form to have you accept the offer all over again - it is called "Counter/Addendum / Contract" and it is what escrow will follow to close the deal. This document is very important and just may state different from the purchase agreement - when you sign this document it superceeds the Purchase Agreement.

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Check out: Real Estate Terms/Definitions. And take a look at Mother and Daughter Blog and D'Adrea's Mother and Daughter Blog - for other tips for Sellers and Buyers. I work with my daughter as the Mother and Daughter Real Estate Team at Family Realty Group and we also focus in Short Sales and the Pre-Foreclosure process. Our consultations are free. Our aggressive marketing plan includes on-line listing advertising. If you are thinking of selling or buying a home in Northern California's Central Valley (San Joaquin County CA - includes Stockton, Manteca, Tracy, Lathrop) plus Stanislaus County CA - includes Modesto, Salida, Riverbank) & the East Bay (Alameda County CA - includes Hayward, Fremont, Newark, Union City & Oakland) and surrounding areas give us a call. If you would like a FREE Home Seller or Home Buyer Handbook, please call us at 866-750-8282 or email at US.

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the Mother and Daughter Realty Team

Rosemary Brooks

Patrick Williams & Associates

the Mother and Daughter Realty Team

PH: 866-543-0461

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Posted by Rosemary Brooks -Mother & Daughter (866)-543-0461 on 04/19/2008 03:48 PM

Comments (30)

reo, foreclosure, offers, family realty group, rosemary brooks, stockton, san joaquin

Originally posted at: Mother & Daughter Blog: Making a REO/bank owned offer? - - here are some tips!

This post has been included in California Information San Joaquin County, CA Information
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Post is included in group: California Loan Modifications, Short Sales, & REOs

30 Comments on Making a REO/bank owned offer? - - here are some tips!

APR

2008

Excellent info. Thank you!

Good Tips and Guidelines.

Don't be afraid to challenge their counter offers and addendums for validity. I recently had a contract in which the selling agent refused to provide the HOA documents. In my state that is mandatory thta the seller provide the info. The selling agent refused of course I would not let up and reminded him that the bank requires can not supercede the state's laws. After a medium worded threat they conceded.

Ann ~ thank you hopefully getting more information out will help the market to move!

Joel & Teresa ~ I solely agree.. counter anything that is in your best interest, nothing worst that failure is to not try. Especially if it is the law, it should be challenged. Thanks for the tip.

Rosemary,

good solid info- now if only the buyers will listen.

Billie ~ I know. After all that's what we are here for!

Very good advice I will agree 100% on this one. As for my service area we have submitted lower than listing (lowball) offers depending on the days the property has remained on the market, and we have actually gotten acceptance or countered to a lower than listing agreed upon price as for repairs zilch, closing cost safe to say upto 3% of purchase price, escrow 30 or less, no warranty as-is. One thing I would like to ask and hopefully you would email me on this is, I recently went out of my area for my own investment to Menifee, CA and have been submitting full price offers on REOs and agents calling me back asking for more $$ on offer. Sometimes even $20k upwards on the listing price. Would you have a clue as to why this is happening on multiple properties, I have also submitted offers for my uncle in this same area. I really appreciate your blog and assistance thank you.

APR

2008

Good advice. Thank you.

Benny ~ thank you.

My take on your question is that some asset managers are greedy! They will turn down numerous offers for a few dollars. They will lose buyers by taking too long and holding the "bidding war open too long" so it does not surprise me that they would ask for more than the listed price. I have not had that happen to me but I would sure hate it if it did. I probably would ask the question to the agent in wrtiing just to see what they offer as an answer. Please let know what you find out. lol

And for sure there will many more REO games coming on board with the situation as it is and will be in the future. You know the more of something you get, the games increase.

Robert ~ Thank you and I appreciate you stopping by.

Rosemary, thank you for this informative post. I am starting to understand the process and understand why so many offers are held up in the pipeline. Broker and Realtor clients, hang in there and I will do the same.

APR

2008

Jacqueline ~ Yes the process is a bit different from a regular or a short sale.

Great information. Although I really believe it differs from bank to bank or AM to AM. Many of the properties that my clients have purchased that have been bank owned they have repaired inspection items. Some of lender required while others are home inspection items. It just depends how bad the bank wants to sell the home. I have a listing where to bank told me to repair the electrical system since it had been damaged by the previous owners and electric could not be put on in the home without the repair.

MAY

2008

Rosemary, first I must say I enjoy reading your blog posts. To share with you regarding REO offers, my very first buyer in my new career was for a REO listing. I learned off the seat of my pants how to file the paperwork correctly. I downloaded and read it over for 3 hours, and then spent another 3 hours explaining it to the buyers from 7pm to 10pm on a Sunday at my office. From the way everything is worded on the papers to be submitted (and I must say the listing agency's website had TREMENDOUSLY straight-forward suggestions to the point of being blunt) it was obvious the way to make a successful offer is to come in as close to price, best to be dead-on, and not ask for "gimme's." Our closing time was 2 weeks - one week for the acceptance process and one week for all ducks in-line at the settlement office. (I have a lender who is very high-strung, which helps.) Any way, my clients got the house. The listing broker himself could not believe that I was a brand new agent, because my contract was the first one he's never had to send back for corrections. (Side-note: I have been in several careers which involved completing lengthy contracts and other legal paperwork, so it was just a matter of digesting the REO info.) I had no assistance with my buyer's offer because it all happened on a Sunday, and my broker was not available. I took the contract to the listing agency first thing Monday morning. These days with many REO's on the MLS, the thing is "you snooze, you lose," and my buyers weren't going to accept that outcome!! The funny part is many buyers out there still don't believe Realtor's advice to make a quick decision, and I tend to hear, "Oh, that one's gone now? " a lot. Well, thanks again. Have a great weekend. Ron

Ron ~ thank you and also thanks for sharing your experience. This is how we learn by sharing. I had to jump right in myself and that is why I am trying to share my experience and knowledge so that others won't have to start at the beginning without knowing what to do.

The REO process is different, but once you get it -- its OK and easy to follow. You hit it on the head "stop asking for the "gimme's" know that you're buying an "AS IS" property and either offer what they ask or close to it or expect to be out bidded, and not get it. Banks don't bend much. Some will but it is a chance you take by trying them to bend.

Thanks again and you enjoy your weekend by staying blessed.

thanks for the info!~

Ron ~ You are welcome.

MAY

2008

Great info, alot of buyers out there are very much informed. I let them know up front that the Bank has already reduced the home tremendously and is not looking to give up anything further, not even a home warranty. I offer a free home warranty to all my REO buyers and short sale if the bank won't pay it. I recently closed a deal with EMC and was amazed that they agreed to pay $10,000 towards buyers cost at the last hour. We were late on closing due to the buyer's lender and we had about $ 2700 in per diems, i was able to convince the listing agent to review the latest comps to see that the surrounding homes were still declining and days on the market were to 90-160 days. If they did not contribute to close they faced placing the home back on the market at least $20K less for who knows how long. They gave up the costs and waived our per diem. But this is certainly not common in our market. I was just lucky!

I have ear-marked your site for a future buyer referral in the Stockton area

LeAndra ~ I appreciate all referrals and I thank you for sharing your experience with REOs. I know that there are more situations happening with these sales and I believe that sharing is what we need to do to keep up on what could and has happened to others. Thanks alot.

I will mark your site as well for referrals to you. Thanks alot.

JUN

2008

Hi Rose,

You are right on! I too list and sell REO's and buyers just don't seem to understand what "AS-IS" means.

Rudy

JUN

2008

Great Information, thanks so much!

But what I really want to know is who hires these so called loss mitigation specialist?

Where do they come from?

This baffles me every time I'm working a short sale, these people have no clue!

Asking them a question or trying to get some cooperation is like dealing with a 2 year old!

I'm tired of the games especially with Country Wide!!!!!!!

Great blog. While REOs can be a great deal I think a lot of people misunderstand and think that REO means that they are going to walk away with free or even half off house. Banks are eager to move these properties, but they are also interested in recouping their investment plus the costs of foreclosure and listing the property.

Coco

JUN

2008

The hardest part about todays market is all you seem to do is spinn your wheels, until you have an acceptance. I have approx 50/50 luck on having my clients offers accepted. Each and every asset managers has their own agenda you just have to hope and pray your listing agent is doing their actual job. Some of these egos are killing me. Actual constructive input from the listing agents is most helpful but is rare but the worst yet is COUNTRYWIDE PRE-approvals. This is the most frustration for me. These require credit reports being pulled before you even get an acceptance on the offer. Word of advice: Dont deal with Helen @tracy/livermore countrywide branch she will without a doubt make you wait a day or two for the letter. Twice now she rushed to help me with preapproval for my clients, the time I had letter in hand the properitys were already PENDING. And the letter is only good for a very short time period. This is wrong.

JUN

2008

Great advice and info, thanks for sharing the knowledge!

JUN

2008

Rudy ~ this is a true statement. The buyers and their agents are still in the traditional sales mode when making offers on REOs and really they do not and are not set up to work the same. The banks really mean that they are selling the property as is.

But there are tricks the trade that the buyers and their agents are using to get the banks to bend.....it is called almost at the end of the escrow ... throw a curb ball!

Lexi ~ I too have a beef with the COUNTRY.... but what can we do? I feel like a sitting duck, waiting on them to decide if they are going to shoot me down or what. They are slow.

I mean if the homeowner is in the home, they will get alot more days in there waiting on the Country to make a decision.

Coco ~ I so agree. Banks are giving the houses away. They can hard nose --even when the list price is a little too high.

Michele ~ I am finding that it is Hurry up and wait... and patience, patience, patience.

Reggie ~ you are welcome, great to hear from you!

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