I’ve gotten a few requests recently to post a list of tips for buyers in the market for REO properties. Specifically, the request was understand the process of how to write offers for these foreclosure properties. After doing a bit of internet research, I came across a clear, comprehensive list from About.com, which provides a list of 8 REO tips to Buying Foreclosures.
In short, the article lists the 8 tips as:
1. Get the property financial records (the bank’s purchase price on the property and the mortgage balance on the home).
2. Review comparable sales, including pending sales. As an agent, I can help you get information on pending sales. This is especially important given that typical comparable sales data may not accurately reflect the current market reality.
3. Analyze the listing agent’s REO sales (specifically, the sale-price to list-price ratio).
4. Ask about the number of offers.
5. Submit a pre-approval letter from the same bank that owns the property.
6. Getting banks to agree to repairs is hard. Don’t ask for them before your offer is accepted.
7. Try to shorten the requested inspection period. This is an important consideration in the acceptance of your offer.
8. Offer to Split Fees. Some banks will not pay for transfer fees. Offering to split may improve the acceptance of your offer.
I think #2 is especially important and is something that an agent with REO experience can help with. The internet is a wonderful tool to search listings info and see sale price history. However, in the quickly moving REO world, the latest pricing data is especially important. Your agent should be able to reach across his/her network of real estate agents and quickly get the latest pricing info on pending sales whenever possible. This will generally increase the chance of a competitive offer and a favorable outcome for your bid.
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