As many times as I've written offers on REOs, I enountered an REO agent who included with her disclosures a guide on writing an REO offer. She requested that the agent initial and return the guide to her so that everyone is clear on what to expect.
After reading her guidelines, I put together a Bullet-point summary that I am sharing with my buyers as further testimony of the importance of writing the BEST and HIGHEST offer. A lot of the do's and don't can apply to writing offers on REO, short sales, and regular sales.
REMEMBER
- Seller/Lender calls all the shots
- Offer is negotiated with an asset manager
- Some terms may be deleted from the formal contracts mandated/sanctioned/prepared by the State Association of REALTORS
- Conversely, some terms may be added by the Lender that may not be familiar to the Agents
- Review these guidelines with the Buyer
- Seller/Lender likely has two or more Broker Price Opinions (BPO) and appraisals so they have a clear idea of what the property is worth
- Seller/Lender are not interested in even looking at seriously low ball offers
- Seller/Lender may prefer using Title or Escrow Company of their choice. In some cases, Seller/Lender may pay some escrow and closing fees.
- Seller/Lender is exempt from providing real estate transfer disclosure statements and may not sign any or all disclosures. Seller/Lender relies on selling and listing agents to provide visual inspections.
DO:
- Submit offers with the following:
- Pre-approval letter. If you are required to get an additional pre-approval letter by the Seller's Banks, DO submit a pre-approval letter from the Lender you are planning to use as well
- Verification of Funds. Don't wait for the Seller to request it. Just go ahead and include it.
- Good faith deposit check. Include photo copy. If Seller requires using their own title company, your buyer can write another check payable to the selected title company.
- Other documents that the Listing Agent/Seller specifies should be included with the offer. Some Seller/Lender require Addendum specific to REOs. Read carefully as there is often a per diem late fee assessed for late closings and terms on that addendum that will supersede contract terms.
- Be aggressive with your time contingencies. 0-10 days for inspections is preferable. 7 days is becoming the norm
- Note that usual turn around time for contract to be returned from Seller/Lender may be 3-10 days. Upon receipt of the formal and written acceptance from Seller/Lender, the Listing Agent will change status of property from "Active" to "Pending"
- Start the loan process and order inspections upon verbal acceptance from Seller/Lender in order to meet your contingency periods for loan approval and buyer investigation.
- Provide agent visual inspection/observation
- Always check with listing agent regarding commissions. Posted commission is based on net of seller concessions if any, from gross sales price.
DON'Ts
- Avoid writing significantly low offers. Everyone wants a good deal, but unless the Buyer can document why Seller should take significantly less than asking price (i.e., contractors provide estimates of repairs, etc), don't submit this type of offer
- Don't change lenders, loan terms or programs during escrow. No surprises. Changes could delay process and subject Buyer to per diem penalty or even lose initial deposit/earnest/binder money.
- Don't enter name(s) of Seller on any documents. Tax records do not always reflect the current seller on record.
- Don't ask for credits or repairs. Normally, property is sold AS IS. If there is a health and safety concern, this may be an exception.
If anyone has more thoughts to share/add, by all means, let's expand this list!
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