This is the final article of this series on strategies for purchasing the best deals on these bank owned foreclosure properties. There are still a ton of these REO homes for sale in Central Florida and another big wave of foreclosures is on the horizon. In this article, I will discuss strategies on getting your offers accepted.
In Part 5 of this series someone posted a question on the blog about multiple offer situations and not being able to get their strong offer accepted. One thing to always keep in mind is that investing in real estate is all about the numbers. It's a numbers game. Often times I've looked at 100 properties (not physically, but at least quickly on paper or the computer) and narrowed it down to maybe 15 or so and then made offers on all or most of those to get 1-2 properties accepted. Just make enough of the right offers on the right properties and sooner or later something good will happen. How I make those offers is a subject for another day. Enjoy reading ...
When making low offers or when competing in a multiple offer situation, it is important to keep the offer as clean and free from contingencies as possible. Banks want to see short inspection periods (or no inspection period), short closing dates, big earnest money deposits, and proof of cash to close or the ability to obtain financing. An all cash offer is certainly more acceptable to a bank then an offer with financing. But especially on the prettier homes that do not need a bunch of repairs, banks know that most of the buyers will need to obtain conventional or FHA financing. In spite of the as-is-where-is, no repair contracts they make you sign, banks will make repairs on occasion to get a property into financeable condition if the appraisal or W.D.O. inspection (a/k/a termite inspection) comes back with issues. It is all a matter of negotiation. Remember, the banks want to see these properties sold too.
The dollar amount that the bank nets (price - closing costs, repairs, etc.) is normally the most important factor in accepting an offer. However banks also place weight on the strength of the offer. Thus if your offer is lower but is all cash with a short closing date and big earnest money deposit, they will sometimes give your offer stronger consideration then they will a higher priced offer that has a longer closing date and a financing contingency. A sure way not to get your offer accepted is to put in oddball contingencies or terms like a closing date of more than 45 days for a financed offer or more than 21 days for a cash offer, an inspection period of more than 7 days, contingent on someone else's approval (attorney, partner, etc.), contingent on the sale of another home, or an earnest money deposit under $1,000 for a financed offer or under 5% of the purchase price for a cash offer.
One last big factor with getting offers accepted is the listing Realtor® themselves. While the listing Realtor ® certainly does not have the final decision, they can often be a strong influence on the asset manager. Some listing Realtors ® do a great job and some do an awfully rotten job in selling their REO's. If you have a buyer's agent experienced in selling REO's, they can often tell you which listing Realtors ® are good to deal with and which ones are terrible to deal with. The best thing of all is that buyer's agents normally cost you nothing. Their commission is paid for by the seller at closing.
An example - in March I had an on-site auction on one of my REO listings. The property was listed in the MLS at $129,900 which was overpriced. The auctioneer had a reserve price of $110,000. We had several bidders at the auction and the highest price was a $63,000 cash offer. Since this was the highest offer that came in, I convinced the bank's auctioneer to allow me to write it up and submit it to them anyway. I also put together several recent detailed comparables and submitted them with the offer. The bank dragged their feet for about 2 weeks, but with a lot of pleading from me and the auctioneer we were able to get them to accept the $63,000 offer. The only reason the bank accepted this offer is because of the aggressive offer package that we put together to convince the bank to take it.
Hopefully this series on REO's has been beneficial to you. REO's will continue to dominate the Central Florida marketplace for the next 2-3 years as more and more short sale and loan modification attempts fail to stop the foreclosure. If I can be of assistance in helping you negotiate a deal or simply giving you a little advice, please do not hesitate to contact me.
(Copyright © 2009. Sand Dollar Realty Group, Inc. All rights reserved.)
Rob Arnold - Your full service and investor friendly Realtor ® in Orlando and Central Florida.
ABR, CPL, CRB, CSP, GRI, Managing real estate broker, Notary Public
We sell foreclosures, short sales, and bank owned REO properties throughout Central Florida. We sell and list Central Florida real estate and Orlando real estate. Free list of foreclosure and short sale houses available.
I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in most parts of Central & South Florida, the Space Coast, and the Treasure Coast including Orlando, Winter Park, Maitland, Ocoee, Winter Garden, Apopka, Altamonte Springs, Casselberry, Longwood, Winter Springs, Oviedo, Lake Mary, Sanford, Deltona, Debary, Deland, Mount Dora, Eustis, Clermont, Kissimmee, Winter Haven, Lakeland, Tampa, Sarasota, Bradenton, Miami-Dade, Fort Lauderdale, West Palm Beach, Port Saint Lucie, Melbourne, Daytona Beach, Ocala, Gainesville, Palatka, Jacksonville, Volusia, Brevard, and more.