Tips for Making a More Competitive Offer on an REO/Bank Owned Property

Real Estate Agent with Ashby Realty Group, LLC SA537042000

   "How do I get the seller to accept my offer"? This question typically comes to us from our clients, out of frustration, after they have made many offers on multiple properties, getting beat out each time! We have experience listing REO's, Short Sales, ‘regular' sale properties, and builder specs. Here is a typical scenario on a bank owned home that is newly listed for $150k:

    Multiple offers are often received within the first 10 days on market. If there are 5 offers on the property, 4 of 5 will look like this: FHA loan, $150k offer, 1k earnest, 3% seller contribution towards closing costs, 10 day inspection, 45 day close. (If you currently work with us or another agent and have submitted an offer, you may be nodding your head and giggling!) To me this is an easy issue and it is rare that we do not get a buyer's offer accepted once they have finally come to the point of desperation and are ready to accept our advice. I will outline the items below that you should consider, and by all accounts that we have an obligation to do for our buyers.

PriceA. Price

Obviously! Duh, right? Well, maybe, but why do so many people "low ball" in an REO market where multiple offers are likely? Our top buyer's agent, Randy Curnutt, will tell you that it is EXTREMELY unusual that he meets a client who is ready immediately to make a COMPETITIVE offer that makes sense on a bank owned property.  You absolutely must consider the following prior to making an offer: Days on market, demand, appraisal, buyer motivation, seller motivation, concessions and so on.  Why should the bank consider a low ball offer on a property that has been on the market less than 30 days? Most REO listings, if priced right, receive MULTIPLE OFFERS in the first 10 days on market! Obviously, this will depend on how much other BANK OWNED competition they have in the immediate area, but here in the East Valley where we work (Queen Creek, San Tan Valley, Gilbert, Chandler, Mesa, Scottsdale, etc.) this is usually the case. The seller/bank will look at the NET offer, they do not care about concessions (i.e contributing towards a buyer's closing costs) as long as they get the highest NET offer. Also, if you are approved for 150k, you should be very careful looking at 150k and higher BANK OWNED properties, as you will not be able to compete if there are multiple offers. You want to work smarter not harder.  Short Sales and regular sales may have some negotiation room....though quite often a short sale may have multiple offers as well.

Lady writing checkB. Earnest

As I stated above, $1000.00 is what I see 90% of the time! This is often because it is a comfortable number for the buyer and not too intimidating for the agent to ask for. If you ask me, and you have the money upfront, and you can't bear the thought of losing out on this property ‘of your dreams'....I will always recommend that my buyers put down a strong deposit.  This means they should put down 3.5% earnest if they are financing with an FHA loan, and at least 5k on conventional offers. Think about this for a moment... the benefit to the buyer is that your down payment is in escrow and you will not spend it! The benefit to the seller is that they see the buyer is more vested in the property. That commitment means a lot when there are multiple, similar offers! The benefit to the lender is they know the money is there! They do not need a Verification Of Funds as they already have an escrow receipt. The benefit to the agent is they will have one less concern with regards to a deal falling apart. Everybody wins, especially the buyer!

MoneyC . Financing

I am amazed at how many deals have cancelled on us in the past based on financing! The first time that happens to me is the last time I will speak to that lender! A good agent will align themselves with a lender that is honest and does not speculate! If you are looking at homes without an approval, you may be wasting your time in many cases. That being said, here are a few tips: First USE the lending program that the seller suggests or requires. The seller will usually take an offer from a buyer using their program versus an FHA/VA offer that is similar. Obviously, sellers love cash, but they are not willing to take it in the shorts to have a cash buyer.  Remember, the final NET offer is King.  If you check out the seller's financing programs, keep in mind many seller programs have no MI, no appraisal, less down requirements, faster closings and so on so always check this out.  Fannie Mae, for example, has a Homepath program that is great for buyers and investors. It is one of the only investor loan programs out there that only requires 10% down! For an owner occupied buyer, they only require 3% down and you won't have to pay out of pocket for an appraisal, etc. Regardless if you use the seller's loan program, make sure you are able to communicate with the lender and that they are going to be responsive to the seller. If they aren't responsive to you, chances are good they won't be much better with the seller or seller's agent. When I receive an offer on behalf of my seller, I make notes on the offer about the lender and if I was able to reach them and what they said. I have saved many bad deals from happening by calling the lender! Also, find a lender that can "really" close  in 30 days or less! I would bet 50% of my listings have extension requests!

inspecting moneyD. Inspections

In Arizona, our contract defaults to a 10 day inspection period. It is very rare that I ever receive offers with a different timeline. I want everyone to re-think this terminology. First of all, it doesn't take 10 days to get a home inspection performed.  If the utilities are on at the property, I can have an inspector out there in 3 days or less. Instead of using the buyer's perspective of inspection period start using the real terminology of "backout" period! That is exactly what it is! It is 10 days that the buyer can just walk away for free. Sellers and banks are very aware of this and that is why you need to shorten that "backout" period on your offers to 3, 5 or 7 days! This will give you a strong advantage with your offer.  Banks always look at the bottom line, and part of that bottom line includes "holding costs".  Every day that home is held in their inventory costs them money.  So, every day you shorten your inspection period is one less day they have to worry about putting that listing back on the market. Sellers will know you are a serious buyer and if you do cancel, the sooner the better so that the seller loses less marketing time.

Sold houseE. Close Of Escrow

As I just mentioned, "holding costs" are huge to a seller. It costs the bank an average of 2% of the purchase price to carry a property on a monthly basis.  Obviously the seller wants this property out of their inventory and off their books sooner rather than later.  Close Of Escrow is a vital issue when submitting offers. It needs to be realistic, but slanted towards the seller's benefit. Cash deals should close in no more than 2-3 weeks and most finance offers 3-5 weeks. Beware of lenders stating they need 6 plus weeks to close.  Unless it is foreign national financing, they may be hoping to correct a credit issue or may be waiting for the buyer to obtain funds....or worse! The sellers are smarter than you think and will ask questions.  Also, the longer it takes to close escrow, the longer the risk that the buyer's loan program guidelines may change or worse, be eliminated!

F. Selling to the listing agent

This is an art! The buyer's agent needs to use their sales skills and get the listing agent to "encourage" the seller to take their buyer's offer. The buyer's agent should sell the listing agent on how great the buyer is! They should make sure the listing agent knows how much business they do successfully! That they have total control! That you (their buyer) understands what "AS-IS" really means and if they lose this property they will JUST DIE! Yes, I actually had an agent tell me this....she was serious, she thought her client might actually commit suicide! Ok, so that's a little extreme, but you get the idea! Bottom Line: The listing agent needs to know without a shadow of a doubt that the seller will regret not taking you offer! But, beware....if the listing agent recommends you and you don't perform, you will NEVER, EVER be recommended again.

G. Multiple deals with the same agent

Have your agent search out REO agents they like, who have a good portfolio, and make offers on their properties specifically. I assure you that after a closing or two that are successful, that agent will be bragging about your agent to the seller and that could throw your offer over the top in a close race! REO's are all about relationships. Establish relationships folks!


When your agent goes out of their way to insure the listing agent that the deal will close, you both then need to make sure that it does! I can assure you that when your offer is accepted and it cancels, that agent will remember and make notes on your agent's next offer. You both need to CONTROL the sale from offer to finish. This will help your agent get more offers accepted and have the listing agent on your side!

I. Concessions

Contrary to popular belief, the sellers typically really do not care about paying concessions. They will do it all day long, but you need to remember they still care about their bottom line. When making an offer, consider how the concessions you are asking for effect the NET offer. You may want to increase the offer price, (yes, even above list) provided you are approved for the full amount and your agent feels the property will appraise for the price you are offering. Be alert for sellers that charge the buyers for seller closing costs, in addition to the buyer's.  For example, FNMA (Fannie Mae) does not pay ANY closing costs unless specifically requested in the offer. Always ask the seller to pay their own title and escrow fees, or this could cost you a pretty penny.  You still need to factor, however, the bottom line here is still that your offer is based on the final net number, so if you offer 150k and want the seller to pay 5k towards closing costs, plus pay for warranty, appraisal, termite and repairs, and pay their own title and escrow fees, you have now really only offered 136k!! Your agent should explain this to you in detail.

J. Home Warranties

Personally, I have never had a good experience with home warranties on my own properties.  They also can muddy up negotiations. Just don't ask for them unless you are increasing the price to compensate for the expense. Believe it or not, it is often that we see deals get beat out by $200-$500 net because a warranty was requested. This may be a nice house warming gift from a family member if you truly see a value in it.

K. DU/loan approval

This is huge! Many banks now require in writing, proof of the Desktop Underwriting or Automated Approval from the buyer's lender. It is certainly no guarantee to the seller that the buyer will close, but it is an additional step. It is better than an LSR or letter and it assures that your lender has at least taken a real application. Have your lender provide this upfront and send it over with your offer! This will be a big plus when competing with other FHA offers!

L. Highest and Best

When a seller has more than one reasonable offer they will often ask each buyer to submit their highest and best offer. When doing this you need to review all of the tips above and sharpen your pencil! Don't forget to have your agent probe the listing agents, as I find they will often disclose more than they should and help you make the right counter offer. Be sure to respond in the timeframes given and follow all requested steps.

     Don't allow bad offers to be the way you as a buyer get educated on how to navigate this market! You should trust your agent as this is what they do, all day, everyday (hopefully). They are the professionals and that should be why you hired them!

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more?


Jessica Sulliman & Randy Curnutt



REal Estate Needs. REal Life Solutions



About the Author...
This article was provided by Jessica Sulliman, a Nationally recognized Realtor and Certified Short Sale & REO Specialist.  Jessica can be reached via e-mail at by cell phone or text message at 602-677-7977. Jessica has helped thousands of people buy and sell their home.  For Arizona real estate and homes see or For more info regarding short selling your home, please visit

Specializing in the following Metro Phoenix areas in Arizona: Queen Creek, Gilbert, Chandler, Mesa, Scottsdale, Apache Junction, Gold Canyon, Tempe, Florence, San Tan Valley, Coolidge, Casa Grande, Eloy, Maricopa, Ahwatukee.

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*Seek competent legal counsel and tax advice for any real estate transaction. Jessica Sulliman and Ashby Realty Group are not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit. Your Lender may not agree to the change of your loan and/or a Short Sale.With a Short Sale, there are no guarantees offered and we cannot provide legal advice. Seek legal advice.*

About the Author...

This article  was provided by Jessica Sulliman, a Nationally recognized Realtor and Certified Short Sale & REO Specialist.  Jessica can be reached via e-mail at or by cell phone or text message at 602-677-7977. Jessica has helped hundreds of people buy and sell their home.  For Arizona real estate and homes see or

Ashby Realty Group handles Arizona real estate sales, Arizona short sales, Arizona strategic short sales, Arizona pre-foreclosure sales, and Arizona foreclosures in the entire metro Phoenix area.  We specialize in the East Valley: Queen Creek, Gilbert, Chandler, Mesa, Scottsdale, Paradise Valley, Apache Junction, Gold Canyon, Tempe, Florence, San Tan Valley,  Ahwatukee, Anthem at Merrill Ranch resort community in Florence AZ. Serving all of Maricopa and Pinal counties Arizona. Arizona Short Sale Realtor. Short Sale Arizona 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Marty and Laurie Gale 05/08/2010 03:03 AM
  2. 05/08/2010 03:13 AM
Home Buying
Arizona Maricopa County
Arizona Real Estate
Foreclosure Talk
Everything About ARIZONA Short Sales and Foreclosures
bank owned
real estate
jessica sulliman
randy curnutt

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Lori Bowers
La Quinta, CA
The Lori Bowers Group

Great article and info!  Will have to pass this on

Feb 04, 2010 03:16 AM #1
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

Great points!   Some will work for our area ....others I will need to adapt!!! 

Thanks for sharing!

Feb 04, 2010 03:57 AM #2
Christine Hynes
American Capital Corporation - Laguna Beach, CA
Orange County Senior Loan Consultant

Really nice article Jessica, I know several people trying to buy bank owned property or short sale homes only to have their offers turned down multiple times. Will definitely save this one!

Feb 04, 2010 04:52 AM #3
Jessica Sulliman
Ashby Realty Group, LLC - Queen Creek, AZ
CDPE, SFR, Queen Creek Real Estate 602-677-7977

Lori, Deborah, Christine: Thanks Ladies, I appreciate the Kudos.  We have been there with our clients many times, but it's our job to educate them.  Unfortunately, "you can lead a horse to water but you can't make 'em drink!" I know that sometimes it helps to share this info from a third party. 

Feb 04, 2010 05:55 AM #4
Adrea France
Ashby Realty Group, LLC - Gold Canyon, AZ

A  lot of great points Jessica! Thanks for the info! Have you found that you receive resistance from your buyers on sharing the DU/LP Findings (SS#, assets, income, etc) with the listing agent and the REO Department? 

Thanks in advance! 

Feb 04, 2010 01:03 PM #5
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

Thanks Jessica great information.  I will definitely book mark this.  Margaret C.

Feb 05, 2010 03:21 PM #6
Marty and Laurie Gale
Utah Realty - South Jordan, UT
Utah Realty | 801-205-3500 |

Great Article. Thanks for the Information. It should help my Real Estate Business in Utah!

May 08, 2010 02:56 AM #7
Tony and Suzanne Marriott, Associate Brokers
BVO Luxury Group @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

Contrary to popular opinion, Buyer Inspection Period is not an opportunity for a "free look".  The Buyer must act in "Good Faith" when making a decision to cancel during the inspection period.  Deciding they no longer like the floor plan doesn't count.....

Oct 21, 2010 03:21 AM #8
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Jessica Sulliman

CDPE, SFR, Queen Creek Real Estate 602-677-7977
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