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How to write a good (or bad) offer on an REO

Reblogger Cyndi Mino
Real Estate Agent with First Team Real Estate

One point well made in this blog is to start your contingencies, such as inspection, termite report and order appraisal upon verbal approval from lender/seller.  By the time you get the signed docs back, you may have run out of time to clear any problems found that you cannot live with.  And yes, 7 days is almost becoming the norm, instead of 10 on most Real Estate Purchase Addendums issued by the lender/seller.  My last REO allowed 5 days for loan approval.

Original content by Pacita Dimacali BRE 01367196

Some REO agents are very good at what they do, and provide concise instructions on how to submit an offer on an REO (real estate owned or bank-owned) listings.

These guidelines were pulled and combined from various instructions from REO listing agents and asset managers….so this is further testimony to the importance of writing the best and highest offer.

GUIDELINES TO WRITING AN OFFER ON AN REO PROPERTY

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 and/or title insurance
  • 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:

  • Follow instructions. Use required form if specified. Sign/initial where needed.
  • 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.
      • This is accomplished by providing a copy ofbank/financial statement showing how much liquid assets you have to close escrow.
    • 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.
    • 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 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’T

  • Don't write 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. Seller name could be “Seller of 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.