Attention NWA Agents - How to best represent your buyer in an REO situation.....

Real Estate Agent with Crye-Leike Bentonville Crossroads

Here are some tips and tricks for purchasing REO properties.  These are not specific to any property or any seller, but just general tips.  These tips don't apply to HUD Properties.  I am in Arkansas, so if you're in a different state, check with the list agent to see if these apply.....

  • Submit offers on state forms.  Check with seller's agent if there are additional forms from seller that are required to be submitted with the offer.
  • Historically, lowball offers seem to get countered at about 97-98% of the current list price.  Your buyers are welcome to offer any amount, just expect really low offers to get rejected or countered at near the list price
  • Offers with contingencies, lease purchase offers, offers to rent are typically rejected.
  • Please give the seller at an absolute MINIMUM 3 business days to respond to the offer.
  • Minimum $1000 earnest money check made out to listing agency.  Some sellers require this to be in certified check or cashier's check, ask the listing agent which is appropriate.  You will need a copy of the EM Check submitted with the offer, but you hold it until either 1) there is a deal, (at which point you'd get it to sellers agent) or 2) you realize there isn't going to be a deal, and you can give it back to the buyer.
  • Some offers asking for assistance with buyer's closing costs go through and become deals.  Don't be afraid to ask for BCC, but try to limit the amount to around 3%.  Make your offer squeaky clean........surveys, termite contracts, home warranties, repairs, etc. usually seem to get countered out. 
  • If there is a seller's disclosure, it's going to say they don't know anything about the property.  The seller (being a bank or asset management company) has never lived in the home, and only knows what the list agent and other BPO agents have told them about the house.  You will get a Lead Based Paint disclosure if the home was built prior to 1978.
  • Make sure your buyers know REO Properties are typically sold AS IS, WHERE IS.  They're welcome to get an inspection, however, don't expect any repairs to be done by seller, and don't expect buyer to be able to perform any repairs prior to closing.  Most sellers will let you out of an offer if the inspection winds up showing the property needs more work than the buyer would like to deal with.  It's important to note this as well when your buyer is considering what kind of loan they will be getting.  If you're not sure if a particular home would pass VA, FHA, RD appraisal/inspection, educate your buyer about the possibility of needing to get a conventional loan.  Even then, many conventional lenders are beginning to require repairs prior to closing, check this out closely.
  • Speaking of inspections, depending on where the property is, the list agent may have difficulties getting all of the utilities on for an inspection.  Please work with them as some utility companies can be hard to work with. Also, there may be difficulty scheduling de-winterization.  Be understanding.
  • Pre-approval letter or proof of funds for cash purchases MUST be submitted with offers.  Proof of funds is actually very easy.  A bank statement, a printout off the buyer's account from their on-line bank service, or even something faxed over from the bank is all you'll typically need.
  • Don't ask for closing dates the last 3 calendar days of any given month. 
  • Once you submit an offer, assuming it's not rejected, you'll go thru a negotiating phase - most of this will likely be through phone and e-mail, however, keep documentation on all of it.  Once you have a firm deal, most likely the seller will issue paperwork that is an addendum that gets attached to the contract that outlines the final details.  Your buyer would check it over, sign it, then it gets sent back to the seller who also checks it over, gets their investor backed approval, then signs it.
  • It's not a "real deal" until everyone signs off on the final offer/acceptance/ addendum paperwork.
  • It usually takes about 3-5 business days to get a property under firm contract - then it usually takes 3-4 weeks to close.  It can be done in shorter time, but with foreclosures, it's better to expect it later and be surprised if it can be done earlier.
  • The listing agent is dealing with an Asset Management company or a Bank that is in another state (if not in another country), most likely a different time zone, and dealing with people via phone, e-mail and internet.  The Asset Management Company or Bank representative who is their contact is most likely dealing with 200-500 properties at any given time.  Be patient.  The listing agent is probably doing their absolute best to get you answers, documents, etc. but remember, it's not like they can just drive over to the seller's office and get what you need RIGHT NOW.

One last thought.  Even though the seller is an Asset Management company or bank, the list agent's duties are still to the seller, not your buyer.  As in any deal, a positive cooperative attitude is necessary.  The list agent may be just as frustrated as you are when it comes to getting things done quickly.  Please respect the list agent's responsibility to their seller and remember, they're human too!


Gordon Sloan
Group1 Real Estate, selling houses in Salt Lake City Utah - Salt Lake City, UT
Salt Lake Homes For Sale, Salt Lake Real Estate

Gary.. This is a very helpful tool. Hope you don't mind if I do something similar to pass out to clients. After reading your post, I realize that I am covering most of these areas during the negotiation in bits and pieces. One memo, up front, would save a lot of time and aggravation.


Mar 03, 2008 10:59 PM
Jessica Bigger
Bigger Communications - Reston, VA
Freelance Real Estate Business Writer

Hi Gary,


Glad I found this post.  Found it helpful.  Had a question though.

I'm representing first time home buyers with 100% financing, but they also need the bank to cover their closing costs.   Bad, I know.  Are we just wasting the bank's time and the buyer's time.  Have you seen any situation where the bank has accepted a 100% financing offer with request for Bank to pay all closing costs (including non-recurring loan costs)?  How about just 100% financing and buyer pays all closing costs or splits with the bank?  Thought I'd ask.

Mar 24, 2008 09:13 AM
Gary Gay
Crye-Leike Bentonville Crossroads - Bentonville, AR
GRI, Executive Broker - NW AR Realtor
I would think it doubtful the bank will pay more than 3% BCC - whether it's a 100% loan or not.    Where in the world are they getting a 100% loan with the lender knowing they need help with CC?  I thought all that money disappeared 6 months ago.  
Mar 24, 2008 09:21 AM
Jessica Bigger
Bigger Communications - Reston, VA
Freelance Real Estate Business Writer
Bank of America - still has 1 100% financing program left, but for the most part your correct, it's pretty much dried up.  To be honest, I've been trying to get these buyers to get in the habit of saving and educate them on their current situation and what it's going to take for them to become homeowners.  I know at some point I may just have to tell them I can't help them at this time.  
Mar 24, 2008 09:36 AM
Ryan Russell

Hey Gary -

That's some great info.  I hope every NWA Realtor reads this. 

I would also add:

  • Garage door openers many times aren't available.  Whatever a buyer finds in the home is what they're going to get concerning openers.
  • More often than not agents won't get paid at the buyers closing.  Allow a couple of business days to receive a seller signed HUD and commission check.

I hope everything's going well Gary.


Nov 01, 2008 03:14 AM
Mike Carey
Synergy Realty Group - Bella Vista, AR

Excellent tips Gary. Thanks.

Mar 13, 2010 08:37 AM