Placing a Bid to Purchase a Bank Owned Hemet Home

Real Estate Agent with Mason Real Estate CA BRE 01444168

Buying an REO home or other real estate in Hemet, CA (or elsewhere) can be a daunting experience, at best.

The process appears to be fairly straight-forward, from the beginning.  The banks each have their own proprietary addendums to our California Purchase Agreement which ends up negating many of the key provision of our ‘standard’ contract.


Probably the most important is that the banks will not (typically) accept the provisions for liquidated damages, arbitration and mediation.  Often time, the buyer will initial these clauses – but the bank will not.  If the buyer’s agent does not pick up on this, then the buyer would be bound by these terms and the seller would not.  I have seen addendums come back after a contract has been ratified by all parties, to exclude these particular clauses.

Other important clauses that are negotiated away when the buyer signs the addendums is that the seller will not perform any repairs – regardless of the outcome of any inspection.  The key here is to inspect prior to writing the offer and asking for adjustments in the form of an adjusted asking price.  In other words, if you would offer $200,000 for a Hemet REO home for sale but you feel as if there is $10,000 of cosmetic repairs (paint, carpet, etc) then offer $190,000.  It is so much cleaner this way and much more likely that your offer will be considered.


It has been my experience that the banks will not drop their prices significantly, just because they are an REO property.  To determine a price, they have typically ordered at least two recent BPO’s (Broker Price Opinions) and an appraisal.  All of the data has been thoroughly analyzed by their in house staff of trained professionals, to establish a price.

Once a month, the REO agent assigned to sell the real estate must submit a MSR (Monthly Status Report) which will show up to date comps and market trends, for further analysis.  New BPO’s are ordered every 90 days.

My experience is that a reduction of up to 3% in the first 30 days a property is listed will be given serious consideration – just about anything else will almost be rejected.  From 30 to 90 days, after the bank has already reduced the asking list price, they still may consider a reduction from 3% to as much as 8%.  Again, there are exceptions, but these are the rules of thumb that I advise my buyer clients of when they want to buy an REO home in Hemet, CA.

Once a home has been on the market 90 to 120 days or more, almost anything can happen.  If a client is looking to write extreme low-ball offers, I keep them focused on this segment of the market.  There is no point in writing a $100,000 offer on a home that came on the market last week for $200,000.  The person who priced that home would just have much too much egg on their face to wipe off.


This is where it gets a little bit tricky.  Many REO real estate agents will promise a ‘quick response” to all offers in their Agent Comments, as listed in the MLS.  The problem is a quick response and an accepted offer is definitely two different things.

You see, nearly every REO property today is managed through an online program that keeps all of the relevant parities connected to one another, so those who need to know, can see exactly what is going on with the property at any given moment.

As a REO REALTOR®, when I submit an offer I am simply completing a simple form that has the terms of the buyers offer.  The form is 6 or 7 lines deep and includes 20 to 25 fields that I must complete.  It has everything that is relevant to the bank, including, of course, the purchase price, down-payment, financing, escrow time and other relevant terms that make a contract to buy REO homes.

The bank will review this and typically get back to me in just a few business hours – certainly by the next business day at the latest.  The response will be in the form of a counteroffer that will include the aforementioned addendums as well as any modifications to the offer.  I’ll receive these documents in a PDF document format, which I prefer to email to the buyers agent.

If the buyers agrees to the terms, they are to sign them and fax (or email) me back a copy and then follow very specific instructions to overnight them back to the bank.


This is where it gets tricky.  Most buyers and their agents believe that once they accept a counter offer that they have solidified the transaction.  This could not be further from the truth.  The transaction is not solidified until the bank actually signs the documents they receive.

The sad truth is it may take the bank a week or more to ratify the contract and make it binding.

In the meantime, as the listing agent for the REO, I still have to keep the property listed in the MLS as an ACTIVE Listing – and let me tell you that makes a lot of buyer agents MAD!  Sorry, but I have no choice.

If other offers come in, the bank will negotiate those contracts – if a better one comes along than the one that they have already approved (not accepted)  they will ask me to go back to the original buyer and ask for their “best and final” offer.  Again, a process that alienates buyers and their agents.

The good news is that the timelines do not start until the offer has been signed by the bank.  So, if the bank countered and told the seller they only have 10 days to complete their due diligence and it takes them 2 weeks to accept an offer, they have given the buyer 24 days to perform their due diligence.


Keep in mind that when the lender accepts an offer, they will immediately open an escrow with an escrow company of their own choice.  They have negotiated large contracts with escrow, title and other vendors for deeply discounted services based on volume.  No mater how hard you try, the services will be the sellers choice.

The real unfortunate part of this is we are working with clients in different time zones who are assigning escrow work to offices a hundred miles or more away from Hemet.  This makes it extremely difficult to work with, as the escrow and title staffs are now overworked and consider themselves underpaid for the amount of work they are doing.

No longer will the buyer have the option of going to escrow to sign paperwork – now it will be sent with a mobile notary – at yet an additional expense to the buyer.

There are of course more nuances to buying REO foreclosure real estate in Hemet from the banks.  All in all, if you do it right, it can still be a great opportunity to buy more home than you would otherwise have been able to afford., and one that should lead to a large profit for you when you sell, once the market turns around in the next few years.

In the meantime, just be careful and work with an agent that knows what they are doing when it comes to Placing a Bid to Purchase a Bank Owned Hemet Home.

Blessings to all who read, 

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Hemet - San Jacinto Valley


Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California.  If you are a buyer, investor, first time home buyer or are just interested in REO real estate,

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Until Next Time, Have a Blessed Day,

John Occhi, ePRO, REALTOR®
DRE Lic No: 01444168

ePro,John Occhi,,realtor      Certified Probate Real Estate Specialist Logo Awarded to John OcchiFive Star Logo,Certification,REO,Five Star Institute     

Excellence in Real Estate,Team Log,John Occhi,,hemet,san jacinto,CA  

This blog and the contents written here is the intellectual property of John Occhi, Temecula - Murrieta, CA REALTOR® in the South West Riverside County region of the Inland Empire of Southern California.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. 

I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

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