Making offers on foreclosed properties can sometimes be a daunting task even for seasoned real estate agents and investors. Each bank can have different and very specific requirements that must be submitted before they even look at your offer. Recently, we have been seeing multiple offers on these homes and above asking price offers on many REO (bank owned) properties. Here are some tips and tricks that we have learned to get our offers accepted:
- Pay cash-REO banks love cash buyers. Although this may appear impossible for you to do, see if can move some equity or money around to make it happen. Alternatively, see if your bank will give you a line of credit against another property so you can write a check for the purchase of this new property.
- Offer to close in 2 weeks-This requires either a cash offer or a very organized mortgage broker to make this happen. Truthfully, I often find that it is the REO bank that can not close that quickly because the title work on a foreclosed home can be difficult (but, the bank may love your agressive offer even if they can’t move that fast).
- Remove the inspection contingency-Only do this if you are confident about your analysis of the property prior to making your offer. Alternatively, many banks will give you a verbal acceptance one day and then require you submit your earnest money check and their bank docs within 48 hours. You can use that window to do your property inspection and then not turn the docs in if you need to cancel. Although this not the most professional way to handle yourself, it could prevent you from buying a problem that you did not see when you did your walk-thru.
- Make sure to use a reputable investment real estate agent as your buyer rep-Surprisingly, the number of REO agents in Minnesota is actually quite small. They do have some influence over the bank’s decision, they may be willing to give you useful advice that may help you win an acceptable offer. I found that I had to earn the respect of the big REO agents before they would talk to me.
- Do not ask for seller paid closing costs-Banks just look at the net offer. To them a $100k offer with $5k in closing costs is the same as $95k offer with $0 closing costs. In fact, they feel that paying closing costs can just complicate the transaction.
- Do not ask for the bank to perform any repairs-They will almost never pay for any repairs or changes to the property. They are selling it as-is. Just factor that work into your offer price.
- Do not put any time limitations on when you need a response from the bank. The banks are on their own time table. They will do what they want to do, when they want to do it.
- Refrain from any other non-standard language or requests on the purchase agreement which may include: assigns to, access prior to closing, repairs, etc. They will most often reject that language.
Although this is not an exhaustive list of foreclosure buying tips, just using the main ones will help you win more offers. Gosh, on second thought, maybe you will be competing with me and I shouldn’t have told you my secrets! I guess in this market, sadly, there are enough foreclosed properties to go around!