What are REO Foreclosure Properties?
REO foreclosure properties are a great attraction for price conscious home buyers. Multiple offers are made when the bank price REO foreclosures under the comparable sales. This means you could be up against stiff competition for that bank-owned home.
It is rare that some REO foreclosures receive fifteen to twenty offers. Sometimes the bank simply ignores all the other offers and ask the selected buyers to resubmit the “Highest and Final” offer. In some case bank simply accepts the best offer at inception.
Tips For Winning REO Foreclosure Properties
If you are worried about making your REO offer shine above all the other offers and want to win the bid, here are a few REO foreclosure winning tips and tricks.
1-Get the History of REO Foreclosure Property
It is suggested to ask a buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Normally it is mentioned in the documents itself, which you can get from the tax roll or title company. Compare that price to the price demanded by the bank. Look at the amount of loan that were secured to the property. The bank will accept the price between the original mortgage balance and the foreclosure sale price, if the home is underpriced.
2-Determine Comparable Sales for REO Foreclosure
The list price has little bearing on the value of the home in some cases and market value carries the weight. If you are up against the competing offers, others will offer more than the list price.
3-REO Foreclosure Comparative Market Analysis
It is recommended to have a look at sale prices of the last three months to have the best idea about the real worth of foreclosure. If you get the services of a real estate agent or consultant to do a Comparative Market Analysis, he would be in a better position to give the right sale price of foreclosure.
4-Pending Sales
It is better to look the pending sales. You can ask your agent to contact the listing agent of those pending sales to try to find out the accepted sales price. Some of the agents will share the information and some of them will not.
5-Active listings
Active listings are mostly used to formulate the price by many buyers because they are the only homes that are visited by the actual buyers.
6-Analyze Listing Agent’s REO Sold Properties
The majority of the REO agents works for one or two banks only. Some listing agent are exclusive agents for RESs and they do not list any other kind of property. Because REO agents deal with a huge number of properties so they apply the same pricing principal to all other REO listings.
- Request your buyer’s agent to find the listing agent in MLS
- Run a search using that listing agent’s name to find the last three to six months of that agent’s listings.
- Determine the list price ratio by pulling up the previous listings. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
7-Ask About REO Foreclosure Offers
Ask how many offers are made to that REO foreclosure property. If there are no offers made, then you can offer less than the list price and get your offer accepted. But, if there are multiple offers, then you will need to offer higher than the listing price. If there are more offers then, keep in mind there may be some of them all cash offers and banks love cash offers. If you are going to get a mortgage, then you will need to offer a higher price than others to be considered.
8-Submit Preapproval Letter
Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the preapproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender preapprovals, but trust their own departments.
9-Don’t Ask the REO Bank to Pay for Repairs / Inspections
Typically, the banks will not agree to pay for the repairs and inspection, but sometimes they agree to pay. If you found some problems during the home inspection, it is suggested to renegotiate after your offer has been accepted.
10-Shorten the Inspection Period
Making the inspection period short will make a positive impact on the bank that you are a serious buyer. For example, the bank asks twenty days to conduct home inspection and you ask for ten days, you will be deemed a serious buyer.
11-Consider the Appraisal Consequences
If you are making offer greater than the list price, then it to keep in mind that you will need to authenticate that price. If you come to know that you are dealing with low appraisal, you have options, so don’t despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.
