As many times as I've written offers on REOs, it is advisable, and I cannot stress enough the importance of writing the BEST and HIGHEST offer. And just as important is to be aware of a lot of the do's and don'ts that apply to writing offers on REOs.
REMEMBER
- Seller/Lender calls all the shots
- Seller/Lender may require getting Buyer preapproved by a lender they specify, or provide proof of funds to close escrow. Buyer may not be required to use that Lender.
- 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.
- 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:
- 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.
- 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.
- Other documents that the Listing Agent/Seller specifies should be included with the offer. 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 of the formal and written acceptance 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'Ts
- Avoid writing 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.
- 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.