subject: How to Make the Right Offer on an REO Foreclosure Property [print this page] How to Make the Right Offer on an REO Foreclosure Property
Tips on How to Make an Offer on an REO Foreclosure Property
REO (real estate owned) foreclosures are often sought-after due to their shockingly low prices. The low cost of an REO property can lead to fierce competition between buyers in attempt to the snatch up a good deal. Some REO foreclosure properties can have over a dozen bidders, making it difficult for a bank to quickly sell the property. It's common practice for a bank to simply ask the two highest bidders for their final price and take the better offer. By adhering to the following tips, you can figure out how to make your REO offer stand out among others when seeking REO properties, despite tough competition.
Know your REO
Figuring out the history of a particular REO foreclosure can be beneficial in trying to obtain it. Your buyer's agent can help you find the bank's purchase price, whether it be on the Trustee's or Sheriff's Deed. These documents should lead you in the right direction to find the purchase price, compare them to the price of what the bank is asking for. Also familiarize yourself with any sort of loans that were attached to the property. The bank will most likely accept an amount between the original mortgage and the foreclosure sale price, provided the house itself is underpriced. Take notice of comparable sales in other REO foreclosure properties in the area, comparing other properties with similar attributes to the REO that you are seeking.
Research and reevaluate
Proper research can be key to securing a foreclosure property, whether it's research on the property itself or the person selling it. Take some time to look up the other listings of the REO agent selling the property you're after. Figure out their history of their listings and compare their sales prices to list prices. Once you've determined an average percentage of what their selling in relation to list price, raise your offer accordingly. Make sure to ask about how many offers have been made for the REO property you're after. You can most likely ask for a price lower than list if there are none, but you'll probably have to go above list price if there are multiple offers. Also keep in mind that banks prefer all cash offers, so make this a priority if it's within your means.
Sweat the small stuff
Don't disregard the smaller details. Submit a preapproval letter to your lender(s), both to your own personal lender as well as the lender who owns the property. Don't bother the REO banks with the need to do inspections or repairs. Iron out such details after your offer is accepted, not before. Something as simple as negotiating your own inspection period (preferably shortening it) can make you seem like a truly legitimate buyer. Be willing to bargain with the bank and help share any fees or potential financial burdens if it means securing your property. Through research and negotiation combined with some personal dedication, you can secure an REO property and beat out your competition.
