SANDEE’S TIPS FOR PURCHASING
REO-BANK OWNED PROPERTIES 2009
- Your offer must be in writing with all required signatures, include a financing pre approval from lender that states FICO scores and proof of funds to close (i.e. a bank statement that shows you have the money).
- The Seller is a financial institution or sometimes a government agency. They work 9-5, Monday through Friday, and their offices maybe in different time zones. Offers are sent to the asset managers during these times. Response times are at the discretion of the Seller/Bank and could take several days to a week. If your offer is reasonable, then a timely response is likely.
- Currently LA and Orange County (REO) properties are selling at 105% of list price. You will have competition from other buyers. At times we are seeing 10-15 offers per property.
- The Bank is looking for the HIGHEST AND BEST OFFER. Sometimes the Best Offer is not always the highest. Offers that are very straight forward with the fewest conditions or no conditions, reasonably close to list price are attractive. Banks easily spot buyers who are not real. Your offer will look weak if it is assignable. The bank wants to sell the property; they do not want to be tied up with a property flipper who is going to drop out of escrow. The bank runs a spread sheet similar to the investor buyer; the bank has a formula for how much they will give on price and terms.
- Don’t expect a counter, response or even a rejection. You may be granted an opportunity to submit your highest and best offer.
- If your offer is accepted, it may take several days to a week for the Seller/Bank to put together their Addendum to the purchase agreement. Expect that many of the terms you have in your original purchase agreement will be eliminated in this addendum. Once the buyer receives this addendum, the buyer will have 24-48 hours to accept the addendum or back out of the purchase.
- The bank is exempt from most property disclosures since the bank has never occupied the property. Many times the bank and its employees are located very far from the property; their knowledge of the property condition is very limited. Buyers are advised to conduct their own inspections. Do not expect the Seller to agree to any repairs.
- Be prepared to operate with email and PDF documents. Fax machines are notorious in degrading the quality of documents. Try to get all your information in a PDF digital format with a scanner. When you submit your offer to the listing agent, make sure it is complete with all supporting documents together in one PDF file. Your offer will need to be transmitted through Real Estate agents. Email is the preferred way to transmit all communication.
- If you plan to use FHA financing, the FHA appraisal may reveal required repairs. The bank may not be agreeable to repairs and may not even consider any offers that have FHA financing. Seller paid closing costs is not unusual, but don’t plan on more than 3%.
- All properties are sold AS IS, with no guarantees. Home warranties sometimes may be included.
- Many of the REO properties are run down and do not have appliances and most often the bank will not replace.
- I can’t stress enough….the bank has sent out appraisers and hired out local real estate agents to give “Broker Price Opinions” (BPO). The listing agent has already given an opinion of value to the bank. The bank is educated on the area market conditions and is not going to give away property. Unreasonable offers get little attention.
Hope these tips help you move forward to a successful close of escrow - looking forward to working with you.
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