Many savvy buyers want to take advantage of the opportunity to purchase a bank-owned property (REO) after a foreclosure sale. A foreclosure sale on bank-owned properties refers to properties that banks own after the foreclosure process has taken place. Some are great deals, and some are not. As with any real estate transaction, you need to understand what you are doing.
Get the property history
Ask your buyer’s agent to find out the bank’s purchase price. Compare this price to the price the bank is asking.
Determine the property’s comparable sales
In many cases, the listing price has little impact on the value of the home. Market value carries the most weight. If you’re competing with other offers, other buyers will likely offer more than the list price. You can do a few things to find out what you’re up against:
- Look at the last three months of comparable sales: Only use those homes that closely match the REO in terms of square footage, number of bedrooms, number of bathrooms, amenities, and condition.
- Check on pending sales: Ask your agent to reach out to the listing agents for those pending sales to find out the accepted offer price. Some listing agents may share that information, while others may not.
- Look at active listings: These are likely the listings that other buyers will use to determine price.
Analyze closed bank sales for properties
Most REO agents work for one or two banks. Some listing agents are exclusive agents for REO listings and do not list any other types of properties. Because REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.
Ask about the number of offers received
If there are no offers on the REO home, you can offer below the list price and get your offer accepted. However, if there are multiple offers, you will likely need to submit a higher offer than the asking price.
Submit a pre-approval letter
To gain the most leverage with the bank, you want to have not just a pre-qualification letter. Instead, make sure you have a pre-approval letter, which shows that your loan has undergone a more detailed review by the lender regarding your ability to qualify for a mortgage.
Do not ask the REO bank to pay repair costs
Sometimes, banks may cover repair costs, but they usually won’t agree to that at the offer stage. If issues are discovered during the home inspection, renegotiate after your offer is accepted. At that point, you may have some flexibility in getting fixes for large items like non-functioning furnaces or water heaters. However, smaller items and visible issues at the time of the offer are your responsibility.
Shorten the inspection period
Shortening the inspection period can improve your offer. For example, if other buyers are asking for 17 days to conduct inspections and you request 10 days, they may view you as the more serious buyer. Inspections are usually for the buyer’s information only. Don’t rush too much so you don’t overlook serious problems. For example, mold can develop in abandoned homes after they have been neglected for long periods.
Offer to split fees with the REO bank
Go the extra mile and offer to split any fees with the bank. Some banks may not pay transfer fees, for example. If a buyer proposes to split those fees, the bank may feel more inclined to accept the offer. The same is true for title insurance fees. Many banks also negotiate to reduce title insurance fees.
Consider
In Consequences of the Appraisal
Before making your offer, it’s important to consider the appraisal. If you offer higher than the listing price, remember that the appraisal will need to document this price. If you face a low appraisal, you have options, so don’t despair. Remember that the bank will face this issue with the next buyer who receives financing.
Conclusion
A bank-owned property can help you get a larger home for less. An experienced agent in these properties can help you make a competitive offer. Be aware of the risks of an REO home, such as its sale “as is,” and make sure to take that into consideration when making your offer.
FAQs
How can I find a bank-owned property for sale?
Working with a knowledgeable real estate agent in the area is a great way to find foreclosed properties and other distressed homes for sale. You can also drive through the neighborhood you love and look for any signs announcing a foreclosure sale. Another way to follow up on foreclosed homes is to check online with banks, government institutions, and auction houses. These types of institutions usually list foreclosed homes somewhere on their site.
What is the difference between the foreclosure resale of bank-owned properties and other types of foreclosure resales?
The foreclosure resale of bank-owned properties relates to a home that has already been taken back by the loan. Other types of foreclosure resales are attempted to prevent the home from falling into the possession of the loan. If these efforts fail, the home will be added to the loan’s assets and will become a foreclosure resale of bank-owned properties.
Source: https://www.thebalancemoney.com/winning-reo-foreclosure-offers-1798483
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