The ABCs For Buyers Of REOs
September 5th, 2008 Categories: REO & Foreclosure
The media tell us it’s a buyer’s market, that banks are giving away the houses because they’re not in the home-selling business, that this is the best time to buy, blah, blah, blah. There is truth to this, but the statement is too broad. It is a buyer’s market and it is a great time to buy (rates are low, inventory is high), but the banks are NOT giving the houses away. Buyers are often stunned when their low-ball offer comes back rejected.
For the buyer to win with REO, they need some schooling, and a good agent can make this a pleasant experience or a bad experience.
To start, the agent needs to set the expectations that this is not necessarily going to be quick, that there are multiple layers of complexity behind the scenes as lenders have multiple departments to handle various aspects of the transaction, and if the deal that was found is so great, you’re not the only one seeing it. This can turn into an eBay bidding situation when lenders are looking for a buyer’s highest and best offer when multiple offers come in.
To have the best chance to win, follow this plan:
A. Get a preapproval letter for financing (the seller will require this).
B. Know what you’re getting into (the good agent will educate you on the process).
C. Find some houses you like that you would make an offer on (if the goal is to get the deal, then don’t look for the perfect house). If you’re looking for the perfect house, expect your chances to get the deal to go down.
D. Once you find the house, determine how good the deal is as it’s listed, calculate what you may be able to get this home for, and then identify the bottom line price you’ll pay should this get into an eBay bidding war.
E. Have your agent prepare the offer for you to sign. Since it’s a bank-owned property, the agent must follow the offer instructions exactly. Too often, the offer goes in improperly and someone else gets the deal while you’re making corrections to your original offer.
F. Once your offer is accepted, get the home inspected. If there are problems, determine if the cost to repair problems exceeds the cost savings of your deal. If so, bail on the deal.
G. Prepare to wait, prepare to have limited information come your way during the process, but prepare to close with a great deal.
