Over the last couple of years with the increase of foreclosures, real estate agents who shy-ed away from Real Estate Owned (R.E.O.) properties have found themselves delving in to them head first. Reason for shying away include everything from elitism (I have been called a bottom feeder for working R.E.O.’s) to ignorance for understanding the dynamics in working an offer and dealing with a bank. For the purpose of this post, I will assume you are the latter rather the former.
As a real estate agent who deals with R.E.O. Properties, I rely heavily on my time spent as a Foreclosure Team Leader and Senior High Risk Property Analyst at J.P. Morgan Chase default department. It has afforded me a unique perspective and knowledge on how to work with these special properties from the side of the buyer, the agent, and the seller . Not only the understanding of the institution itself, but the quirks that follow along with the Asset Manager (Remember this person works 8-5 M-F and has 300 files on his desk).
The following information was altered from a fax that my good friend Alan Plager in Tampa developed. It is in no way definitive since every transaction is different. Every time there is a scheduled showing on R.E.O. home I have listed, this information goes out to the buyers agent.
20 Things You Should Know When Writing An Offer on a R.E.O. Property.
#1. Verbal offers are rarely accepted, considered, or responded to.
#2. Seller is an institution or government agency and does not respond to offers on weekends or holidays. Offers presented during these times will be presented the following business day!
#3. Be aware, the possibility of multiple offers exists, all offers will be presented to seller. Please read items 4-8 carefully.
#4. Seller is looking for HIGHEST AND BEST OFFER, this means that the highest offer may not be accepted. The institution definitely weighs all of the risks associated with offers. Contingencies and sales terms are considered to determine with whom they will enter into contract.
#5. Response times of 5 to 7 business days or longer are not unusual. Your offer will sometimes require the signatures of multiple parties. Be advised that all efforts are being made to give the buyer a timely response. The listing agent has no control over this time frame! The listing agent has the same desire as you, to see a successful closing!
#6. Due to the nature of R.E.O’s, once there is an acceptance of your offer, the usual turn around time for an executed (fully signed) contract is 7 to 10 business days.
#7. Because of items 2 – 6, once an offer has been sent to the seller for FINAL (fully signed) approval, all offers after that are considered back up offers.
#8. Seller may respond with a “reject offer” with no counter.
#9. Due to the nature of REO clients needs, Agents can be out of the office most of the day. Email is the preferred method of contact. Most responses are by email and/or fax.
#10. If you need to reach the seller’s (listing)agent by phone, PLEASE LEAVE only ONE MESSAGE .
#11. Seller is exempt from property disclosure and has never occupied the property. Buyers must rely on their own inspections.
#12. Seller will complete no additional repairs other then what has already been completed.
#13. If you need financing in your offer, most properties will need some amount of repairs to have either, FHA or less then 80% LTV. Seller will not grant permission for buyer to complete any repairs prior to closing. Because of the possibility of lender required repairs, most offers of this type are usually rejected.
#14.Special contracts and Addendums will be required. Some sellers provide the addendums themselves after all negotiations have been completed. All addendums and special contracts are written to favor the seller.
#15. Curb offers, and offers that are assignable will run the risk of being rejected without a counter offer.
#16. When presenting offers, please remember that full contact information of all parties involved must accompany the purchase offer along with other forms your state may require. This maneuver will expedite the response time & quantification of intrinsic risks.
#17. Cash offers will require “PROOF OF FUNDS.” Generally, a letter from the buyer’s bank stating that buyer does have an account, the funds are readily available, and the amount being held by their institution, will suffice.
#18. Offers subject to financing will need a PRE-APPROVAL letter stating that buyer’s credit has been reviewed.
#19. All properties are sold â€œAS ISâ€ with no guarantees.
#20. All real estate transactions are different, this document is intended for information and education purposes regarding only an REO transaction. Please review with a licensed real estate agent and/or attorney.
There you have it; simple information that makes the purchase of an REO home smoother for the buyer, the seller, and all agents involved. Keep in mind the R.E.O. listing agent has the same goal as you: To have a SUCCESSFUL CLOSED TRANSACTION!
When writing on an an REO property, patience is the key!