REO FORECLOSURES, (Real Estate Owned), is a home which is in the possession of a lender as a result of a foreclosure or forfeiture.
Many buyers want to buy REO foreclosures because most banks often list these homes under market value. Because the homes are “priced to sell,” theses homes often receive multiple offers. The term HIGHEST AND BEST is a term used with most banks to respond to multiple offers. They will ask each buyer to submit their Highest and Best offer and the bank will approve the “Winning Bid.” Many times the winning bid may not be the offer submitted with the highest purchase price. Many things go into consideration when looking at an offer.
A buyer offering all cash and not asking the bank to wait for loan contingencies is appealing to the bank and may be able to offer less than a loan that may be hard to finance. Buyers that are obtaining a loan want to make sure they submit their pre approval letter along with their offer. Buyers may want/need to get pre approved by the lender who owns the property. You do not need to use their lender for your loan, but having their approval will give you a stronger offer. Banks will trust you are a qualified buyer if they know that someone from their bank will lend to you.
Typically when you are purchasing a REO home, it is an AS-IS purchase. Writting an offer for the home in it’s As-Is condition will be a stronger offer presented to the bank. If you encounter a problem during the inspection period, you can renegotiate with the bank after the offer has been accepted.
On a typical purchase contract a buyer has 17 days to conduct inspections on the home. If you are able to shorten this time, even to 10 days, that will make your offer a little stronger and make you appear as a serious buyer.
Some banks will not pay certain fees, such as transfer fees, or escrow fees. If a buyer offers to pay, or split those fees, the bank may feel more inclined to accept the offer. Although choosing a title company is the buyer’s choice, offering to let the bank choose the title company can often save the bank money and again make your offer a little stronger. Many banks receive title discounts when they use their prefered title company and allowing them to choose can help you.
When you get into a multiple offer situation and the price is bud up above the asking price, many times the appraisal could become a problem. If you find yourself dealing with a low appraisal the bank will most likely have to lower the list price of the home. The bank will most likely run into the same appraisal problem with the next buyer who has to obtain financing. This is why all the other factors of the offer are so important the bank can “make up money” in other places other than just the “offer amount.”