Here are a few random points for anybody considering making an offer on a bank owned foreclosure.

The bank has at least two different opinions of value.

They will sell the property for very close to those values or if it has not sold after 60 days, they will order more opinions of value.  No matter what you see on late night TV, the bank is not going to give these properties away for 50% of value, just so you or your buyer can make that extra 50% on a flip!

Banks are closed from 5pm Friday until 8AM Monday.

Don’t submit an offer at 4pm Friday with a deadline to respond of 4pm Saturday.  Won’t happen.

Buyer Biography

I read somebody giving advise on buying bank REO suggested including a buyer biography.  Interesting idea but not sure it would ever be seen.  Many systems for offers have no way to include this information.  Really, unless your buyer is a not for profit that wants to use the property for some better society objective, I would not spend a lot of time telling the bank about your buyer.

Proof of Funds

Provide the very strongest, clearest, accurate proof of funds or financing that is possible.  If you want to tell the bank about the buyer, do it through your proof that they can actually close on their proposed offer.

Inspection Contingencies

Have an inspection contingency in your offer and be prepared that if the inspection findings are troublesome, the buyer should be prepared to walk.  You can ask the bank to make repairs but a credit is going to be your most likely response.  Lately though I do not see the bank changing their net so they operate with the idea that if given a $3k credit for repairs, buyer will pay $3k more for the property.  This is why a lot of REO deals never close.  Buyers need to have some cash in the bank to make repairs.  It is OK to ask though.

Be Prepared To Wait

Bank offers that are accepted are accepted verbally and usually subject to corporate approval.  A buyer needs to be prepared to wait for a bank written addendum to the actual purchase agreement.  This document is not negotiable.  When presented it needs to be executed.  If the buyer does not like certain terms, it is cold and harsh, but the bank will just cancel the accepted offer and sell to somebody who will sign their addendum.  Bank’s lawyers write these addendum, and nobody in the REO department is authorized, or will even invest a minute, in negotiating them.
These are just a few random thoughts on issues that seem to always trip up transactions.  Don’t get me wrong.   There is an advantage to buying a REO property and it is often based on a discount to market.  It is usually not the size of discount that seems to be expected from some buyers today!

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