If you’re preparing to make an offer on a corporate-owned REO property (foreclosure) there are certain unwritten rules that buyers and their agents need to follow. No doubt, there will continue to be agents who will ignore the advice given to them and submit their offers in a way they believe is right. To be blunt – what the buyers and their agents think is right is irrelevant when it comes to making an offer on a corporate-owned REO property. If you want to sell one of these properties, you need to follow the instructions to a T. It also won’t hurt to take the following few tips and incorporate them into preparing and submitting an offer.
Write your offer as if you are only going to get one chance to submit it
it’s most likely that you’re only going to get one chance. If there is a counter offer it will usually be made to the offer on a few terms related issues. We find most offers are reviewed based on net to the seller, and if it is not acceptable, the offer is ignored.
Make sure the proof of funds provided makes it clear that the buyer has the ability to perform on their offer
This means if it’s a cash offer, a bank statement with bank letterhead and dated in the last 30 days should be provided. The account holder needs to match the buyer. If financing, the letter from the mortgage company needs to not have a bunch of contingencies. It needs to be on a mortgage company letterhead and identify the borrower to match the buyer, the program used, the amount they will borrow and a proof that the down payment and closing costs required exist.
Submit the offer in one electronic PDF document
We have an email address email@example.com that the offer can be submitted to or you can fax. Fax has issues with legibility depending on the machine used. Some asset managers reject offers because they are not legible. If you do not have a way to scan the proof of funds and combine with the offer, find somebody who can. This type of request is now considered a common business practice and you really need to create your own system to process in this manner.
Expect a confirmation within one business day to the same email address or fax where you sent your offer
Please do not send the offer and call and ask if we received it. Frankly, we don’t know until we clear out our receiving systems-something we tackle roughly every two hours. If one business day has come and gone, and you do not have a confirmation, then email firstname.lastname@example.org and explain that you have not received a confirmation and you have allowed one business day. We want to know this and will research immediately. Please also understand that an offer submitted on Friday afternoon, Saturday or Sunday, will not be able to be submitted until Monday so you are not going to have a confirmation until Monday.
Consider how competitive your offer is
A lot of buyers have the idea that a corporate-owned REO property can be purchased for 30-50 cents on the dollar. This is a misunderstanding they have gained primarily by subscribing to somebody who calls themselves a guru and following their step by step plan to make millions in distressed property. Banks do not sell foreclosed properties in the open market for these types of discounts. Bulk packages in the millions of dollars are sold at discounts to note value that sometimes go this low. The kind of properties we sell are priced based on a review by two brokers and one appraiser. A price is determined by the bank based on these reports. The values submitted by these parties take into account condition. These properties are selling and the reason is they are priced correctly initially.
Don’t prepare a narrative to submit explaining why the price offered is the right price for the bank to accept
Nobody will read it. Nobody will care. All parties on the selling side know that the windows have to be replaced and the roof is leaking. We already took that into account when we came up with the asking price.
Be patient and prepared
If you are a Realtor, please prepare your buyer for how a corporate-owned REO transaction might proceed. The offer response deadline on a purchase agreement… ignored. It means nothing. The deadlines are set by the seller. You may wait a week to hear your offer is the one they wish to accept and you will have two business days to complete the execution of the banks addendum to the purchase agreement. The bank addendum is a document that will be required to be executed by the buyer if their offer is accepted. It clears up various terms issues for the seller’s purposes and makes it clear the property is being sold the way the seller agrees to (as-is etc.) So, buyers need to be prepared for not really having control over timelines but the need to perform within them.
It is a black and white business. Not a place for those expecting room for emotion and empathy. Prepare your buyers and your offer so that the experience can be a positive, professional one.