There are many ways to find and close real estate deals. One of the more popular ways is with buying real estate owned (REO) properties. An REO is a property that has gone through the foreclosure or short sale process without a sale, and the bank has taken back ownership of the property. Since banks are not in the business of managing properties, they will often immediately put the home on the market and try to get it sold as quickly as possible. In most cases, they will accept a buyers discount just to get it off their books. To get your REO offer accepted, there are a few things that every deal must have.
Regardless of your financing options, you need to show that you have funds to close. Lenders will give favor to those that are offering cash and can close quickly. If you are making a cash offer, you need to have an updated proof of funds letter attached to your offer. If the dates are old or the name on the letter is not the same as the one on the contract, your offer will be put to the side or dismissed all together. The same can be said if you are getting bank financing. Most lenders will not accept a lender financed deal unless they are desperate or you can show that your approval is already in motion. At a minimum, you need a prequalification letter stating the exact terms and conditions. If you can show that your documentation has already been approved by an underwriter, you greatly increase your odds of getting accepted. Whatever your financing type is, you need to have updated and accurate information.
Aside from your financing type, the next most important item is your contract. The offer price will always be important, but for banks it may not be the most important thing. Many banks are still scorned by the short sale and foreclosure rush with buyers backing out of deals or not getting approved weeks after the process started. They want to find the balance between maximizing their revenue while still having the security that they are accepting a deal that can close in a timely manner. This often means taking the deal that offers the path of least resistance. There cannot be any unnecessary contingencies, addendums or other red flag items on the contract. Everything should be as clear and concise as possible. This is even more the case if you are making an offer that is below market value. You should be ready, willing and able to close in seven to ten days. If your contract is sloppy or your demands are unrealistic, you cannot expect your offer to be considered.
With your offer, you should put down a considerable down payment. In a transaction with a traditional seller, you can get away with 3% down, but with an REO or short sale, you need to show that you are serious and ready to close. By putting down a 10-15% down payment, you show that you have some skin in the game. This decreases the chances that you will back out of the deal and forfeit your deposit. By adding 5% to your deposit, you can separate yourself from every other offer that comes in and show that you really do want to buy the property.
Every investor wants to get their offer accepted at the lowest possible price. This is important, but by increasing your offer slightly, you may able to secure the deal at a number that still works for you. Most lenders know exactly what they value the property at and what number they will take on an offer. This is especially the case if the property has been on the market for a significant amount of time. Instead of making a lowball offer that you know they won’t accept, increase that offer a little bit and get negotiations started. If your offer is clean, with updated contracts and inspections waived, they may just accept your first offer. Even if they don’t, they will most likely make a counter offer. Ideally, they will counter at a number that works for you, but even if they don’t you now know what they are thinking and where you can draw the line. If the number is still too high, you can try making one more counter. If that isn’t accepted, you can walk away quickly instead of spending weeks going back and forth on a deal that they would never accept. You or your realtor can watch the property from a far and check in every so often, but the sooner you know the lenders bottom line, the sooner you know where you stand.
Simply throwing offers out there and trying to see what sticks will not get your deals approved. If you want to increase your chances of getting accepted, you need to focus on how your contract looks, the dates involved, financing documentation and a realistic purchase price. The more offers you make does not increase the chances they will get accepted. There is still plenty of competition on REO properties. What you submit to the bank can be as important as the price on the contract.
See more at: http://www.fortunebuilders.com/get-reo-offers-accepted/