Making An Offer
Making an offer on any house can be scary; with all the details to worry about etc. Making an offer on a REO property is even scarier, as you may not know all there is to know about the property before hand.
Everyone has their idea of the perfect home, whether people hold out and wait to find the special place is there own preference, however most people who need to buy a house will look for one of the following options
A bargain: a house whose price is below market value A house that comes close to what they are looking for
For the majority of home hunters they option that they will choose is the second one, a house that comes close to what they are looking for. There are many reasons for this; proximity to good schools, green areas, close to work or just a good neighborhood.
In a few cases; usually those who wish to purchase a house with the intention of renting it out, have a low credit base or don't want to spend too much, home hunters will choose the first option: Looking for a bargain.
In many respects an REO (Real Estate Owned) property classes as a bargain. Banks and Loan Companies are so eager to get rid of the property to free up cash for investment that they will offer various benefits or incentives to sell it quickly. Such incentives or benefits include the following:
Benefits Of Buying REO
For sale price that is almost 20%, lower than the property's comparative market value
· Provide an easy way for a first time homebuyer to buy a property
Allowing instant access to the property for the purpose of carrying out inspections Removal of back taxes or liens on the house; the bank will clear all of these up with the necessary parties Allow negotiations on rehab costs, interest, closing points, loan amount, etc. Accept a less than average down payment
With all of theses incentives it is easy to see why some people look for the relative bargain of an REO. However, finding an REO that you would consider purchasing is the first step, the second one is tendering an offer to the bank, or Loan Company.
Before making an offer on the REO you should seek the services of a Realtor, or real estate agent. Real estate agents are trained professionals and usually have years of experience in their field, that their knowledge of tendering an offer will be extremely benefit to you. When discussing an offer with your Realtor you should make certain that your realtor has contacted the listing agent to ask the following questions
Are there any inspection reports?
The first thing to discover about the REO that you are wishing to purchase is whether or not there are any inspection reports on the house. Home inspections are very common and give a through and detailed analysis into the condition of a property, regarding all aspects; giving information ranging from how clean the house is to any major faults and the condition of all major systems within the property such as water and electrical systems.
Sometimes a bank or Loan company will have an inspection carried out, however this is very rare. The majority of the time a previous person who may have either wanted to buy the property, or where living their origioannly would have carried out an inspection.
If there is an inspectors report it will be invaluable to you, helping you understand the condition of the property and any major faults that you should be aware off. If the copy of the report is recent then it will save you time and money, by not having to get a new one. If the report is out of date it is a good basis to start negotiations, however you should get your own as soon as is possible.
What work has the bank agreed to?
Finding out what work the bank is willing to do on the property is essential. Most of the time a bank or Loan Company is unwilling to carry out any repairs, as it is trying to make as large a profit as possible. If they do agree to carryout repairs it is essential to know what they are and what other repairs will need to be done when you purchase the property.
You should always be careful about how much repair work is carried out before you buy the property, as you don't want to spend money after buying it on replacing major items, such as the water system. Knowing in advance what repairs need to be done (inspectors report) and what the bank will do (bank repair agreement) is essential to deciding whether you area comfortable buying the property.
Is there a special "as is" form?
In some REO property sales there is a special 'as is form' which details the condition of the property. This form gives the buyer specific knowledge as to how the property rates and what they can expect from it. If such as form exits it is essential to be aware of it, as you can't legally claim you were unaware of the state of the property before you purchased it.
How long does it take the bank to accept an offer?
All banks differ from one another, however the large banks and Loan companies will have an entire department that is solely for REO sales. Depending on whether the bank that you are purchasing the property off has its own REO department will largely affect the time it takes for them to look through the offer.
A large bank will have a number of people who are involved in the decision making process, of whether or not to accept an offer. It is not unusual for 3 or 4 people to look through your offer and give their opinion. Generally however, you should give the bank around a week to look through the offer.
If the bank approves the offer, then all is good. If they reject the offer however you should look at whether you are happy to pay more. If you are then you may wish to submit a counter offer. A counter-offer is standard for the real estate industry and If the price is accepted by the bank then you can accept their offer and continue with the purchase.
If you chose to carry on with the acquisition, once your have offer accepted, the bank or Loan Company will prepare a contract for you to sign. It is vital that you take a good look at the contract and have your legal representative go over it with you.
How does your agent deliver the offer?
REO property offers are usually faxed to the bank; it is rare that you do it face to face, as the real estate world is now a busy place and bank, or yourself, may not have the time to go to a meeting.
As there is no formal presentation, the listing agent will need your original copies of the contract. You should remember that nothing happens in the evenings and weekends as banks are closed, so if you are in a hurry to purchase the property you should keep this in mind.
As there is no face-to-face presentation to the bank or Loan Company, you must provide the listing agent with a pre-qualification or a pre-approval letter and buyer biography to conclude the transaction and make your offer easy to accept.
