In today’s market, frequently the very best “deals” are bank owned foreclosures (REO’s). But getting an offer accepted on an REO can prove challenging.  On the most desirable properties, buyers often are faced with multiple-offer situations on foreclosure purchases, where they are competing against numerous other prospective buyers.  In representing banks in the sale of their foreclosure listings, I have at times had up to 25 offers come in on a single property within days of placing it for sale in MLS. 

 Following are some tips on how to write your offer to get it accepted:

1.  In most cases banks prefer offers that will close quickly, have short inspection periods, and be purchased “as is”, with no repairs. 

2.  Cash.  In most cases, cash offers trump offers being financed.  You will need to furnish recent verification of funds in the form of bank statements in the name of the person making the offer. Attach this with your offer upfront so that the bank will know you are qualified.  

3.  Fannie Mae owned properties:  During the first 15 days a Fannie Mae owned property is on the market, only owner occupied offers will be accepted.  Investor offers will be considered on the 15th day.  If you are purchasing as an owner occupant  and need financing, you may have a competitive edge by using Fannie Mae’s own Homepath Financing.  It’s an excellent program. Owner occupants can get in with as little as 3% down. There is no appraisal required, no repairs required as a condition of lending, and there is no pmi (Private Mortgage Insurance). This loan would be considered similar to an FHA loan, without the appraisal and repair requirements.  If the property is a fixer in poor condition and is Fannie Mae owned, regular Homepath financing may not be offered.  Instead, you could posssibly consider Homepath Renovation financing.  This works similar to an FHA 203k loan, where repairs are contracted for prior to closing and made after close of escrow, with cost of repairs calculated into the loan. To see a list of approved HomePath lenders, go to www.Homepath.com. 

4.  Bottom line calculations are looked at closely with bank owned properties.  The less closing costs you ask for, the better your offer looks to the bank. 

5.  Repairs.  Banks prefer to sell their properties in present condition.  Keep this in mind in structuring your offer.  If you are considering VA or FHA loans, keep in mind that repairs may be required as a condition of lending.  This could make your VA or FHA offer less appealing to the seller if you are competing with cash offers or Conventional Loan offers.

6.  Loan Preapproval:  If you will need a loan to purchase, it is imperative that prior to writing your offer you be preapproved for purchase.  There is a large difference between the generic “pre-qual” letter that some loan officers whip out quickly and a formal DU Underwriting Approval.  What you want to have to be competitive in offers on bank owned properties is Formal DU Underwriting Approval.  Before you start your home shopping, select a lender and go through this loan approval proceess.  Furnish your DU Underwriting approval with your offer, along with verification of funds in the form of a current bank statement in your name.  This verification of funds should be sufficient to cover any cash deposit, total down payment, and closing costs.

7.  Contingency sales.  Offers that are contingent on the sale and close of escrow of another property are not usually accepted on bank owned foreclosures. 

In Summary:  Just like a job interview, you want to put your best presentation possible when structuring an offer on a bank owned foreclosure.

Real estate.  My love affair with real estate started as a child.  Growing up in small towns, I had the pleasure of roaming the countryside as a kid.  I loved the trees, the grasses, the smells, the creeks and rivers.  Being around nature was a never ending series of wonderment.  Whether it be traversing dredger tailing rock piles, peeking into mining caves, or wandering through the woods, I loved it all.

I also loved the game of Monopoly.  And saw the benefits of owning even the modest properties…for I could collect rent whenever anyone landed on them.  And money is a nice thing to collect….even if it’s just pretend.   And adding houses and hotels brought even more rent.  And cash flow bought more houses and hotels.

I watched my father come home from a long day of work and go to work on the house.  Building things and fixing things and always making them better.  From this I learned the intrinsic joy of making a difference in a property by improving it.  Whether or not the changes resulted in monetary gain was irrelevant.  It was about leaving something better than you found it.  This concept has carried with me with every real estate investment I have made. 

Real estate IS an investment.  Whether it be a first home that shelters your family, a modest income property that provides a home for someone else’s family, an apartment complex, or vacation getaway, the investment is visible, touchable, changeable, and you can pretty much always enjoy the opportunity to make it better.  In the case of rental properties, that opportunity may come a little more often than desired…. but there’s always the rent to collect when someone lands on your space.

Welcome to the new website and blog for Carol Leidy, Broker/Owner of Goldfield Real Estate Services!  In the future, this blog will feature expert market analysis, up to date information for the investor,  the homeowner, and the first time buyer, as well as a close look at the current market trends in Placer, Sacramento, Yolo, Nevada, Sutter and Yuba counties.     Come back soon!