In the very different Real Estate climate of today, first-time buyers are becoming baffled, confused, frustrated, and angry with the process of buying a REO or bank-owned foreclosure property.
In the past, your Real Estate Agent would tender an offer for you, based on the listed price of the property, and then you would wait for the Listing Agent to come back to you with a counter offer, and the process would proceed until you you reached an agreement with the seller, the offer would be accepted, and you would proceed to escrow.
That is not happening now, especially if you wish to purchase a REO or bank-owned property. Now, because there are so many foreclosed properties on the market, many banks are not writing counter offers, but are requesting that all potential buyers submit Best and Final offers on the property, and then the bank chooses the best one. This process is difficult for the buyer to understand. Many consider it unfair, because it becomes much like shooting fish in a barrel, there is no counter offer to give a foundation for a higher offer; the buyer just has to guess what kinds of offers will be coming in from other potential buyers and go from there. But that is how it is right now, so we must adjust our tactics.
This is where the Real Estate agent has to get busy and do their homework. If they haven’t already, they should run careful and thorough comparisons on several houses in the immediate area to see what price should truly be offered on the property. In this market, many savvy Listing Agents offer REO properties at discount prices in order to generate multiple offers, expecting that knowledgeable Realtors will offer considerably more than the listed price, if the property warrants it. One of my clients just offered $75,000.00 above list price for a house, and still did not get it! And then you must consider the strength of your offer. All cash usually comes in first, with large down payments of 20% and more plus solid financing second, and FHA and VA loans last, because of the small down payment and more stringent financing rules. Banks also like shorter contingency periods and shorter escrows. Knowing this, you can adjust your offer further to make it more attractive to them.
Above all, be patient. And remember, you are buying an already discounted property, so don’t insist on lowballing the price. Eventually you will find an REO property that you can make a realistic offer on, and the bank will accept that offer. Even if you have an FHA or VA loan with a small down payment, there just are not that many all cash buyers in the market, as well as those with large down payments. You are in the majority, and will eventually win.
